HEALTHPLAN MAGAZINE

The United States appears poised to follow through on its commitment to reduce the fee for renouncing American citizenship, slashing it from $2,350 down to $450.

The news of the U.S. government's intention to fulfil its promise to lower the fee for renouncing citizenship, initially pledged in January, has been warmly received by American expatriate communities. This development was made public through an announcement dated October 2, posted in the Federal Register.

The move from the State Department to lower the fee, is in response to ongoing concerns expressed by the public since the fee was increased from $450 to its current level in 2014.

Notably, the State Department acknowledged the substantial anecdotal evidence of challenges faced by U.S. nationals residing abroad when attempting to renounce their citizenship.

The State Department has underscored that the $450 fee represents only "a fraction of the cost" associated with providing consular services for processing a Certificate of Loss of Nationality (CLN). Public input on this matter will be accepted by the State Department until November 1st.

This change is particularly welcomed by groups representing 'Accidental Americans,' who are primarily individuals born in the U.S. to foreign parents, often with minimal connections to the U.S. during their adult lives. Fabien Lehagre, the founder of the Accidental Americans Association based in Paris, expressed relief and noted that while the cost reduction is significant, he remains committed to advocating for even more affordable waiver procedures. Lehagre emphasised, "Renunciation is a right, protected by the U.S. Constitution."

Accidental Americans face unique challenges due to the U.S.' citizenship-based tax system, which requires them to fulfil tax reporting and potentially tax-paying obligations, even if they never reside in the U.S.

For months, Americans contemplating renouncing their citizenship had been waiting to see if the government would proceed with the fee reduction, first announced by the State Department on January 6th, 2023.

While the notification does not provide an exact date for the fee reduction, some experts, including Toronto-based lawyer John Richardson, believe that it will eventually occur, albeit with uncertain timing. Richardson suggested that the fee reduction may not significantly impact the number of individuals renouncing their U.S. citizenship, which has been as high as over 6,000 annually.

The United States stands out for its unique practice of imposing tax obligations based on both residence and citizenship, requiring citizens living abroad, even those with no U.S. economic activity, to file annual tax declarations with the IRS. Additionally, certain regulations, such as the 2010 FATCA law, have made it challenging for American expatriates to maintain European bank accounts and engage in specific financial investments in Europe. The number of renunciations began to rise notably after the introduction of FATCA.

According to Richardson, "For those Americans living abroad who are seeking to renounce, the advantages [of no longer being American] are worth far more than $2,350."

A spokesperson for the State Department informed theLocal newspaper in Spain that, "On October 2nd, 2023, the Department published a proposed rule proposing a reduction of the fee for Administrative Processing of a Request for a Certificate of Loss of Nationality of the United States (CLN) from $2,350 to $450.

“This proposed rule will be open for public comment until November 1, 2023. After the close of the public comment period, the Department will issue a Final Rule that will take into account any substantive public comments. Once implemented, the fee change will not be retroactive, and no refunds or partial refunds will be issued as a result of this fee change."

Sources

https://www.thelocal.es/20231002/americans-in-europe-us-finally-moves-to-cut-e2350-fee-for-renouncing-citizenship
https://www.globalvillagespace.com/germany/us-finally-moves-to-cut-2350-fee-for-americans-renouncing-citizenship-in-europe/