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.
You’re right — elegant and COMMON SENSE.
Thanks for injecting this concept into the conversation!!!
see the treaty linked here http://www.fin.gc.ca/treaties-conventions/USA_-eng.asp
and go to Article XXVI-A “Assistance in Collection” section 8 which states
“No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that
(a) where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State”
This is the section which has been referenced both by Jim Flaherty (in a letter sent to Ms. Denise Savoie MP-Victoria and reporduced on her website with his signature on it) and in quotes by a named Canada Revenue Agency official in at least one media article a couple of months ago, the one I saw was in Financial Post.
The treaty is VERY clear on this point. And it’s any tax revenue claim, it isn’t limited to penalties, at least not to my reading of the treaty.
The tax obligation had to be in existence during the citizen’s time of residence in the U.S. Canada has no treaty obligations to collect tax obligations that may be incurred after residency in the U.S. was given up.
It is completely discretionary if Canada should chose to take such an action. However it is unlikely that such action would succeed because Canadian courts have usually prevented such things because to do so would be an infringe Canadian sovereignty.
I came across this article when browsing through some magazines and sure enough it’s on the website too. This may interest some of you.
The article is titled “In praise of a second (or third) passport” from the Economist.
http://www.economist.com/node/21542413
The section I found most interesting in terms of what we’re discussing here is this:
“The wrong response to this (multicple citizenship) is political protectionism, with states forcing citizens to choose one nationality only, or hampering their right to multiple passports. This seems an odd approach, given that citizenship is so easily acquired. In some countries it is, in effect, on sale. In others, such as America, it may be an accident of birth, with no conscious choice involved. Rather than making a fetish out of passports, a better approach would be to use residence (especially tax residence) as the main criterion for an individual’s rights and responsibilities. That encourages cohesion and commitment, because it stems from a conscious decision to live in a country and abide by its rules. The world is gradually moving in this direction. But many states (mostly poor and ill-run) resist the trend and some rich democracies like the Netherlands and Germany are trying to curb it (see article), offering a variety of excuses.”
Nice find. I think that people want mobility and protection. Government wants subjects who pay taxes. The two are not always compatible because we often need protection from government.
Excellent piece of news there, Petros. It logically is most reasonable. When I was young the definition of an offshore bank account was, and I am paraphrasing,; is a bank account that is held by an American with a foreign domiciled financial institution. How the U.S. can say that I have an offshore bank account when I live in the same country as where my bank account is located is not logical.
It actually is illegal for a U.S. person to have a U.S. based bank account if the address listed on the account is not a U.S. address. So what is their problem? It seems like a lot of overkill to have FATCA and have this law too.
It would do me absolutely no good to have a U.S. based bank account unless I was spending time in the U.S. But even then why would I need one? When my Canadian bank will set up a U.S. denominated account for me that I can use anytime I am over the border.
“It actually is illegal for a U.S. person to have a U.S. based bank account if the address listed on the account is not a U.S. address. ”
It is not illegal to have a US bank account if you live in Canada. I have had one for years. They send my monthly statement to my Canadian address. Where did you find this information?
Given this discussion on Dual citizenship, and Dominant Nationality, you might be interested in the most recent edition of The Economist…
In praise of a second (or third) passport
Multiple identities are natural. Citizenship laws should catch up
http://www.economist.com/node/21542413
zucchero81,
That’s a great story. I wish there were some way to get these stories told before Congress so that they could understand how much confusion there is around this. I go into Paris on occasion and I talk to American friends there and even with all the news around FATCA folks are terribly confused and afraid. Almost everyone would like to get compliant but they don’t know how. And everyone is afraid to talk to the Paris IRS office for fear that they are going to come up on the IRS radar, get audited and get hit with fines. (Most of these folks are English teachers for chrissakes and won’t owe any taxes.) I got an email a few months ago that said that FOR THE VERY FIRST TIME in the history of the American diaspora in Paris (200+ years), the Paris IRS office was auditing Americans in France. Scared the beejesus out of everyone.
Here are a couple of very good books about modern citizenship if anyone is interested in delving into it:
International Migration in the Age of Crisis and Globalization by Andres Solimano (2010).
International Migration and Citizenship Today by Niklaus Steiner (2009).
Citizenship Today: Global Perspectives and Practices edited by T. Alexander Aleinikoff and Douglas Klusmeyer (2001).
Beyond Citizenship by Peter Spiro (2008)
The Aleinikoff is best for a global perspective. For the EU see Marc Morje Howard. For the US perspective see Peter Spiro.
