As the deadline for the Foreign Account Tax Compliance Act looms, over three-quarters of US expats and green card holders who have taken out a supplementary overseas pension contract say that they are “satisfied” that they will now not have to renounce their citizenship to blunt the impact of the legislation.

With the deadline for the Foreign Account Tax Compliance Act looming, over three-quarters of US expats and green card holders who have taken out a supplementary overseas pension contract say that they are “satisfied” that they will now not have to renounce their US citizenship to mitigate the adverse effects of the legislation, according to a new poll by deVere Group.

In a poll of 361 overseas-based American clients, deVere Group found that 78 per cent who had created a tax-qualifying FATCA-compliant pension plan would no longer consider giving up US citizenship to reduce the burden of the incoming tax law.

FATCA is set to take effect on 1 July and requires all financial institutions outside of the US to regularly submit information on financial accounts held by US persons to the Internal Revenue Service. When the act comes into force, those who are not compliant will suffer a 30 per cent withholding tax on income and gross proceeds.

deVere’s findings buck the official trend. According to Treasury Department figures published in the Federal Register last year, 3,000 US citizens handed in their passports - three times the average of the past five years. While the Treasury has given no reasons for why they handed back their passports and green cards, many observers believe that the dramatic spike over previous years is due to them wanting to avoid paying taxes as a result of FATCA.

“The Treasury Department’s figures seem to highlight a clear correlation between the increase in expatriations and growing awareness amongst Americans of FATCA’s highly contentious, burdensome and expensive requirements,” said Nigel Green, founder and chief executive of deVere Group.

“The official statistics make for depressing reading. It is our experience that Americans are, quite understandably, loathed to give up their US passports, they don’t want to sever these ties, but do so as they feel there’s no viable alternative,” he added.

In the first quarter of 2014, 1,001 Americans gave up their passports or green cards, an increase of 47 per cent on the same period last year. It is also expected that a record number of US citizens will give up their passports this year, meaning more than 3,000 are forecast to do so before the end of 2014.

FATCA has a number of serious unintended consequences for US citizens living overseas. These include being rejected from non-US financial institutions, such as banks in their country of residence, and the onerous and expensive new reporting requirements for anyone with assets of more than $50,000.

“Against this backdrop of soaring US passport relinquishments, it is extremely encouraging that the overwhelming majority of those we polled who have created an additional overseas pension contract to mitigate FATCA’s complicated, costly and privacy-infringing demands, told us they were ‘satisfied’ with the action taken and that they would no longer consider giving up US Citizenship,” said Green.

The supplementary overseas pension contract recommended for US taxpayers with assets abroad will permit a qualifying expat to make annual contributions to a pension fund over and above $51,000, which is not possible within the current US tax-approved regime; to take advantage of tax-deferred investment growth; and to benefit from the opportunity to invest freely into passive foreign investment companies without incurring US tax penalties and burdensome tax reporting procedures.