Around a million of the 6 million US expats living overseas have had bank accounts closed due to Foreign Account Tax Compliance Act (FATCA), says a new survey.
Banks, investment houses and other financial institutions claim they have terminated the accounts because the costs of FATCA compliance are too much.
FATCA is a US law that demand overseas financial institutions send the Internal Revenue Service (IRS) information about accounts and investments controlled by Americans.
For US citizens, the reporting threshold is accounts with a balance of $50,000, while the limit is a lot higher – $200,000 – for expats.
The figures for closed accounts come from a global survey by Democrats Abroad, the foreign arm of the US Democratic Party.
The research also revealed a fifth of American expats claim their relationships with non-US partners are under stress if they have joint bank accounts and investments, as their personal information must be reported as well.
Many other expats allege employers are denied promotion at work and business opportunities are falling through because a company or partnership with a US taxpayer would mean revealing financial information to the IRS.
These problems are also leading more US expats to consider renouncing their citizenship.
“No matter where they live, FATCA seems to have a far reaching effect on all Americans abroad,” said Carmelan Polce, a Democrats Abroad spokesman.
“These Americans are suffering as unintended targets of FATCA rules and we would like this unfair fall-out to be relieved by changing the law.
“They have made clear that they do not support tax evasion but would like to see a less hostile way of handling the problem.”
How FATCA works
FATCA was brought to the statute book in 2010 by President Barak Obama as a tool for unearthing hidden money and assets of American taxpayers.
After a series of delays, the law came into force from July 1, 2014.
FATCA places no burden on taxpayers but requires around 750,000 foreign financial institutions to report the financial status of any American customers each year.
The data is compared with information provided on personal tax returns.
Foreign financial institutions who fail to provide data on their customers face a 30% withholding tax on any financial transactions in the US.
To date 101 countries have signed FATCA tax information sharing agreements with Washington, while around 100,000 foreign institutions from more than 200 financial jurisdictions have also registered on the IRS online FATCA portal.