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USA Topic -- Renouncing U.S. citizenship now both more popular and much more difficult


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No, it's not something I'm currently interested in doing, but who knows about the future.

 

Yet another thing that U.S. embassies are not very helpful with to put it mildly. Not exactly surprising considering what happened here with income letters. 

 

https://www.washingtonpost.com/world/2020/10/27/us-citizenship-renouncement-fatca/

 

Quote

How the coronavirus made it nearly impossible to renounce U.S. citizenship

 

 

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37 minutes ago, Jingthing said:

No, it's not something I'm currently interested in doing, but who knows about the future.

If so & you don't have a second citizenship (that you're comfortable with), it might be worth exploring options for getting one.

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17 minutes ago, onebir said:

If so & you don't have a second citizenship (that you're comfortable with), it might be worth exploring options for getting one.

Well it won't be in Thailand, that's for sure.

I didn't post this to talk about any plans I might have to renounce my citizenship, because I have no such plans.

Obviously if you renounce citizenship you need another one.

Edited by Jingthing
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16 minutes ago, Jingthing said:

Obviously if you renounce citizenship you need another one.

Sure; my point is just that on top of the difficulties reported in the article, getting a second  second citizenship can be difficult/slow/expensive, effectively imposing another barrier to renouncing one's initial one.

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What I understand from reading about this some time back is that it's mostly very wealthy people who want to a lower tax regime.

 

The IRS annual foreign earned income exclusion for US expats is more than $100k and FATCA reporting is a little more than a nuisance unless you have high value international holdings. So, for little people like me and most TVers I guess there's little to be gained from renunciation even to the Caymans.

 

The cases mentioned in WaPo are different though. People who never really lived in the US  but just got stuck with the citizenship because of birth. Which is strange in that you would think that at some point of time in their "real" country they would have been able to declare themselves as citizens, e.g., get the right passport, SS, etc.

 

Plus, as a US citizen you have to be mindful of SS and investments in the US if you have them, which I do. If the shirt hits the ceiling I want to be able to get in the citizens line for my ration of bread.

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1 minute ago, onebir said:

 

Sure; my point is just that on top of the difficulties reported in the article, getting a second  second citizenship can be difficult/slow/expensive, effectively imposing another barrier to renouncing one's initial one.


More importantly, over the years it has progressively gotten more difficult and expensive, so, anyone who thinks they might need it this in the future should consider sorting it out now.

 

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18 minutes ago, Why Me said:

What I understand from reading about this some time back is that it's mostly very wealthy people who want to a lower tax regime.


That characterization, which was particularly prevalent in the left-wing media, was mostly a justification for rules that made it harder to renounce citizenship, disproportionately affecting people without much money, such as those mentioned in the article. Actual rich people can afford to pay lawyers to sort it out for them.

A few years ago there was a story about an American in her 80s who had been an English teacher in Paris for half-a-century. Her whole life was there but, for sentimental reasons, she held onto her US citizenship. Then, under Obamacare, there was an unfair situation by which Americans abroad had to pay a significant amount of money each year, despite not being able to receive any benefits as non-residents. She reluctantly renounced her US citizenship because she simply could not afford it on her French pension.

Today, she would not even have that option, thanks to laws designed to catch the evil millionaires.

From my perspective, your country should not have any right to tax you or interfere with your ability to open foreign bank accounts once you have lived elsewhere for more than six months.

Equally, your access to benefits in your home country should be tied to having paid certain cumulative amounts into the social security pot during your working life. You should be given the option to continue paying that tax while you live abroad and, if you decide not to bother, you should not be entitled to any public assistance if you return in your old age.

 

Edited by donnacha
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2 minutes ago, donnacha said:

That characterization, that was particularly prevalent in left-wing media, was mostly a justification for rules that made it harder to renounce citizenship, disproportionately affecting people without much money, such as those mentioned in the article.

Actually, no, the reason for renouncing, in fact, is mostly wealthy Americans reluctant to disclose their international holdings in FATCA filings. Renunciations were almost unheard of till FATCA came to be enforced. I'll leave you to google the data.

 

5 minutes ago, donnacha said:

A few years ago there was a story about an American in her 80s who had been an English teacher in Paris for half-a-century. Her whole life was there but, for sentimental reasons, she held onto her US citizenship. Then, under Obamacare, there was an unfair situation by which Americans abroad had to pay a significant amount of money each year, despite not being able to receive any benefits as non-residents. She reluctantly renounced her US citizenship because she simply could not afford it on her French pension.

