When Donald J. Trump was elected president in 2016, some people, including many Democrats, discussed giving up citizenship of the United States and moving abroad for political reasons. But now another group of Americans are saying they are considering leaving – people of both parties who would be affected by the property tax proposed by two Senators who want to stand up against Mr Trump in his race for re-election, Elizabeth Warren and Bernie Sanders.
Wealthy Americans often leave high-tax states like New York and California to leave low-tax states like Florida and Texas. However, renouncing citizenship is far more permanent, costly and complicated.
Many who do this to save taxes and get rid of American financial regulations and filing requirements are also making a bigger statement.
“America is the most attractive destination for capital, entrepreneurs and people who want an excellent education,” said Reaz H. Jafri, partner and director of immigration at Withers, an international law firm. “But in today’s world with other economic centers of excellence – like Singapore, Switzerland and London – people don’t see the US as the only place to be.”
According to the US Treasury Department, which publishes expatriation figures, 231 Americans gave up their citizenship in 2008. 742 next year. By 2016 the number was 5,411, up 26 percent from 2015. It was roughly the same in 2017 before dropping to 3,983 last year.
Immigration lawyers said the number would be higher if the embassies had the staff to handle the volume of inquiries. David Lesperance, a Canadian immigration attorney based in Poland who specializes in helping American citizens emigrate, said many embassies around the world had backlogged appointments.
“The current reality is that an American who wants to forego something must first book an appointment on a processing system that has reached capacity – as evidenced by the significant backlog in the granting of interview slots,” Lesperance said in an E. -Mail. “In fact, the backlog has grown so much (up to and sometimes over a year) that most US missions have stopped posting the date information online and have not done so since the system was at capacity for a number of years seems before. “
As soon as this date is secured, the process seems to have accelerated. Mr Jafri said he had customers who had waited over a year for the letter confirming that they were no longer American citizens. Well, he said, this letter can come in two weeks.
“The decision was made somewhere in the system to release this faster,” he said. “We haven’t seen any slowdown in giving up.”
Historically, the majority of expatriates fell into two categories: the elderly, wealthy, hoping to save taxes, and the “casual Americans” who were born in the US but lived and worked overseas, or were born overseas. but lived in the US long enough to fall under the tax authority of the Internal Revenue Service.
Now many inquiries are also coming from younger entrepreneurs who are upset about the political situation in the United States and from people who want to do their business abroad and are not subject to the requirements of American financial reporting.
“This younger person also sees it as impact citizenship, like impact investing,” said Jafri. “You don’t want to be American. They are not happy with how we are perceived overseas. “
Mr Jafri said he had heard of several other reasons as well. There are people who are motivated by fear. “We have people who are terrified of the prospect of a Warren presidency and a property tax,” he said. “And there are people who are equally afraid of Trump re-election.”
There are also business people who either do not want to be subject to the IRS review or who feel that the annual report on foreign bank and financial accounts has become too time consuming or too costly.
“I’ve never seen it before,” said Mr Jafri. “People always said, ‘If one way or another becomes president, I’m moving to Canada. ‘Well, nobody did. “
But now the price may be right to go. While the cost of expatriation varies based on a person’s wealth, the rich are betting that if a Democrat wins next year, leaving now means a lower exit tax.
There is no exit tax for individuals with assets less than $ 2 million or an average salary over 165 years of age of approximately $ 165,000. For everyone else, the exit from a person’s assets is calculated as if they had been sold on the day of expatriation. For example, someone with a portfolio of valued stocks would be taxed at the capital gains rate.
It becomes difficult when people own private companies that need to be valued. Even if they don’t sell the company, they’ll have to raise tax dollars to pay the IRS. But like the land tax, there are ways to reduce the value of the business, including arguing that it is a tight family business and lack of marketability.
Mr Jafri said he had a client who just paid $ 58 million in exit tax, even though it was 40 percent higher before a valuation firm made various deductions.
The wealthy contemplating foregoing citizenship fear a wealth tax that is less than the possibility of capital gains tax being raised to the normal income tax rate, effectively doubling what a wealthy person would pay, said Reading performance.
“I have a client, a relatively young man who has made a lot of money as a founder and is not optimistic about the US in the long term, but what makes him lock himself in and forego it now is that he is the Made numbers. “He said.” He said that when the slightest democratic scheme comes into effect – taxing capital gains like normal income – it makes sense to forego it now. “
Regardless of wealth, anyone who wishes to give up their American citizenship must have fully complied with all tax forms for the past five years. This is one of the biggest stumbling blocks, said Jerald David August, chairman of the international tax and wealth planning groups at law firm Fox Rothschild.
“The prototype is an overseas US citizen who is tired of paying taxes twice around the world,” August said. “The ghost of that five year review and the awareness that there was no full compliance can be intimidating. I’ve had situations where, after receiving extensive advice, clients decided not to go ahead with expatriation. “
Had they done this without having immaculate tax returns, they could have been forced to amend tax returns or, worse, be screened for tax evasion.
Even if their returns are in line, any money they leave behind their children, who are still citizens, is subject to a 40 percent inheritance tax.
“If someone had never stepped into the US and died and left $ 100 million for the children of someone who moved to the US, the children wouldn’t pay the tax,” August said. “But if you leave with $ 10 million, the US will still be responsible for taxing the migrant.”
Those who leave must also consider their reputations, as the finance department publishes a list of people who are overseas.
When Eduardo Saverin, a Brazilian-born but American-trained Facebook founder, renounced US citizenship shortly before the social network went public, he was criticized for tax avoidance. But his spokesman said he lived in Singapore for several years. Several estimates said that giving up his citizenship prior to Facebook’s initial public offering saved him $ 700 million in taxes.
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