Dual nationality exists when two or more nations claim jurisdiction over an individual. This may lead to disputes between the nations claiming the allegiance of the person, requiring that international law settle the matter. This has led to the doctrine of dominant nationality.
See also:
Dual Citizenship and National Laws
Dominant nationality protects individuals from state overreach
Dual citizenship and forced marriages, by Alison Symington
In a forthcoming article of Emory International Law Review (25) 2012, “Dueling nationalities, Dominant and Effective Nationality, and the case of Anwar al-Auluqi”, Abraham U. Kannof argues that the United States should be able under the law to exterminate terrorists like “Anwar al-Aulaqi”. He was a dual Yemeni-US citizen when the United States took him out with an armed drone in September 2011. In such cases, according to Kannof, the United States could treat a belligerent like al-Aulaqi as a dominant and effective citizen of Yemen, and no longer under the protection of the United States, and therefore al-Aulaqi’s Constitutional rights, such as the right not to be deprived of life and liberty without due process of the law, no longer count.
Kannof argues further that the United States also recognizes this international convention of dominant and effective nationality. Indeed, I was able to find quickly a Department of Justice memo, that suggests that dominant nationality could help determine if a person should be allowed to work in jobs for which the law requires a US citizenship and loyalty to the US, in cases where the applicant is a dual citizen of a country for which there is no exemption.
What determines Dominant Nationality? An American woman, Mrs. Strunsky Merge, tried to get reparations from the Republic of Italy to recover damages to her property during WWII; the court denied her claim, because she was a dual national thanks to her Italian husband–the court determined her dominant nationality to be Italian, and therefore she was not entitled to any recovery of damages under the terms of the peace treaty. Kannof writes (p. 118):
In that same year [1955], the Mergé Claim gave the principal statement of the doctrine of dominant and effective nationality. There, the Italian-U.S. Conciliation Commission “looked to general principles of international law for resolution to the issue of dual nationality,” finding that “the sovereign equality of States . . . must yield before the principle of effective nationality whenever such nationality is that of the claiming State.” The Commission established considerations by which an individual’s nationality would be evaluated, including “habitual residence, [t]he conduct of the individual in his economic, social, political, civic and family life, as well as the closer and more effective bond with one of the two States.”
Now, Kannof (p. 123) argues that the dominant and effective nationality test should have many uses outside of the context of international arbitration of disputes, including the assassination of United States home-grown terrorists. I argue that it has important ramifications for dual citizens crossing the United States border, US extraterritorial taxation, FBAR and FATCA. The concept of dual citizenship is inadequate when it comes to determining the issues that we are facing. We need to insist upon the doctrine of dominant nationality in the following cases:
(1) When crossing the border. A person born in the United States but who is a resident and citizen of Canada must have the right to travel to the United State with a Canadian passport because he or she has dominant and effective Canadian citizenship. If the United States could decide unilaterally that it can assassinate a US citizen, then we need to insist upon the protection of Canada, and not travel with a US passport–insisting further, that as having dominant and effective Canadian citizenship, that we have the right and the duty to travel on a Canadian passport.
(2) When paying taxes. Canada says it will not collect US taxes from Canadian citizens. If you are living in Canada and you are Canadian citizen, you should not have to pay taxes or file to IRS, because your dominant nationality is Canadian. The IRS cannot collect any taxes that they may assign to a Canadian citizen resident in Canada, unless they can establish lien on a property or bank account that is in the United States. Get your assets out of the United States, and legally, you don’t have to file, because your dominant nationality is Canadian. But in any case, if the USA could potentially assassinate you because your dominant nationality is not US, then I don’t see why you should have to file a 1040.
(3) When threatened with FBAR and FBAR penalties. The Canadian government says it will not collect FBAR penalties. But those dual citizens with dominant Canadian nationality do not fall under the FBAR law (Bank Secrecy Act), which very clearly states who must file: “Each person subject to the jurisdiction of the United States”. Well, a person with dominant Canadian nationality does not fall under the jurisdiction of the United States but that of Canada. I’m sorry Mr. Geithner, but dual citizens living in Canada don’t have to file. This is clear under international law; and the FBAR law likewise supports this point. So why don’t you just change the rules already to reflect that fact. I urge dual citizens in Canada and abroad to assert your dominant nationality and refuse to file FBARs.
(4) FATCA : When the bank asks you to cede your rights as a Canadian, just simply tell them that your dominant and effective nationality is Canadian. Pull out the law article by Kannof if they don’t know what that is (they won’t).