Story is nonsense. Are you a tax-filing American? I am. There's a simple box I check in my return declaring residence abroad to avoid ACA penalty.

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12 minutes ago, Why Me said:

Actually, no, the reason for renouncing, in fact, is mostly wealthy Americans reluctant to disclose their international holdings in FATCA filings. Renunciations were almost unheard of till FATCA came to be enforced.


You state that as the sole reason. I have no idea how many renunciations are tied to that but it is very obviously not the sole reason. Perfectly regular Americans working in regular jobs and living regular lives abroad have to jump through ridiculous hoops compared to other nationalities. There are many non-wealthy Americans who eventually drop their citizenship for that reason. In your zeal to catch the evil millionaires, you crush the regular folks underfoot, even denying their existence.
 

12 minutes ago, Why Me said:

Story is nonsense. Are you a tax-filing American? I am. There's a simple box I check in my return declaring residence abroad to avoid ACA penalty.


What is the case today may not have been the case when Obamacare was originally introduced. The whole scheme has been significantly modified over the years. At initial introduction, this particular woman had this particular problem. Perhaps she missed the simple checkbox, or perhaps it was introduced because of the widely reported stories such as hers.

 

Edited by donnacha
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15 minutes ago, donnacha said:

Actual rich people can afford to pay lawyers to sort it out for them.

Not only that, for the "actual rich" there are "citizenship by investment" schemes that apparently make it quite easy to get a second citizenship (effectively you can buy one.... for  $100k+, with minimal hoop jumping). No lawyer required (for some of them; some apparently are only available through nominated agents, who I guess are mostly lawyers).

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3 minutes ago, donnacha said:

Perfectly regular Americans working in regular jobs and living regular lives abroad have to jump through ridiculous hoops compared to other nationalities.

This seems true; no real need for a UK citizen who's out of the UK for a few years to even file a tax return...

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9 minutes ago, onebir said:

This seems true; no real need for a UK citizen who's out of the UK for a few years to even file a tax return...


Yes, most countries follow that model. The US tax authorities are unusually aggressive. So much for "Land of the Free" if the livestock are not permitted to escape the farm.

Sadly, I have a feeling that many countries, particularly in the EU, will start to shift towards the US model as they struggle to cover the costs of Covid. I expect already high tax rates to increase to 60 or 70% for at least the rest of this decade, along with higher V.A.T. rates.

With working online more acceptable than ever, more citizens will try to escape those higher taxes by moving outside the EU, and this will prompt their governments to change the rules.

 

Edited by donnacha
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7 minutes ago, donnacha said:


Yes, most countries follow that model. The US tax authorities are unusually aggressive. So much for "Land of the Free" if the livestock are not permitted to escape the farm.

Sadly, I have a feeling that many countries, particularly in the EU, will start to shift towards the US model as they struggle to cover the costs of Covid. I expect already high tax rates to increase to 60 or 70% for at least the rest of this decade, along with higher V.A.T. rates.

With working online more acceptable than ever, more citizens will try to escape those higher taxes by moving outside the EU, and this will prompt their governments to change the rules.

Could be a good time to stock up on citizenships then 😛

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14 minutes ago, donnacha said:

I have no idea how many renunciations are tied to that but it is very obviously not the sole reason. Perfectly regular Americans working in regular jobs and living regular lives abroad have to jump through ridiculous hoops compared to other nationalities. There are many non-wealthy Americans who eventually drop their citizenship for that reason.

I never said sole reason but mostly. I am one of those perfectly regular Americans working abroad and you can take it from me the hoops are not arduous at all. FATCA filing is about 15mins. and my tax return takes a couple of hours. And below a certain level of income you don't have to file.

 

I can't compare with other countries but I hear Australians have residency requirements re getting their state pension. None of that for US citizens. And the foreign income exclusion is generous.

 

Repeat, unless you are a seriously wealthy American abroad there's little reason for renunciation. I know because I researched this a couple of years back. Only to find that I am not close to seriously wealthy, doing ok though:-)

 

14 minutes ago, donnacha said:

What is the case today may not have been the case when Obamacare was originally introduced. The whole scheme has been significantly modified over the years.

Why do you say things without doing research? It's always been the case one can exempt oneself by virtue of foreign residence. I know because I've been a filer since long before ACA.

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