This is basically it. If you’re just Joe Average working a normal job it doesn’t really matter much. There is a tax treaty between the US and UK that allows you to offset UK taxes paid against US taxes owed. The tax rate in the UK is a bit higher so I never owed any US taxes under normal circumstances. But now I’m looking towards retirement and want to move money into better investments. The US passed a law requiring information on all US citizen’s financial details. This clashes with EU data protection laws so many EU financial institutions simply won’t deal with US customers. There are also certain types of investments/accounts in the UK where the interest is tax free that the US don’t recognize as tax free, such as UK Premium Bonds. There are also problems with how the US views UK pension plans. Lottery winnings are also tax free here so if I hit the £32.6 million jackpot tonight I don’t have to give any to the US.
"A U.S. national may acquire foreign nationality by marriage, or a person naturalized as a U.S. national may not lose the nationality of the country of birth. U.S. law does not mention dual nationality or require a person to choose one nationality or another. Also, a person who is automatically granted another nationality does not risk losing U.S. nationality. However, a person who acquires a foreign nationality by applying for it may lose U.S. nationality. In order to lose U.S. nationality, the law requires that the person must apply for the foreign nationality voluntarily, by free choice, and with the intention to give up U.S. nationality.
Intent can be shown by the person’s statements or conduct. The U.S. Government recognizes that dual nationality exists but does not encourage it as a matter of policy because of the problems it may cause. Claims of other countries on dual national U.S. nationals may conflict with U.S. law, and dual nationality may limit U.S. Government efforts to assist nationals abroad. The country where a dual national is located generally has a stronger claim to that person’s allegiance."
The US requires its citizens to file tax returns. Techincally (IIRC, IANAcitizen) if you don’t owe money, this is not a big deal - but that could change in the future. The other, BIG issue, is that US citizens must declare any foreign holdings over $100,000(?). If you are comfortable middle class in the western world with decent retirement savings, you probably hit this limit. Failure to file a declaration is also apparently a violation.
On top of that, any bank that wants to deal with America must declare any accounts held by American citizens and the details. Should they fail to file the necessary paperwork, some bureaucrat in Washington can decide to fine them 30% of all remittances to that bank, which would be seized from other banks who would be sending money to them - effectively freezing them out of the international banking community. Of course, if the Washington bureaucrat was wrong, I’m sure the bank’s expensive Washington lawyers could have the whole problem fixed within a few years, at which point the bank would rejoin the system. Violating EU privacy laws? Try to imagine Washington’s deep concern.
So to avoid the risk of running afoul of the paperwork, the foreign banks simply closed the accounts of US citizens held in their country. You can’t be cited if you don’t have us customers. Can’t bank outside the USA? Sucks to be you.
All this legal crap was written to catch the millionaires hiding wealth in off-shore accounts, and the law was written so well it basically disrupted mainly the average Joe instead. I worked with one lady whose brother was born in the USA and so was a citizen, although he’d probably been there only a few times since he was 2. Still, when the law was passed, he had less than a year to file a declaration and file 25 years of income tax returns using an accountant familiar with both US and Canadian tax law - who was probably busy with 10,000 other similar customers.
This is a huge problem not only for U.S. citizens abroad, but also for foreigners who work in the U.S. (legally) but may still have bank accounts, etc. in their home countries. Hiring someone to prepare your tax return competently in this situation can cost thousands of dollars, even if we’re just talking about something like a normal-sized retirement savings account.
I fielded an inquiry once from a Canadian couple who had a few thousand in RRSPs (which as I understand it are the Canadian equivalent of an IRA). Apparently the IRS considers those to be trust accounts, and the poor guy had been quoted $4k for an accountant to prepare his U.S. tax return. (He was working in the U.S. on a professional work visa; sure, it was a professional job, but he was not a rich guy!) The Canadian account had something like $10,000 in it.
Can you clarify? Why isn’t “not wanting to be an American anymore” a valid reason? I am planning on giving up my US citizenship once age out of the work force, but I hesitate because I don’t want to be restricted from visiting.* It has nothing to do with taxes. These are an annual hassle, but due to the tax treaties it doesn’t cost me anything other than the annual accountant’s bill to file them.
I read where an expert on Australian citizenship had said “it can be easier for an ex-citizen to gain residency in Australia, its not like they will be treated as freshly applying to immigrate”.
In the past Australia had started to ignore the citizenship of people who took up new citizenship elsewhere, but as this has now gone (one can ask for new citizenships without fear of losing Australian citizenship now), they feel sorry for those who might have lost Australian citizenship by gaining citizenship elsewhere… (Brain drain considerations… if smart, highly qualified people are attracted elsewhere … there shouldnt be a hurdle to prevent them coming back !)
But there is no specific law - the country can say you keep your new citizenship and don’t get the old one back !; it generally goes like “The request will be presented to the minister” . Basically if your biography, CV , income, wealth looks good, oh have your citizenship back then !Brain drain… wealthy immigration etc
Vietnam has a specific status for refugees who left there without passports… perhaps to mark them as suspected identify thieves. ( They may try to use a fake identity to claim inheritance, property, or compensation, for example.) Well it means that the gov , police there can say “yes well a regular citizen could claim that, but you are refuge citizen… no you can’t claim that !” )
Hm, are you sure that it was an RRSP? I was under the impression that they’re covered by a tax treaty between Canada and the US and aren’t a big problem. Are you sure it wasn’t a TFSA? Those are supposed to be a bad account to have open as a US taxpayer.
