Sunday, May 4, 2014

Switzerland: Rise in Swiss-US Dual Nationals Surrendering US Citizenship Over IRS Overreach

According to Switzerland's The Local, with financial relations between Washington and Bern increasingly strained over taxation issues, increasingly Swiss-US citizens are surrendering their US citizenship.

The reason reportedly stems from the long-arm of the US Internal Revenue Service (IRS), according to the online news source, La Matin

Unfortunately, the US is one of only a handful of nations around the world that tax its citizens even when they live abroad.

To be specific, even Swiss citizens who enjoy dual citizenship with the US, must complete and submit a US tax return annually, particularly if they have financial interests in the US.

COMMENT: Of late, the Internal Revenue Service is putting vigorous pressure on Swiss banks to disclose details of US clients to ensure compliance with tax laws passed in the US.

Consequently, Swiss banks and financial asset managers are denying services to anyone with US financial interests. In a number of case, Americans who had relocated to Switzerland were denied services for having US citizenship.

After five years of reduced revenue prompted by the 2008 financial crisis, many US citizens have been forced by necessity to relocate abroad in order to lessen their US tax burden, given the fact that the US has one of the most complicated and highest tax rates in the world.

Additionally, with a significantly reduced tax yield, the IRS has come up with creative ways to elicit even more taxes from those having financial interests in the US.

Frustrated by the bureaucratic hurdles forced upon them by Washington, many dual nationals are choosing to surrender their US citizens if they are able to do so.

According to the newspaper, "Tages Anzeiger," in 2013, some 2,000 people worldwide renounced their US citizenship, a figure seven-times higher than it was four years ago. 
 
Of those 2,000, some 500 were from Switzerland.

Ryan Larson, a US tax expert living in Zurich, confirmed that he has also seen more and more dual nationals give up their US passports. In 2011, he helped some fifty people renounce their US citizenship, while in 2010 he dealt with only half that number.

Larson expects the situation to further worsen when the new US Foreign Account Tax Compliance Act becomes effective in 2014. 

The new law will require banks either to give up details of their US clients or to withhold 30% on all accounts that are US-based.