The doctrine of dominant nationality under international law could indeed have important ramifications for our problem. It is perhaps also a better solution for many dual citizens of the US and another nation, in particular those who do not want to relinquish their citizenship. It is also the practical and common sense solution. And that is why the United States government will fight it tooth and nail.
Petros, I was going to post another one of senator Levin’s nightmares on here, but decided not to. Check out the Defense Act of 2012 that was signed by Obama recently.
geeeez, in your view how does the Defense Act of 2012 impact what I am saying in the post?
I think in section 2 above where it says “Canada says it will not collect taxes from Canadian citizens. ” it should say “…not collect U.S. taxes…”
Thanks for that. I will correct. Indeed, an untruer statement has never been made. 🙂
But the tax treaty obliges both countries to assist the other in collection of valid tax claims.
“A revenue claim of the applicant State that has been finally determined may be accepted for collection by the competent authority of the requested State and, subject to the provisions of paragraph 7, if accepted shall be collected by the requested State as though such revenue claim were the requested State’s own revenue claim finally determined in accordance with the laws applicable to the collection of the requested State’s own taxes.”
http://www.fin.gc.ca/treaties-conventions/usa_-eng.asp
So if a Canadian resident owes taxes in the US and refuses to pay, and if those taxes owed are covered by the treaty, Canada will collect those US taxes as if they were Canadian taxes owed. This is a reciprocal agreement.
The Canadian government’s official stance is that it will not collect US taxes from a Canadian citizen. This is a reason, for those like me who didn’t get serious about Canadian citizenship, to get it with all alacrity.
Petros, first paragraph, treatment of US Citizens.
Petros, how does this square with the tax treaty?
If you mean: “The Canadian government’s official stance is that it will not collect US taxes from a Canadian citizen.” I have not read the entire tax treaty, but I believe that it accords with it.
Read the tax treaty: it is to prevent double taxation, but also to prevent “fiscal evasion”:
“Canada and the United States of America, desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, have agreed as follows: ” etc. Very long, and probably worth reading in its entirety at some point.
Canada will not collect FBAR penalties, ie FINES, but it will help collect a valid claim by the US government for US taxes owed. That tax claim however must be a claim covered by the agreement. I haven’t read it all, but clearly that is part of the treaty, just like an extradition treaty. Mutual cooperation to resolve a claim under the treaty.
Sorry, first paragraph of my article or first paragraph of the 2012 law? I mean I think I know where you are going with this. The killing of al-Auluqi is extremely significant for our situation. If the US can unilaterally take away the citizenship rights of a US citizen, then we are left to find protection where we can. Thus, I am no longer American. I am Canadian. IF they want to take me down, they have to kill a person of dominant Canadian nationality. If they do that without first getting Canada to agree, they are killing the citizen of an ally. This is a casus belli and a reason to rip up all the treaties that ever existed since the war of 1812. But if the United States can kill me, they can no longer claim that they are offering me the “protection” of the United States, and therefore, they do not have the right to tax me or collect my bank account information.
What I’m saying is that Obama, by killing al-Auluqi, did us all a big favor, in that it shows us that our US citizenship is worth a bucket of warm piss.
Hi Ladyfox: As far as I am concerned this point is canonical, for it the official stance and interpretation of the Canadian government of the tax treaty (as posted at the Vancouver Sun):
I think this is also true of France. However, it has yet to be determined if EU law trumps nation-state treaties on this question. See this excellent article by Sokol of the New York Times http://www.nytimes.com/2011/10/07/opinion/07iht-edsokol07.html?_r=1&src=recg
How would the European Court of Justice rule? Well, if the US goes after a French “accidental American” and he or she brings the US gov before the ECJ the question will be resolved.
But whatever the ECJ decides the cat would be out of the bag and the publicity alone would be horrendous (imagine the outrage of EU citizens) and very detrimental to US interests and image.
Hmmm – I see what you are saying — but where other than the Vancouver Sun is this laid out ? Is this actually stated somewhere in a Canadian Government document?
Because what this would mean is that for a Canadian citizen, even if still a dual citizen, no US taxes will be collected by Canada, so that means eg no corporate taxes, no taxes on income over the $92K limit, no estate taxes – and Canada would be a tax haven WRT US taxes for any Canadian citizen earning money overseas in any manner. Just don’t cross the border.
But then what’s the point of renouncing? Why bother to become tax compliant and file the FBARs and then renounce, especially for those who say they’ll never cross the border again?
Cayo was quoting the statement from Canadian Department of Finance.
this “dominant” nationality is quite interesting, and I wish could pop up in the mainstream media somewhere. It has the potential to get people discussing the issue. The current system in effect now is just not compatible with 21st century mobility.