The entire list can be found here http://thefranco-americanflophouse.blogspot.com/2011/06/flophouse-citizenship-international.html
Oops, I wasn’t looking closely. I see that zucchero81 already posted that link at JANUARY 7, 2012 AT 7:25 PM . Oh well, so now you know it is doubly important… 🙂
The other interesting quote that I take from this is:
“But countries that want to clamp down on tax evasion, protect their national language, or deter such foreign customs as forced marriage, should do so through specific laws tailored to these ends, rather than relying on the symbolic power of citizenship. America’s policy of taxing its citizens wherever they live seems especially perverse; it is an accountants’ charter. As for benefits, residency is surely the key.”
mvh
The UK considers me a UK citizen and resident but nonetheless still US tax-domiciled. I thus doubt if they would offer me any protection from double taxation or fbar fines…The US and UK would thus argue that while I msy have dual nstionslity, my primary dominant nationality is still American … So, unlike Canada, I don’t believe US citizens will be offered any protection over here in the UK unless perhaps they’d been born in the UK.
The only way to change that would be to fully renounce my USC. Thus, I am still deemed primarily a US citizen in spite of my dual nationality. And I’m sure the US would agree.
Hey folks, I want to call your attention that Schubert’s message was spammed yesterday. So please read this comment before it gets lost from our memories.
http://isaacbrocksociety.com/2012/01/07/dominant-and-effective-nationality-and-why-it-matters/#comment-586
Reblogged this on Stop Unconstitutional Double Taxation and commented:
This is an excellent post from a few months ago. You can also refer to the “Master Nationality Rule” in International Law
“The UK considers me a UK citizen and resident but nonetheless still US tax-domiciled. I thus doubt if they would offer me any protection from double taxation or fbar fines…”
An interesting, but specious, argument. The English (and Scottish, although that may be slightly different) law of domicile assigns to a person at birth his or her father’s domicile at that time. Changing domicile is far more difficult than the simple act of moving as under the domicile laws of American states. But it is also irrelevant to cross-border taxation. Domicile is relevant to UK taxation of estates, to taxation of unremitted unearned (investment) income abroad. But only insofar as the Treaty provides in tie-breaker provisions, to the rules of cross-border taxation.
It is not for the UK to offer “protection” from taxation or fines, but for the English (etc.) courts to decline to enforce them. And ever since Her Majesty Queen in Right of Province of British Columbia v. Gilbertson, 597 F.2d 1161 (9th Cir. 1979) it has been IRS policy not to appear before a foreign court. For one thing, voluntarily appearing abroad forfeits their sovereign immunity and binds them to a foreign court’s determination of US tax law. You can find the English-law rules regarding foreign tax claims in the book Dicey, Morris & Collins on Conflict of Laws (14th ed. 2006, vol. 2 at p. 105; but the page will be different in the 2010 ed.)
As for the concept of “dominant nationality” the real term is “effective nationality” and it’s an obsolete concept. Since the War, nationality has become more a bearer of rights than of obligations, military and tax and, for some civil-law countries “personal law” of status — and marriage, divorce, etc. — are attached to nationality. With special rules for those with more than one. And within the EU/EEA/Switzerland it would seem that since Micheletti v. Delegación del Gobierno en Catabria, [1992] E.C.R. I-4239 one EU member state must recognise possession of the EU status of any citizen regardless of the old “effective nationality” principle.
On the question “if EU law trumps nation-state treaties on this question” generally a statute trumps a prior treaty provision. That’s the basis on which the AMT was held to trump prior treaties, but it’s a longstanding rule. The EU has made derogations to certain laws, such as those relating to trade treaties; and tax treaties are still largely outside the bailiwick of EU law. But the ECHR (not a part of EU law directly, but EU states must apply it) is a kind of constitutional law, a superlaw that would, in my opinion, supersede a conflicting tax treaty rule. Anyway the French mutual collection provisions haven’t so far as I am aware, been applied to date, and they are far weaker than the Canadian one. The various U.S. treaty collection provisions are discussed in IRS Chief Counsel Advisory 199919034 dated Aug. 6, 1999, discussing the application of IRC § 6330 to levies made for treaty partners. Bruce Zagaris is a tax lawyer who has written on the subject.
@punktlich11
Well, obviously you have a legal background and training and seem very well schooled on these matters, with the many sited references adding an air of authority. That said, in some cases I am not sure what you have said, so will have to read it again. Not having a legal mind, it takes me longer to absorb concepts I have never heard about before, but I do appreciate you taking the time to challenge me on subjects I would never heretofore had an interest or inclination to understand. For that I thank. Now.. I think I will go back and read what you said again. 🙂
Cheers
@JustMe
In case you are curious in Canada the Charter of Rights and Freedoms does trump treaty law and in fact has be ruled to do specifically in a case Chua which involved none other than an attempt for the IRS to impose a collection on a resident of Canada.
