According to an article in the Arab Times, Kuwait is going through another one of its periodic crackdowns on holders of dual citizenship, forcing them to choose one nationality or the other. Two years ago the focus was on Kuwaitis with inherited nationality of Arab or South Asian countries; this time, however, they seem to be looking to root out Kuwaitis who were born abroad in jus soli countries — including “accidental Americans” born to in the U.S. to international students who later came back to Kuwait. This could mean long lines outside the U.S. Embassy in Kuwait City, and even bigger numbers of CLNs piling up on State Department desks in Washington, DC waiting to be approved.
As the first linked article states:
Minister of the Interior Sheikh Jaber Al-Khalid Al Sabah says the government will withdraw Kuwaiti citizenship from dual citizenship holders … He added the majority of Kuwaitis holding American passports believe in Kuwaiti citizenship, considering they received the American passport beyond their control. Ambassadors, diplomatic attaches, and students are included in this category. Therefore, holders of dual citizenship should come forward and nullify the other nationality.
Technically the point about ambassadors and diplomatic attaches is incorrect (their children only receive automatic eligiblity for a green card — which also makes them U.S. Persons for purposes of the Internal Revenue Code). But other than that, it seems reasonable to assume that dual nationals who want to continue living in Kuwait will give up U.S. citizenship.
Some MPs are working on a bill to allow dual citizenship, and there’s the occasional supportive editorial on the topic. However, another columnist makes a very perceptive point about why certain other countries are so enthusiastic about dual citizenship:
Most of those who support calls for the recognition of the dual nationality of some citizens believe it is pointless to dwell on this issue as it is just an ordinary concern; hence, it is not detrimental to the nation. They have also argued that having dual nationality is a global phenomenon, citing as a case in point many other countries in the world which allow their citizens to hold more than one nationality.
Personally, I am not convinced with this line of reasoning, not only because such statements are misleading, but most importantly the fact that other countries have allowed their citizens to have dual nationality, in order to benefit from them by forcing them to pay taxes or perform significant national duties. This is not applicable in Kuwait, as the country provides its people with the so-called ‘cradle to grave’ support.
Anyway, I don’t think it’s likely this Kuwaiti dual citizenship bill will be passed, so we’ll be seeing a spike in renunciations of U.S. citizenship. (These will indeed be renunciations rather than relinquishments, except for the few among them who have government or military jobs). And if there’s not a bunch of Arab names in the Federal Register a few quarters from now … well either they didn’t renounce, or more likely their names got quietly dropped, just like most of the two thousand South Koreans who gave up U.S. green cards or citizenship in 2011 but never showed up either.
So if you’re planning to give up U.S. citizenship, my advice is to make your appointment at the consulate or embassy sooner rather than later. Remember, you don’t have to go to the U.S. mission nearest you; if you’re willing to travel, you can shop around for the one with the shortest waiting time. You could even go to one in a third country; just make sure you already have a non-U.S. passport, so you’ll have some way of getting back to your home country.
*There is one statement in this document that is somewhat misleading:
“He added the majority of Kuwaitis holding American passports believe in Kuwaiti citizenship, considering they received the American passport beyond their control. Ambassadors, diplomatic attaches, and students are included in this category. Therefore, holders of dual citizenship should come forward and nullify the other nationality.”
The statement “…they received the American passport behond their control.” The US does not force alll its citizens to receive American passports. Persons born Kuwait, or anywhere else outside of the US to a parent who has US citizenship(and has met the minimum US residence requirements to pass citzenship to a child born abroad) is not “forced” to have a US passport. They are automatically US citizens, whether they realize it or not. but the US does not automatically force a US passport on them. They have to apply for it.
But they are indeed subject to US taxation on their world-wide income, whether they realize it or like it or not. And there are severe US penalties for persons who, because of their US citizenship, have income not reported to the IRS and upon which the tax due has not been paid, or who are required to submit FBAR or FATCA reports on their foreign bank accounts and other financial assets, but fail to do so.
That alone is reason enough to renounce US citizenship.
@Eric: thanks again for another informative post.
Better to get an appointment in a Consulate in Canada. Word came out a few months ago that the Canadian Consulate was serving Americans with Canadian addresses and would refuse appointments from others. Can’t remember when or where I heard this any more.
@Roger, It seems to me that “US passport” is a metonymy for “US citizenship”. Technically wrong, but essentially correct.
*@Petros, I totally agree with you.
