Posted on May 4, 2014
This entry was posted in Tax Compliance.
I found the decision making process incredibly straightforward.
The risk/reward of being a US citizen abroad is almost exclusively risk and no reward. The best analogy I can give is that you live your life permanently with your neck in a guillotine while wearing a metaphorical financial straightjacket. I for one refuse to live my life where the IRS can drop the blade on me based on some obscure rule that applies only to US citizens abroad. Nor will I allow the government of a country I haven’t lived in for 15 years to impact every single decision I can make in my financial life.
Each year, I subjected myself to a penalty regime that would bankrupt me many times over, paid $3,000-$5,000 in tax prep fees and spent about 200 hours tracking, compiling, calendarising (since the local tax year is not a calendar year), translating to USD, checking, double-checking and filing. All that for a US tax liability of zero in 2013. By comparison, my local tax return (which uses precisely the same three sources of income) took less than 2 hours all-in. I even went so far as to pay my US based accountant to count the number of “accounts” I had for FBAR purposes so that I could tick the 25 accounts and over box and be extra confident that the number of accounts I entered on the form was correct. You spend money on silly things when the prospect of getting it wrong is potential financial ruin.
As if the decision wasn’t easy enough, the provider of my main investment account decided that they would become FATCA compliant by implementing the FATCA required client onboarding procedures but not implementing any of the FATCA reporting procedures. Makes sense since the vast majority of FFIs would never be able to recoup the cost of full FATCA implementation from 0.1-0.3% of their customer base. I live in a country of 65 million and there is one (ONE!) online investment account provider who will take US citizens (and another one who says they will but haven’t updated their terms and conditions). As for the rest, if the IRS asks, they will simply say they don’t have any US citizen customers. Problem solved. My provider amended their customer terms and conditions such that it was a breach of the agreement to be a US citizen. Any US citizen discovered on their books would suffer an immediate account freeze and possibly also a forced liquidation of the entire account (confirmed via email since I didn’t want to speak to them by phone for obvious reasons). Do you choose your money or your citizenship?
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