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Is the process lengthy and/or difficult?
The renunciation itself is fairly straightforward. It involves meeting with a consular official at a US embassy or consulate and taking an oath of renunciation. The official will review paperwork and will ask questions to ensure that the individual understands the ramifications of the act – the primary one being that the act of renunciation is irrevocable.
However, any individual considering expatriation should carefully consider the effect that the expatriation may have from a US tax perspective. Anyone who expatriates will be required to certify that they have been compliant with their US tax and reporting obligations for a period of 5 years.
In addition, individuals who have a net worth in excess of $2 million (or who meet an income tax threshold) may be subject to an “exit tax” and a tax on certain future gifts. The exit tax rules can be complex and should be considered in detail before an appointment is made with an embassy.
How long does the process normally take?
The process begins by requesting an appointment with the US embassy. Depending on the embassy and the volume of appointments they are managing, the wait for an appointment can be a few weeks to a month or more. After the appointment, the documents will be sent to the US Department of State for processing. The State Department will then issue a Certificate of Loss of Nationality (‘CLN’) confirming that the individual is no longer a US citizen. The wait for the CLN also varies but typically arrives in a few months.
Will I be able to travel to the US?
We are often asked whether someone will be able to travel to the US after they give up US citizenship and whether this process will be more difficult. The important thing to remember is that an expatriate will be treated as any other non-US citizen (with a few exceptions). If an expatriate is a UK citizen, they will be able to travel to the US under the visa waiver program. This allows citizens of participating countries to travel to the US for work or tourist for up to 90 days without obtaining a visa.
A potential expatriate should be aware that the visa waiver program could be revised or terminated and their ability to travel to the US could be restricted. They should also be aware that the ability to travel to the US without getting a visa is very different than having the right to live and work in the US at will.
Another potential issue is the so-called “Reed Amendment”. This provision allows certain expatriates from being denied entry to the US if they are determined to have expatriated for tax-motivated reasons. The effectiveness of this provision is complicated, but it is very rarely enforced (if ever).
Can I travel to the US while I am waiting for my CLN?
The best advice is that an individual should avoid travelling to the US after their expatriation appointment at an embassy and before receiving their CLN. This is because they may be asked to present a US passport and will not have the CLN to serve as proof that they have given it up.
Will I continue to be taxed in the US for 10 (or more) years?
Under previous law, certain individuals who relinquished US citizenship remained exposed to US federal tax in years in which they spent significant time in the US. These rules, known as the “shadow period”, changed in 2008 and do not apply to individuals who expatriate after 2008. Under current law, once an individual expatriates he or she will no longer be subject to US federal tax except on certain US source income.
If my children are still minors, can I cause them to lose their US citizenship or can they expatriate themselves?
It is not possible to cause your child to lose his or her citizenship. Although a minor can technically expatriate themselves prior to reaching age 18, they will be required to show that they understand the ramifications of the act of expatriation and are not being coerced into making the decision.
After I expatriate, I will not have to file any additional US tax returns, right?
As explained earlier, it is possible to completely sever all tax ties with the US by expatriating. However, individuals who have US-source income may still face a US tax filing obligation.
Written by: Chris McLemore, Attorney, Butler Snow