*This might be a valid position to take if you never plan to travel to the U.S. again, but what happens if I don’t file and then decide to take a trip to go hiking in the Appalachians? What if I cross the border? Even if I travel on my Canadian passport, it states my U.S. place of birth. I don’t owe any taxes and feel the FBAR reporting is an invasion of privacy, but will I get harassed at the border? Also, does voting in U.S. elections affect the determination of dominant nationality?
@Kristin,
Welcome. You ask some good questions that many of the Canadians here have been dealing with a lot. Hopefully they will see your entry here, but there are many other comments related to your questions on the relinquish thread, which at over 860 comments does seem daunting. I would move your question over there, as they watch it carefully and respond pretty quickly! 🙂
@Kristin: What if I cross the border? Even if I travel on my Canadian passport, it states my U.S. place of birth.”
That is, indeed an issue: persons who travel with foreign passports that show a U.S. place of birth are, if the border guard notices it, asked to explain why they think they are exempt from the requirement of presenting a U.S. passport. Those who have renounced U.S. nationality are advised to bring proof that; those who were born in the U.S. to accredited foreign diplomats usually can explain this; if the issue is in question the State Department Protocol Office has a record. (Where the diplomat’s spouse is a U.S. citizen the child will be, complicating the issue.)
Unlike many countries, the U.S. does not know who all its citizens are. Indeed, qualifying U.S. residence (or status as dependent of USG employee abroad) needs to be proven in the case of citizens born abroad. And for nonmarital children, one year of uninterrupted physical presence in the U.S. Many of these foreign-born children are never registered with a U.S. consular office: they are in fact U.S. citizens but no laws or obligations can be enforced against them because their status is unknown to the USG. There is a number of cases addressing such matters, chiefly relating to births in Mexico where the State Department has disputed claimed facts of (usually maternal) prior residence. Given the state of U.S. tax law, one wonders whether it is anymore advantageous for parents to register the births of their foreign-born children when no future residence in the U.S. is contemplated. Better to save the elements of proof for some possible future occasion if the child has a perfectly useful non-U.S. passport.
And as for passports of “accidental Americans” born in the U.S. to Canadian and other foreign parents: AFAIK only Swiss passports show “place of origin” (i.e. Swiss commune of ancestry or declared “Heimat” or “Bürgerschaft”) and not place of birth. And all foreign-born U.S. citizens would pass casual examination at the border. On the other hand, if a person is known to the USG, it is possible that a scan of the passport (encoded data or chip) would show previous entries and other USG status notes.
The question remains to what degree border guards have been enlisted in the enforcement of U.S. tax laws. Presumably non-criminal issues cannot cause a traveler to be held. I have heard of, but never confirmed, stories of travelers being advised upon entry that there is an issue with the IRS. In the era of FATCA and in an atmosphere where foreign residence and foreign assets of U.S. citizens is looked upon as implicitly disloyal and where such persons have no constituency in Washington, I wonder what the future holds.
@punktlich11
What the future hodls?
The question, of course, needs to be to what degree border guards WILL BE ENLISTED in the enforcement of US tax laws. We have continuing evidence of the US changing law, and retroactively. I think all points to the fact that things will one day change and tax information will be readily available right there at the border crossing. Advancing technology will make it easy. (My thoughts with the caveat that I am one who was intimidated by a US border guard into obtaining a US passport.)
*@calgary411
“intimidated by a US border guard into obtaining a US passport”?
Perhaps I missed something and I haven’t time to read the history of the thread. But everyone who is a US citizen must arrive and depart the USA with a US travel document. As I said, there are thousands who are US citizens but have never documented that fact, or their status is in doubt. One wonders whether, assuming they live abroad and have no need of US nationality, why they should establish it.
Retrospective legislation is common in taxation. It is otherwise unconstitutional and contrary to natural justice: except of course that it gets taken into penal law as tax evasion. Also crimes associated with “terrorism” evade constitutional and human rights limits.
The massive use of digitised data and the public’s failure to object is frightening. Now read this: http://www.wired.com/threatlevel/2012/03/ff_nsadatacenter/all/
Then there’s the story of Ronald Anderson: http://uniset.ca/other/news/wp_ronaldanderson.html
Border guards are unlikely to enforce civil liability. But the data they collect on travellers’ comings and goings may well be shared on government networks as these networks become modernised and interconnected.
