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Renounce US citizenship (Expatriation)

The United States imposes its Income Tax on US PERSONS based on the person’s worldwide income.  It does not matter where you live – if you are a US PERSON or as an advisor have a US PERSON in your investment structure, you (or they) are subject to US Income Tax.

Many American citizens who have lived outside the United States for a number of years, find it increasingly difficult to reconcile paying and reporting taxes on worldwide income to the US.

CAN I RENOUNCE MY US CITIZENSHIP?

This of course is your right – and your decision – but if you are a US citizen and you decide to renounce your US citizenship this can still have substantial tax implications to you, as the US imposes an ‘Exit Tax’ when you renounce your citizenship if you meet certain criteria.

Generally, if you have a net worth in excess of $2 million the exit tax will apply to you.  This tax is based on the inherent gain (in dollar terms) on ALL YOUR ASSETS (including your home!). You will also be taxed on all your deferred compensation—such as pensions at the time of expatriation.

The exit tax will also apply to you, even if your net worth is below $2 million, if you have not complied with your US tax obligations for the last five years!!!

The $2 million trigger will not apply to certain individuals who are dual citizens at birth but the tax will still be imposed if they have not met the five year tax compliance test.

Green Card Holders and the Exit Tax

The exit tax is also imposed on green card holders who have held a green card for 8 out of the last 15 years (referred to as ‘long-term residents’). This can mean that green card holders who have not formerly surrendered the green card are ‘stuck’!!! They remain subject to US Income Tax but cannot afford to surrender the card because of the exit tax they will have to pay.

SUMMARY EXPATRIATION:

Applies to

  • Citizens
  • Green card holders (8 out of last 15 years)

Exit tax if:

  • Net worth in excess of $2 million (value of all assets including house, pensions, etc.)
  • Not compliant with US tax obligations (reporting and paying) for last 5 years

Except:

  • Dual citizen at birth with the following requirements:
  • $2 million net trigger does not apply
  • Must still have been tax compliant for last 5 years

Here to Help

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Contact one of our specialists

London
US Tax & Financial Services Ltd
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London E14 9GE
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Geneva
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US Tax & Financial Services GmbH
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PO Box 1367
CH-8021 Zurich
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