U.S. Taxation of Expatriate
BENEFITS AND BURDENS OF
RELINQUISHMENT (OR RENOUNCEMENT)
OF U.S. CITIZENSHIP OR TERMINATION OF
U.S. LONG-TERM RESIDENCY
U.S. Taxation of the Expatriate
1. Relinquishment (or Renouncement) of U.S. Citizenship or Termination of U.S. Long-Term Residency by an individual
- who does not satisfy either of the Annual Net Income Test or the Net Worth Test, and
- who complies with the Certification Procedures.
- Individual will not be subject to the Alternative Tax Regime for income tax purposes upon relinquishment (or Renouncement) of U.S. citizenship or termination of U.S. Long-Term Residency.
- Need to discuss with Immigration counsel the effects on relinquishment (or Renouncement) of citizenship or termination of U.S. Long-Term Residency on (a) the future ability to enter into the U.S., (b) the preclusion of the right to immigrate immediate family members to the U.S., (c) the inability to work in the U.S. without obtaining a work visa, (d) the inability to obtain a U.S. driver’s license and (e) the inability to obtain U.S. car insurance.
2. Relinquishment (or Renouncement) ofU.S. Citizenship or Termination ofU.S. Long-Term Residency by an individual
- who satisfies either the Annual Net Income Test or the Net Worth Test; or
- who fails to comply with the Certification Procedures.
- If the expatriated individual gives notice of the expatriating act and provides the annual statement under amended IRC Section 6039G; then
(a) the U.S. will not tax income from abroad, interest from foreign lenders, dividends from foreign corporations, and gains from sale of foreign source assets.
(b) No. U.S. gift or estate taxes on donative transfers of foreign source assets.
- Individual will be subject to the Alternative Tax Regime for income tax purposes for the 10 taxable years ending after residency termination (see IRC Section 877).
- An expatriated individual continues to be treated as a U.S. citizen until the individual gives notice of an expatriating act to the Secretary of State or the Secretary of Homeland Security, and provides a statement under IRC Section 6039G (Form 8854).
- Expatriation involves eliminating all contacts that the individual has that might lead to the conclusion that he or she remains domiciled in the U.S.
- Individual who relinquishes or renounces his U.S. citizenship may be determined by the Attorney General to have renounced his or her citizenship by the United States and thereby be “excludable” [namely, barred] from entry into the United States and risks being added to future “exclusion list” by the State Department circulated to consular posts.
- The Secretary of the Treasury is required to publish in the Federal Register the names of all former U.S. citizens with respect to whom it receives the required statements or whose names or certificates of loss of nationality it receives under the information-sharing provisions.