@punklich11
Re: “intimidated by a US border guard into obtaining a US passport”? Perhaps I missed something and I haven’t time to read the history of the thread. But everyone who is a US citizen must arrive and depart the USA with a US travel document.
Yes, that is US law (and as I think Steven Mopsick said — the law is the law). However, we find that sometimes US law is the law and sometimes US law is not the law, with US border guards generally ignoring that one for decades. Below are just a few comments, examples of often discussed topic here.
It is my conclusion that I was intimidated (stupid me!) and I continue to wonder why this isn’t some kind of a precedent. From ‘my story’ http://isaacbrocksociety.ca/2011/12/14/my-story-calgary411/:
**@calgary411
“Earlier this year I talked with an immigration lawyer who confirmed that I had absolutely relinquished my U.S. citizenship when I became a Canadian citizen. “
It’s easy to get sidetracked with anecdotal stuff. Whether you “relinquished” your US nationality depends on when you were naturalised in Canada. Whether you acquiesced to the restoration your US nationality (by the Vance v Terrazas and Afryim v Rusk Supreme Court decisions) by availing yourself of an “attribute” of US nationality is a more complex question. For purposes of US taxation, that is the rule: Rev. Rul. 75-357, PLR 8138071.
Fairness or unfairness has little to do with the law. And the decision (or negligence) by a border guard or a prosecutor or other government official to waive a violation of law or a discrepancy does not compromise either the law itself or the rights of the Government to enforce its law (and its secondary law, i.e. rules published in the Federal Register) at some future time.
There are said to be one million dual US-Canadian nationals living in Canada. For most, their US nationality is an irrelevance: only those living near the border who cross into the US have a problem. Think of Stanstead QC/Derby Line VT (the public library & opera house is right on the border, which is virtually the main street of the towns). There are cameras everywhere and a person coming from Canada who wanders into the USA except to use the library is liable to find a border agent approaching him to remind him to go first to the immigration station, actually located some distance from the border. Point Roberts, Wash. is another interesting conflict area, for other reasons: http://articles.latimes.com/2002/jun/09/news/adna-point
The tax complications of accidental and/or unwanted US nationality don’t need to be re-hashed here. Suffice to say that the estates of dual nationals were double-taxed for a decade after Canada switched to CGT on deemed sale at death: it took that long for the tax treaty to be amended.
One learns to live with anomalies just as with other things one is born with (wealth, talent, disability, minority status). That is part of the human condition.
To clarify: If indeed your US nationality was forfeit upon naturalisation in Canada and if it was restored (retroactively but conditionally) by Supreme Court decision then that restoration was subject (under international law acceded in by the USG) to your consent. You probably gave that assent by applying for a new passport. You should have had legal counsel. Unfortunately there aren’t many lawyers competent in this arcane area to which I have devoted much of my life.
@punklitch
“Fairness or unfairness has little to do with the law.”
That is interesting and telling statement. I think there is general sense in the non-lawyer population that there is supposed to be, at least in theory, some sort of connection between laws and fairness. We except that sometimes things don’t work out perfectly that way, but we expect the principle of fairness to play some role in the legal system. Justice and fairness are terms that are often used interchangeably.. Without some value to “fairness” the law seems to be an instrument of control that those with power use over those with out it to get what they want.
“There are said to be one million dual US-Canadian nationals living in
Canada. For most, their US nationality is an irrelevance: only those
living near the border who cross into the US have a problem. ”
Really? Some of us accidental Americans who don’t live in border towns still cross the border (to visit family, go on holiday) Much as I appreciate the difficulties of people in border towns, it hardly makes the rest of our problems go away. Or are you suggesting that we ignore the IRS reporting rules, etc. My many hours of work to produce my 34 pages of US tax and reporting forms (rather than spend thousands to get an accountant to do it) is hardly an “irrelevance”
“The tax complications of accidental and/or unwanted US nationality don’t
need to be re-hashed here. Suffice to say that the estates of dual
nationals were double-taxed for a decade after Canada switched to CGT on
deemed sale at death: it took that long for the tax treaty to be
amended.”
Are you suggesting that estates are not dual taxed now.? As I understand Canada does not have an estate tax, the US does. I suppose if Canada doesn’t tax the estate beyond the taxes due on deemed sale at death, then maybe you could say it is not “double taxation” because only the US is doing it. But the fact that the country in which I live and work doesn’t tax me and then another country with whom I have only minimal connection does tax me fulfills the idea (if maybe not the actual wording) of what double taxation means to me.
But there I go again, thinking laws ought to be fair! Silly me.