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SWEDISH CITIZENSHIP

United States set to reduce fee for renouncing American citizenship

Renouncing American citizenship could become less costly, after the US department of state announced that it intends to reduce the citizenship renunciation fee from the current eye-watering $2,350.

United States set to reduce fee for renouncing American citizenship
The Association des Americains Accidentels (AAA - Accidental Americans Association) demonstrate against certain aspects of US legislation of extraterritorial nature in Paris. (Photo by Zakaria ABDELKAFI / AFP)

Rina Bitter, the Assistant Secretary for Consular Affairs in the USA, wrote a declaration stating that “the Department intends to pursue rule-making to reduce the fee for processing CLN requests [renunciation of US citizenship] from the current amount of $2,350 to the previous fee of $450.”

Bitter also said that “the Department will consider any necessary changes to this fee, as appropriate, in future rule-making.” The Washington DC District Court was set to hear in-person oral arguments on January 9th.

The change has been particularly welcomed by ‘Accidental Americans’ – people born in the US who therefore have American citizenship but have little connection to the US during their adult lives – but applies to anyone who wants to renounce their US citizenship.

The usual reason for wanting to do this is the strict tax rules that continue to apply to Americans, even if they live outside the US for many years. 

The Accidental Americans group founder and president, Fabien Lehagre said: “By lowering the fee to $450, the US government is showing that the right of voluntary expatriation is not to be trifled with and deserves the utmost protection.”

Nevertheless – the change has not yet been put into practice, and the court case was still ongoing as of January 9th, a fact that Lehagre acknowledged, stating that “time will tell how the government will formulate and develop the new fee.”

However, even with lower fees, renouncing American citizenship remains a lengthy and complex process, that for most people will involve paying a lawyer or accountant.

The United States is unusual in that it imposes tax responsibilities based on both residence and citizenship – so even citizens who have lived abroad for many years and have no economic activity in the US have to file an annual tax declaration to the IRS.

There are also certain limitations on US citizens who live abroad such as the FATCA law that make it hard for them to open European bank accounts and limitations on certain types of financial products such as pensions in Europe.

“Renouncing US citizenship is not as simple as scheduling an appointment at a US embassy or consulate, paying the applicable fee, and declaring that one does not want to be American,” explained international tax law specialist Alexander Marino. “There are many details to consider, and careful planning is essential.”

READ MORE: How to renounce American citizenship in France – and why you might want to

Set in 2010 to $450 to pay for the processing renunciation requests, the amount was later increased to $2,350 due to the need for “close and detailed case-by-case review,” according to Bloomberg Tax.  

The Accidental Americans group is made up of European citizens who also have American citizenship – often without even knowing it.

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TAXES

Spain’s deputy PM proposes freezing mortgage rates

Yolanda Díaz, Spain's Deputy Prime Minister and Labour Minister, has called for a freeze on variable mortgage rates amid news that Spain's biggest banks have enjoyed a bumper year of record profits.

Spain's deputy PM proposes freezing mortgage rates

Yolanda Díaz, Spain’s Labour Minister and the ideological force behind sweeping labour market reforms, has called for a freeze on variable rate mortgages following news that some of Spain’s biggest banks reported billions in record profits last year.

On Wednesday, BBVA reported a 2022 profit of €6.4 billion, the largest profit in its history. Driving this profit, the bank’s interest margin grew by a whopping 30.4 percent, commission income by 12.3 percent, and loans by 13.3 percent.

Banco Santander posted an annual net profit of €9.6 billion, up 18 percent from 2021 and higher than forecasted by analysts polled by financial data firm FactSet.

READ ALSO: Banco Santander posts record profit as rates rise

Given these record-breaking profits, especially against the backdrop of a prolonged cost of living and inflationary crisis in Spain, Díaz has said the government must act decisively to “freeze mortgages” and “moderate profits.”

“The crisis cannot be an excuse to earn more,” she said, adding that the rise in the Euribor rate is “very serious”, with the average increase (estimated to be €258 per month) “impossible to bear” for normal Spaniards.

Euribor is the interest rate most often used to work out mortgage payments and calculate both variable and fixed rates.

READ ALSO: What the Euribor rise means for property buyers and owners in Spain

It is anchored to the interest rate set by the European Central Bank (ECB), and, as we are now seeing, quite responsive to global economic events. By the end of January, the rate had risen to almost 3.4 percent, the highest level since December 2008.

“While the rise of the Euribor will increase the average mortgage payment by €250 per month, BBVA’s profits grow by 38 percent to reach €6.4 billion, the largest in its history. The crisis cannot be an excuse to earn more. Freeze mortgages, moderate profits,” Díaz wrote on Twitter on Wednesday January 31st.

Banks respond

Unsurprisingly, Spanish banks are not exactly keen on Díaz’s idea. BBVA President, Carlos Torres, said “I trust what will happen is that the benefits of a market economy continue to be defended”. 

Torres also tried to remind people of the “negative years” that BBVA has endured, with “many billions of negatives”. 

It remains to be seen how persuasive Spaniards or the Spanish government find this comparison, or whether Díaz’s Twitter idea will translate into policy.

Windfall tax

Díaz’s call for a mortgage rate freeze is in line with the Spanish government’s approach to the excess profits of banks and energy companies. In July, the Spanish government introduced a temporary windfall tax on excess profits in order to fund some of the extraordinary measures it was implementing to help the most vulnerable in Spanish society deal with the cost of living crisis.

The government in July introduced a draft bill to slap a temporary 4.8 percent charge on banks’ net interest income and net commissions in 2023 and 2024 to fund measures to ease cost-of-living pressures. Between the new taxes on banks and energy companies, they should generate around €7.0 billion for the state coffers in 2023 and 2024. 

However, in November the ECB published a non-binding legal opinion that suggested Madrid undertake a “thorough analysis of potential negative consequences for the banking sector” of the tax.

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