However, I believe it is important to make it abundantly clear that are many persons who live outside of the US who have US citizenship who never in their whole lives have held a US passport.
The “typical” legislator in Washington does not understand this.To them the US citizen living abroad was (1) born in the US and (2) has moved abroad for the sole purpose of making a fortune by living “Tax Free,” and has made this move to illegally evade US taxes. It is this mistaken impression that results them throwing Americans living abroad as traitorous tax evaders that merit every penalty Congress can dream up to punish them.
*@Petros,
Regarding US consulates in Canada only serving US citizens with Canadian addresses, it is not “untypical” of foreign consulates to only serve citizens of the country they represent who live within the country where the consulate is located.
Several years ago (30+ some years) when Australia required a visa of US citizens to enter that country, I took advantage of a trip to Montreal to visit the Australian counsulate to obtain this visa since there was none in Miami, where I lived, and I hoped this way to not have to send my passport to the Australian consulate there to obtain the visa.
I did not have to make an appointment at the Australian consulate in Montreal, but when I went there with my US passport to obtain a visa to enter Australia I was informed that as a resident of the US, I would have to obtain my Australian visa from an Australian consulate in the US. They were very sorry, but they were not authorized to issue visas to persons who were not residents of Canada. So ended up having to send it to Washington.
I am aware that some counsulates are even more restrictive than that. I can recall at one time, I don’t know how it is today, only the Brazilian consulate that serves the particular state in which the American applying for a visa to visit Brazil resided was authorized to issue that person a Brazilian tourist visa.
Some countries and their consulates are much more liberal. Once when I went to Mexico City I took both my wife’s and my passport to the Yugoslavian consulate there. We were booked on a organized bus tour trip to Europe that included going across the border to stay overnight in Ljubljana, which was then part of Yougoslavia. (I think it is in Croatia today.) The Yugoslav consul in Mexico City even allowed me to sign the visa application for my wife, pay the fee and I was in and out of the consulate with visas in both of our passports in about 10 minutes. It was a small consulate with only the consul and a secretary.
@Roger, The Brazilian consulates only issue visas to residents of the area that they serve, if the person applies by mail. I think this is done to ensure that the volume of visa applications is split into multiple consulates. In person, they serve anyone.
http://www.consbrasdc.org/english/service.asp?id_en_service=14
I have a Brazilian friend who was visiting the US and needed a visa to travel to Canada. She was able to get it at a Canadian consulate in the US even though she did not reside in the US.
Ljubljana is the capital of Slovenia.
http://acs.ait.org.tw/acs-faq.html
It sounds pretty easy to renounce in Taiwan where there isn’t an actual consulate. The AIT building looks inviting and I’ll bet the second appointment can be made within days …
In order to renounce U.S. citizenship, you will need to come to
AIT/American Citizen Services at least twice. On your first visit (which
usually does not require an appointment), we will provide you with a
worksheet which helps you prepare your statement of intent and required
documents. You will need to take this worksheet home with you and
compile some information for us. If, after reading the information that
we provide, you are convinced that you want to renounce your
citizenship, you will need to call our staff to make an appointment
(2-2162-2306). Upon notification that you are coming back for a second
visit, our office will prepare some documentation here. For further
information about renunciation of U.S. citizenship, please click here: http://www.travel.state.gov/law/citizenship/citizenship_777.html
A new fee of $450 will be charged for documentation of formal renunciation of U.S. citizenship.
Fees are payable prior to the renunciation ceremony.
Being American and living in Kuwait is a serious disadvantage because Kuwait doesn’t have an income tax on individuals. There is no foreign tax credit.
@roger conklin- I agree that the statement is misleading but I don’t beleive that it was intended to be misleading. I think that what happens is that for a none U.S. person they take the law that permits only U.S. citizens to carry U.S. passports and they fuse that with the imposition of U.S. citizenship based on jus soli thus rendering the two as being the same thing as far as the can comprehend English usage.
I believe that this points to the futility of the U.S. attempt to impose citizenship based taxation on expats because the problems of translating U.S. tax law into a form in which it can be understood by none English speakers is impossible. The IRS doesn’t have a staff of translators and linguist on hand that can understand how the idioms and word construction of English can best be translated into the other languages of the world. Nina Olsen referred to this problem in her report on the IRS and none resident taxation.
