Thu, Aug 2 3:03 PM
Experts were surprised when the number of U.S. citizens who renounced their citizenship fell drastically in the second quarter of 2012, down from 520 during the same period in 2011 to 189 in 2012, according to a list released by the Treasury Department.
One reason former citizens will give up U.S. citizenship is to avoid paying taxes, Investment News reported.
In 2011, the United States experienced a significant increase in expatriation, as nearly 1,800 citizens followed in the footsteps of Facebook co-founder Eduardo Saverin and songwriter Denise Eisenberg Rich and renounced their citizenship. Experts attribute the spike to a “recent drive to enforce U.S. tax laws concerning foreign accounts,” according to The Wall Street Journal.
The United States imposes taxes on world-wide income, and charges citizens and permanent residents regardless of where one resides.
This poses a problem for the numerous people who meet the broad definition of a U.S. citizen. According to the law, individuals who were born on U.S. soil but classify themselves as “accidental citizens” – or do not really consider themselves to be U.S. citizens – are legally obligated to pay taxes to the United States, WSJ explained.
The legal expatriation process is not easy, and requires people on the Treasury Department’s list to provide proof of five years of tax compliance and pay an exit tax when they renounce if their average annual income for the previous five years is $151,000 or if their net worth is greater than $2 million, reported the source.
Many who consider expatriation decide against it when they learn of the consequences.