US expats could have their passports revoked on 1 January 2016 if they fail to get their finances in order back home, it emerged this month.
The US Congress is preparing to enact a new law under which Americans with more than $50,000 of tax debt would have their passports confiscated or be denied a new one.
The Wall Street Journal reported the law, reportedly buried in a highway funding bill to be passed in December, will hit US citizens that have failed to pay federal taxes while living overseas – a requirement under the Foreign Account Tax Compliance Act (Fatca), which came into effect last July.
Fatca stipulates that Americans – whether they are resident in the US or not – must continue to pay taxes in the States if they opt to retain their passport.
Under the new law set to take effect on 1 January 2016, the Internal Revenue Service (IRS) will compile a list of Americans in violation of the new rule, reported the WSJ.
A taxpayer would not be at risk of losing their passport if they are already in the process of resolving a tax debt issue with the IRS, contesting the obligation, or travelling for humanitarian purposes, the newspaper added.
Tax experts this week warned the estimated 50,000 US nationals residing in the UAE that they should “get their finances in order” or risk having their passport taken from them.
Nigel Green, founder and CEO of financial advisory firm deVere Group, which claims to have 80,000 predominantly expat clients across the world, told Emirates247: “While this law is aimed at all Americans, it is likely that the 8 million US citizens who live overseas will be disproportionately affected.
“This is because, due to the cross-border element, their financial affairs are typically far more complex than their counterparts back home.”
He added that the Fatca has added extra layers complexity, and that, since September 30, the financial information of millions of Americans living overseas who have more than $50,000 in bank accounts is being sent automatically to the IRS.
“This move underscores the lengths the US government is prepared to go on this issue of tax recovery,” Green added.
“I would urge US citizens abroad – the ones who, due to complexities, could more easily fall foul of the regulations and who are perhaps more reliant on their passports – to ensure that their financial affairs are in order and compliant by the New Year.
If the bill becomes law, US authorities estimate that around $398 million could be raised over 10 years, the WSJ said.
However, lobby group American Citizens Abroad, which represents the millions of US citizens living overseas, wrote to Congress earlier this month asking them to ditch the “draconian” proposal.
The letter, dated 6 November, said: “This provision creates a tax collection provision that is frankly far too draconian. This approach puts disproportionate pressure on the taxpayer… and discriminates against Americans abroad who, unlike Americans living in the US, are overwhelmingly reliant upon their US passports in their everyday lives.
“American Citizens Abroad strongly opposes enactment of this type of provision and urges Congress not to act until it has explored alternative ways to solve any perceived tax collection problems.”For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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