Giving up your US Citizenship

Many clients approach us having made the decision or considering giving up their US citizenship.

In order to renounce US citizenship, an individual is required to show that they have been US tax compliant for the last 5 years. As such, a common process is to regularise the US tax position by filing late returns and related forms before renouncing. The IRS offers amnesty programs, for example, the Streamlined Program, which if eligible, may also be used to file these returns. Other programs are also available and you should contact us to discuss the best option for you.

Failure to become compliance with US returns would result in the individual being considered a “covered expatriate” subject to an exit tax and the exposure to failure to file penalties may still remain. The Exit Tax is computed as if you sold all your assets on the day before you expatriated, and had to report the gain. Currently, net capital gains can be taxed as high as 23.8%, including the net investment income tax.

The decision to give up your citizenship should be approached with caution. You may be subject to an exit tax if your net worth is more than US$2 million or if your average net annual US income tax liability is more than US$162,000. The same applies if you are a long term green card holder so seek advice before acting.

We regularly assist clients in this situation, please contact us for more information.