US tax law no red light for Chinese green card seekers
While some Americans are giving up their citizenship due to invasive reach of Fatca, the US retains its allure for applicants from China
A US law to fight tax evasion globally, the Foreign Account Tax Compliance Act (Fatca), is driving some worried Americans to give up their citizenship, but has not stopped the waves of Chinese applying for United States citizenship or green cards.
Fatca demands that banks and tax havens around the world give more information on US taxpayers to the United States government, making it harder for US tax evaders or a corrupt Chinese official who becomes a US citizen to hide their ill-gotten wealth.
Chinese citizens continue to apply for US citizenship or permanent residency, said Ross Feingold, a senior adviser at DC International Advisory, a US risk consultancy. "Immigration to the US remains attractive to many people from China and the rest of the world for many reasons," he said. "This may include confidence in the rule of law and transparency, standard of living and education system."
There are 10,000 US green cards available each year, and Reaz Jafri, head of US and Asia immigration at Withersworldwide, an international law firm, said that in recent years, 75 per cent had gone to Chinese nationals. "They're applying often unaware of Fatca and America's taxation on worldwide income for green card holders," he said.
Erik Wallace, a partner at Withersworldwide, said: "One would think the interest of mainland Chinese in the EB-5 programme, which is a type of green card, would have diminished. However, we are not seeing a drop in interest. Instead, these persons are implementing comprehensive tax plans to diminish the US tax impact before acquiring their US green cards."
In contrast, Feingold said, many US citizens and US permanent residents in Hong Kong and on the mainland were exploring how to renounce their US ties.
"Those seeking more information are not only billionaires, but also moderately wealthy or even middle-class," he said.
The US Internal Revenue Service said 228 expatriates gave up US citizenship in 2008, but that number jumped to 1,810 in the first half of this year.
One of the biggest frustrations for US citizens or permanent residents living abroad was that financial institutions increasingly refused to open accounts or provide other financial services to them, Feingold said. "This is because the costs of compliance with Fatca and risks from non-compliance outweigh the profits from having account holders," he said.
Wallace said that under Fatca, US citizens and green card holders were also finding it more difficult to invest outside the US.
Simon Parfitt, chief executive of Guardian Life Management, the Hong Kong arm of Guardian Wealth Management, an international financial planning firm, said it had seen "a marked increase in the number of calls from US clients who have been turned away by [financial institutions] as they don't want the cost and complexity of complying with Fatca".