Moving to another country when you are young is often relatively easy. You have little money, are usually in good health, and employment opportunities abroad may be plentiful. That was my situation when I moved to Canada from the U.S. in my 20s, and it is still the case of many expats today.
However, as your time abroad grows and your situation changes, things can become more complicated. Recent legislation in the United States is, according to an article in Main Street (www.mainstreet.com
) leading many Americans who live abroad to renounce their U.S. ctiizenship or at least to consider doing so.
The number of actual renunciates is still small, under 5,000 per year out of a population of Americans abroad estimated to be at least 10 million. U.S. citizens have long suffered under onerous tax reporting requirements regardless of where they live, but the introduction of a law known as the Foreign Account Tax Compliance Act in 2010 is apparently finally encouraging a lot of them to jump ship.
This law requires reporting by individuals of details on foreign accounts if the total of funds exceeds $50,000. For those with multiple accounts, the reporting can become pretty time-consuming, and it is in addition to the reporting required at a different time of year called the Report of Foreign Bank and Financial Accounts, where the total of funds held abroad need only exceeed $10,000.
In addition, a section of the FATCA that is scheduled to go into effect next year requires that foreign financial instituitons report on accounts held by U.S. citizens, and this has led many such institutions to refuse to open or continue to operate accounts for Americans abroad, which can make living abroad pretty difficult.
I understand that Canadian financial institutions have been exempted from this latter requirement, because of the large number of Americans (estimated to be more than one million) who live in Canada.
So far I have been able to keep up with all these filings, in addition to doing two tax returns in Canada. However, it is not fun and many expats turn to expensive accountants because they feel they are not up to the task. My advice--you can do it if you try, and save yourself a lot of $. But be prepared to devote a week or two to the filings. It usually takes me most of the month of March to complete my tax forms.
These are all things to consider, particularly if you are an American who is thinking of emigrating for the long term. Citizens of other countries are not generally so burdened by their governments, but may also face considerations of how to handle finances as an expat. For example, Canada has an exit tax that may apply if you move abroad permanently. It's good to know before you go.