One of the principles upon which the legitimacy of the application of a law is based is its, “perspicuity” or clearness. Translations are best approximations and many things in our languages are not translateable at all. We all know how word order and puncuation can alter completely the meaning of a sentence. If U.S. tax law cannot be rendered in such a way as to be understood by the person who is to be taxed then the application of that law and it penalties is clearly unjust.
*@recalcitrantexpat, believe it or not the IRS actually has a Multi Language Initative. Here is the link:
http://www.irs.gov/irm/part22/irm_22-031-001.html#d0e972
As I galance through this information it appears that it is directed towards individuals who live in the US who are not proficient in English as opposed to US citizens abroad who don’t know English. The primary foreign languages being focused on by the IRS, according to this document, are Spanish, Vietnamese, Chinese, Korean and Russian.
IRS telephone assistance for overseas filers is practically non-existent. Unlike in the US where there are toll-free phone numbers available, if you live abroad then you are on your own to dial a number in the US or used one of the computer-based means for calling the US. Generally you can call toll-free numbers in the US (often referred to as 800 numbers) but these calls are charged for and not free if you dial internationally from abroad.
I have no personal experience, but others who have reached the IRS by phone (it is not easy, you may wait on the line listening to a recorded announcment for a half hour or even hours.) If your question relates to specific topics with respect to US taxpayers resident outside of the US, the chances the the IRS agent can help you is zero. In essence there is no telephone assistance available to US persons resident abroad. This is one of the items focused on by Taxpayer Advocate Nina Olson in her 2011 report to Congress and the Commissioner of the IRS. As you are aware her report has so far been totally ignored.
The attitude of the IRS is that if you live overseas and don’t speak English or know enough to fill out US tax forms, that is your problem. It is up to you to find a solution. Don’t expect any sympathy or help from the IRS.
In 2009 when I found out that the earliest appointment I could get for an appointment to renounce in Bern was well into 2010, I called Paris and London to see if I could get an appointment there. Fat Chance. My experience was that you can only renounce in the embassy of the country where you are residing (and where your other passport is from).
*@shadowraider, your are 100% correct. With no income tax, there is no foreign tax credit to offset the US tax on foreign income. This lays bare the real pupose of US taxation of citizens living abroad. First and formost it is a punishment for living in a country whose tax laws do not mirror those of the US. So you will be taxed by the US, as if it were some sort of a crime.
On the other hand if you live in a country with a high tax on income, the foreign tax credits you accumulate by paying those foreign income taxes may very likely totally offset your US tax obligation so that you end up owing nothing to the IRS But you have to prove it by filing a US tax return and supplying all of the documentation to prove you paid the income tax you claim for foreign tax credit purposes, plus all of the other forms.
In the latter case you produce zero tax revenue for the US Treasury So the primary purpose of citizenship based taxation is not to generate revenue for the US Treasury but instead to substantite that you have paid an income tax to somebody.
What kind of sense is there in a tax policy like this? Why shoul it matter to the US Congress how other countries raise their tax revenues? Kuwait is not alone. There are several other countries which raise either 100% or the vast majority of their tax revenue through consumption, wealth and/or other non-income taxes. None of these are either decuctible or useable for foreign tax credit purposes in filing your US tax return if you live and work abroad. State or local personal property taxes are deductible if you live in the US, but they are specifically singled-out as not deductible if paid to a foreign government.
Why should the US citizen be punished fiscally for living in a country with a tax system that is diferent from our own? I have yet to hear any even half-logical explanation for this. Yet Congress insits that it is only “fair” that US citizens abroad pay their full share of US taxes. That is the justification legislators always use in introducing legislation to abolish the Foreign Earned Income Exclusion.
@ recalcitrantexpat; re “I believe that this points to the futility of the U.S. attempt to impose citizenship based taxation on expats because the problems of translating U.S. tax law into a form in which it can be understood by non-English speakers is impossible.”
And as many have pointed out here, we don’t even understand it if we are native English speakers with sufficient levels of education and literacy. None of the specialized trade terms like ‘reasonable cause’ mean what we would think of, when we read it as non-professionals.
Expats abroad also have to have all their supporting documentation translated to the IRS satisfaction.