My .02 (I’m a lowly IT manager not a lawyer or an accountant 🙂
I think it’s a very elegant solution. The original intent of FATCA and the FBAR reporting as I understand it was to catch US citizens living in the US who hide their money in overseas accounts to evade taxes or to nab people that flee the US to escape a tax obligation. If the US applied the principle of “dominant nationality” these folks (mostly people living in the US) would still be liable for US taxes incurred when their “effective nationality” was US and subject to pursuit if they attempt to flee to another country. But the duals living and working in their country of citizenship would be exempt because they have demonstrated that their “dominant and effective nationality” is that of their country of residence. The US then has the perfect right to say that these duals are no longer under the protection of the US and cannot claim US assistance while living in their country of residence. If they wish to reclaim that protection then they can simply show their intention by entering the US on a US passport, taking up residence on US territory and filing a 1040 like any other resident US citizen or Green Card holder.
All that seems fair and just to me. It would also be better for the state of residence since they would no longer have to worry about the US exerting sovereignty over that dual. Much simpler for all concerned.
The mainstream media is a joke. I’ve been writing for two years about their incompetence. The articles on expat tax issues is just one example. Many writers have been patsies for the IRS. Others come to the subject with little knowledge and do little research. Those who are knowledgeable, a few well-versed accountants and lawyers, for example, are often constrained by the profession and our reticent to speak. Accounts and lawyers are often guided by a CYA approach, and that means that their articles usually recommend compliance. If I go to jail, it will not be for professional incompetence, but because I am all around s— disturber.
Absolutely, and US taxpayers would save money because they wouldn’t have to pay IRS employees to open all the zero returns coming from Canada. It is win-win.
geeez, I suspect that the reason that it never comes up is because people assume that it has already been applied because it intuitively makes sense. If you are a French-American living in France, French law applies and you should pay French tax on your income and assets in France If you are the same person living in the US, most Americans would insist that US law should apply. If that person has assets or income in both countries, he should pay French taxes on the French stuff and American taxes on the American stuff. It just seems so logical and obvious and so much simpler for everyone
Folks back in the US are genuinely surprised to learn that it doesn’t work that way at all. I called the helpline of a major US tax preparation software vendor one day with a question and both reps I talked to were absolutely convinced that “if you don’t live in the US you don’t have to file or pay American taxes.” It was surreal.
And they could close all those IRS offices in Paris, Frankfurt, London, Beijing which must be costing the US taxpayer a pretty penny…. 🙂
Precisely, and then the only benefit to keeping US citizenship would be the not inconsiderable one of being able to move back to live and work there if you chose, without going through immigration proceedings or applying for a green card. I’m good with that.
“Folks back in the US are genuinely surprised to learn that it doesn’t work that way at all. I called the helpline of a major US tax preparation software vendor one day with a question and both reps I talked to were absolutely convinced that “if you don’t live in the US you don’t have to file or pay American taxes.” It was surreal.”
Victoria, when I moved to Canada seven years ago, my mother’s accountant was preparing my taxes. The first time I had to file to Revenue Canada, I asked that accountant if I also needed to file to the IRS since I have an IRA account and am paying off a student loan. The CPA said I don’t have to file to the IRS any longer since I don’t have any US source income. So I figured a tax expert would know what she’s talking about and went with that all these years until the FATCA story broke in the news. Goes to show even accountants and tax preparers have no idea what the IRS is doing more than half the time.
“Absolutely, and US taxpayers would save money because they wouldn’t have to pay IRS employees to open all the zero returns coming from Canada. It is win-win.”
Petros, I’ve been saying that to my partner all the time! Maybe we should be pushing that point that it’s US taxpayer money the IRS is using to process all these $0 tax owed returns from people overseas. That might infuriate a lot of people. Politicians down south are always harping on how there is too much government spending.
Remember, the IRS is partly this way because if they aren’t, they’ll have budget cuts, reduction in staff, all sorts of things. But as of now, I have yet to hear of a single case of an American expat, moderate successful in a foreign country, is arrested or detained due to tax issues in America. The only cases I’ve seen have been successful (mostly foreign-sounding names) living in America who “had” whopper-sized swiss bank accounts.
But let’s not lose sight of why this FACTA is terrible – we simply can’t open bank accounts. Last year I finally found a place that would open an account for me, but only if I signed a waiver letting them send money to the IRS. Common!! I don’t live there and the money is made in another country. Why should it be this way!