The motivation behind renunciation is usually traced back to tax reduction and avoidance within the US. This is because US expats are taxed wherever they go in the world. Renouncing your US citizenship isn’t easy and should be heavily considered before you decide to move on and do it.
FATCA is a tax regulation that explicitly targets U.S. citizens that have assets outside the country. Under this act, such individuals are required to report those foreign assets. Renunciation is also a way to avoid double taxation. A U.S. citizen in a foreign country is obligated to pay taxes to the United States and the country of residence.
There are some downsides to this as well. Despite the renunciation, the applicant still has to file their previous tax obligations. Additionally, the individual has to file a form 8 along with the last five years’ worth of tax records.
Also, if it’s found that the motive for renunciation is solely based on tax avoidance, then the person may be barred from entering the United States ever again.
How to Renounce Your U.S. Citizenship?
According to the provisions of Section 349(a)(5), the renunciation process can only take place in person.
To renounce their U.S. citizenship, a person must:
- Appear before a U.S. consular or diplomatic officer in a foreign country.
- A meeting with the diplomatic agent should take place in the foreign U.S. Embassy or Consulate.
- Sign an oath of renunciation.
Failing to meet the criteria will render the renunciation null or void, with no legal authority.
On the applicant’s end, the process is quite simple. However, the complexity and intricacy of the matter making it a daunting task for the U.S. Embassy or Consulate. This is reflected in the cost of renunciation, which amounts to $2,350.
Limitations of the Renunciation
Act of renunciation requires you to give up all the rights and privileges of being a U.S. citizen. Yet, there’s no escape from some of the obligations. The person renouncing citizenship still has to repay their debts and clear their taxes.
Moreover, renunciation isn’t a way to avoid prosecution for a crime someone committed or may commit in the future and laws of the United States would be followed in the court procedure.
Irreversible Nature
Renouncing one’s citizenship is an irrevocable act. No request for reinstatement will be entertained after that. However, under section 351(b) of INA only the individuals who renounced or lost their citizenship before the age of eighteen can request reinstatement.
If this is an area you are exploring or want to ask questions on, please email me at info@investmentsforexpats.com.