The IRS doesn’t address literacy levels abroad either. Yet, inside the US they know that the actual literacy levels of the population have significant numbers extremes at the low end of the literacy spectrum – of adults who do not have the functional literacy and numeracy skills to read and comply with IRS notices and forms. The IALS http://www.statcan.gc.ca/pub/89-588-x/4152886-eng.htm demonstrates this (tellingly, the US didn’t participate as far as I can tell). “Document literacy — the knowledge and skills required to locate and use information contained in various formats, including job applications,
payroll forms, transportation schedules, maps, tables and graphics ;”
and “Quantitative literacy — the knowledge and skills required to apply arithmetic operations, either alone or sequentially, to numbers embedded in printed materials, such as balancing a cheque book, figuring out a tip, completing an order form or determining the amount of interest on a loan from an advertisement.”
I’ve posted the link below re clear language before, but I’d like to see the TAS refer to it vis a vis those abroad, as we have no access to free or volunteer or low cost community tax clinics for seniors, low income filers, or those with low literacy and English language skills – which exist in the US. For example, if the IRS doesn’t produce materials in French, how did they think those in Quebec and other Canadian areas where unilingual francophones are the majority would access information? How would those with other print disabilities (ex. low vision) or cognitive and mental health disabilities cope?
See http://www.plainlanguage.gov/plLaw/index.cfm
“Plain Language: It’s the law”
“President Obama signed the Plain Writing Act of 2010
”
on October 13, 2010. The law requires that federal agencies use “clear
Government communication that the public can understand and use.” On
January 18, 2011, he issued a new Executive Order, “E.O. 13563 – Improving Regulation and Regulatory Review.
It states that “[our regulatory system] must ensure that regulations
are accessible, consistent, written in plain language, and easy to
understand.”
Two other executive orders (E.O. 12866
and E.O. 12988
) cover the use of plain language in regulations.”
This is a serious issue for an aging population as well:
I shudder to think what US ‘compliance’ would be like for those aging abroad, with visual impairments, difficulties with print materials, limited incomes, and perhaps memory and other cognitive declines. A parent or partner could easily fall behind in filing, or filing sufficiently without error, and be prey to the FBAR, FATCA and US tax return penalty regimes. No-one else would want to take on that burden either.
Add the literacy, language and disability barriers up with the already incomprehensible and expensive US tax reporting burden, and it is a recipe for disaster for those living abroad – and a windfall for the US reaping penalty and fine revenues.
Another reason to renounce while we can – so that we’re not adding the unethical US extraterritorial citizenship-based tax burden to the ones our family will already shoulder as we age and lose independence.
@Roger, sorry the Alternate Minimum Tax kills the Foreign Tax Credit. Even in countries with a tax treaty with the United States, because of the Last-in-Time Rule. So being in a high tax jurisdiction just means paying high tax there, plus the AMT in the United States. Then, it would be better to be pulling six digits in Kuwait. You only pay US taxes then, though I’m sure Kuwait may have some interesting ways of taxing people like a VAT.
*@Shadowraider, In a similar situation I had a US friend attending a trade show in Brazil. He turned up a sales opportunity in Argentina, but at that time Argentina also required visas of US citizens. He was able to visit the Argentine consulate in Rio de Janeiro and obtain an Argentine visa with no problem. It would have been a tremendous burden to fly back to Miami in order to get an Argentine visa and fly back to Buenos Aires just like it would have been for your Brazilian friend to fly back to Rio from the US to get a visa and then fly back north to enter Canada.
Sometimes common sense does prevail.
In those days of standard air fares, the round-trip air fare between Miami and Buenos Aires was only $10 more than the round-trip fare between Rio de Janeiro and Miami, so he was able to get his Pan-Am ticket reissued to change it to go on to Buenos Aires for only $10. That saved him the several hundred dollars it would have cost him to by a separate round trip ticket Rio-Buenos-Aires-Rio. Intermediate stops were permitted under the fare structure in those days as long as the total miles flown did not exceed a specific maximum mileage permitted for the fare to the most distant point.
Fares are much different today.
@Roger, I have given up trying to understand how airlines calculate their prices. There doesn’t seem to be any logic to it. For example, a flight from city A to city B may cost more than a flight from city A to city C with a layover in city B. A one-way international flight often costs more than an entire round trip.
According to the IRS, foreign real estate taxes can be included in itemized deductions.
http://www.irs.gov/publications/p17/ch22.html
*@Shadowraider, Yes, foreign real estate taxes can be claimed as a deduction, but foreign sales and personal property taxes are not deductible, according to IRS Pub 54, the instruction for us persons abroad. In the US personal prpperty taxes are deductible and you generally have a choice as to whether to deduct state income taxes or state sales taxes. I think it is one or the other, but not both.