(I really hope that you’re wrong about the RRSPs in the US, because I’m contemplating a move to the US next
India also has specific programs to encourage those of Indian ancestry to move back and take up citizenship again. PIO (person of indian origin) status allows them to get work permits much more easily than other foreigners. I don’t know the details but I imagine they do try to make it much easier for PIO’s to get back citizenship again than other foreigners.
Again the aim is to counteract brain-drain and encourage especially skilled workers to consider moving back to their country of origin even if they now have another citizenship.
Someone who has been putting decent money into an RRSP (or now, also a TSFA) for a while will likely have over $100,000 - the trigger point for mandatory reporting. Plus, if you paid off your home over time - most Canadians do, there’s no tax break for primary residence mortgage interest - you have over $100,000 in equity in your home. One of the other dilemmas was whether you apply for an extension and put your name on the radar which may cause hassles crossing the border; or hope your name is not flagged, but failure to file a declaration is in itself an offense.
The government logic (other than “if you don’t want to be an American, screw you”) is obviously along the lines that since you don’t want to be an American, why should you be able to still enjoy life in America for up to 180 days a year? If you got rich in America and now want to spend half your life in New York and half on the French Riviera, well, they want you to pay American taxes. I assume…
But if I enter on a Canadian passport, why wouldn’t they treat me like every other non-criminal Canadian?
The presumption seems to be “you just want to live here without paying taxes,” which is a weird presumption for someone who has chosen, instead, to live in a country with higher taxes.
I’m reasonably sure, but I didn’t go into a lot of details - I am not a tax person, and it was a friend of a friend asking for a referral to a tax person. But even if it was an RRSP, I can certainly see them having a hard time finding a mainstream U.S. tax person who wanted to deal with foreign accounts at all. (And it’s not an issue I run into very often; most of the time when I deal with people in the U.S. on L-1 intracompany transferee visas, they are on some sort of expat benefits package that includes tax prep services.)
The U.S. government doesn’t necessarily assume that everyone who is renouncing U.S. citizenship is doing so for tax reasons. It’s mostly an issue for people with significant assets. If I were you or anyone else who is worried about being barred from the U.S. for this reason, I’d consult a qualified U.S. immigration lawyer and/or tax expert. (IANAL or tax person, but you already know that.)
Thanks. I’m not really worried about it, having few assets and zero attempts to be dishonest about them with either government. I was trying to get some clarification from a poster who hasn’t returned to the thread.
Surely sooner or late the us government is going to see sense and not try to tax non-residents, like every civilised country, and just about every uncivilised on as well.
I don’t doubt that this statement is correct, but the operative phrase is “with the intention to give up US nationality”. When I became a Canadian citizen, I had no such intention and no one can demonstrate otherwise. In practice this is a dead letter.
Referring to an earlier post, former president of Latvia Vaira Vike-Freiberga of gave up her Canadian citizenship to become president. But a Canadian immigration lawyer said he could get it back to her in a week if she was interested. She was Latvian born, refugee after the war and eventually wound up as professor at the University of Quebec in Montreal, before being chosen president of Latvia.
The case of Conrad Black is different. As a convicted felon, he would have trouble even getting a residence permit. Good riddance, say I.
Since when has the US followed what civilized countries do?
Someone above said that my house is an account that has to be reported? Nothing in any form I ever filled out said that. And I have done FAFSA and foreign assets forms. Although their instructions are clear as mud.
Well, what other reason would there be for renouncing American citizenship (that would make sense to an American government agent)? Especially if you live in a country with generally higher taxes.
The law was written to ensnare multimillionaires who tried to escape the IRS. The fact that it was badly written and causes a lot more grief to regular working Joes instead does not seem to bother the IRS or congress.
the only hassle I heard of with RRSP’s is that an American (no matter where they live) must declare all foreign assets over $100,000. That’s one part that’s causing grief to so many dual citizens. you declare it, you haven’t filed tax returns, you are putting the government on notice to look for you.
Doesn’t seem to have stopped him from moving back to his posh Bridle Path home in Toronto, last I heard - complete with Canadian residency permit, since his wife is still Canadian. I had assumed (former) prime minister Harper was only waiting for an opportune time to sneak through a citizenship restitution.
Nah. Renouncing US citizenship doesn’t actually get you out of paying income tax: the USA is also possibly the only country which makes you pay income tax on world wide income even after you’ve renounced your citizenship.
Q1: If you live outside the US, how do they make you pay after you’ve renounced?
A1: The same way the make you pay before you renounce.
Q2: Do your really have to pay US income tax?
A2: Nope. Many places have reciprocal arrangements, and you get tax credits bigger than your tax bill.
Q3: Then why bother?
A3: The US tax forms are /Insane/. And it’s even worse if you earn overseas income.
Q4: What if you’re really rich?
A4: The rich are different.
I’d like to see some cites for that. The US has special reporting requirements for US citizens opening overseas bank accounts. After you no longer have US citizenship you just open a new foreign bank account using your new citizenship. You then stop filing US tax returns. Unless you still have assets in the US what can they do at that point?