Today I think air fares are pretty much calculated on the basis of how much persons are willing to pay. Back in the “olden” days the prices were regulated by the governments. That was before deregulatoin.
@Petros & Roger: Some of them were probably actually forced to get physical U.S. passports too and not just the citizenship. E.g. parents doing a degree in the U.S., had a baby there, got a Kuwaiti passport for the baby or had him included on the father’s own passport, took the baby back to Kuwait on holiday to show all the relatives, but then found out when the holiday was over that they’d had no choice but to get the baby a U.S. passport to bring him to the U.S. with them. (Technically I think the State Department says that U.S. citizens are supposed to “use” a U.S. passport to leave the U.S. too, but since the U.S. doesn’t check passports during the exit control procedures, no one ever finds out that this law is regularly broken). IIRC that’s similar to what happened to Don Pomodoro — denied a U.S. visa because of U.S. birthplace. Not to mention Boris Johnson.
@ConfederateH & em: there seem to be ways to “hack” the residency requirement. E.g. student visa in the target country. Taiwan would probably be a good idea for me, except that HK will not give me an actual passport until I renounce U.S. citizenship so I would have to use a stateless person’s travel document (“Hong Kong Document of Identity for Visa Purposes), and Taiwan probably will not issue an entry permit to someone using an HKDI especially if I am still holding a U.S. passport. (Due to the fun of Beijing/Taipei politics, Taiwan does not actually give visas to HKers, but separate booklet “entry permits”, and makes it much easier to use a non-HK passport to travel there).
*@Eric, I suspect you are right on all counts. I have worked with US citizens who had two additional passports based on their mother’s and their father’s diferent nationalities. This gave them a lot of liberty in selecting which was the most convenient in entering into a foreign country, but they were always careful to us their US passports in entering and leaving the US. Yes, the US controls are pretty loose when leaving the country since they are not “stamped out” by immigration when they leave the US, and I do suspect, as you have stated, that more than a few US citizens slip out using foreign passports. That is just a guess on my part, but it seems like it could happen.
The case I remember of the Brazilian born in Washington when his dad was Brazil’s military attache led him into being issued a US passport when he went to the US consulate in Rio de Janeiro to get a US visa in his Brazilian passport. He should have insisted that he was not a US citizen since children born to diplomats in the US are not US citizens.
He probably thought the path of least resistance would be to take out a US passport because then he woud never have to be concerned in the future about getting a visa to visit the US, but little did he realize, I am sure, the “can of worms” he was allowing to be opened with respect to the US tax liabilities, FBAR and now FATCA reports requriements this created for him.
This was some 30 or 35 years ago. Things have gotten much tougher for persons with US passports living abroad today than they were back then. FBAR reports were required back then, but this law was never disclosed to US citizens abroad until 2009 when, for the very first time, it was mentioned in Pub 54, instructions for US citizens living abroad.
These are things the consulates don’t tell people in his situation about.
Roger, the FBAR law has been around for a LONG time. I remember when I was still in my late teens, when I first saw the form. If you had $10,000 in a foreign bank account, you were supposed to file the form. At that time, the most I ever had was $1,000 in my European bank account to pay rent so I never worried about it.
The reason that I remember this is because I always wondered why they kept the reporting requirement to some low level ($10,000) and they never increased the amount. Keep in mind this was nearly 20 years ago so 10k today is not the 10k of 20 years ago.
*geeez, Yes the FBAR has been around since 1970. Its existance however was never published in IRS documents for overseas taxpayers until Congress changed the legislation with respect to enforcing this law, transferring it from the Treasury Department to the IRS (which is of course part of the Treasury Department). It was not until 2009 that the requirement to submit FBAR reports was published in the information for overseas tax filer and most Americans abroad who receive or access this publication became aware for the first time of the requirement to report all foreign bank accounts if their total value was $10,000 or more on any day during the calendar year. To most abroad FBAR was a closely guarded secret of which they were totally unaware.
The on-line Oanda website with historical information on the value of foreign currencies only goes back to 1990. From that website if you had the equivalend of $10,000 in Swiss Francs deposited in a Swiss bank in 1990, that would have been SW FR15,556. Because the Swiss Frank has increased in value with respect to the US dollar over thsee 16 years, the equivalent of US$10,000 in Swiss Francs today is 9,735. In other words “$10,000” in Swiss franks has depreciated in dollar value by 37%. So $9,735 in Swiss Francs is now equivalent to US$10,000.
But when you consider the purchasing power of the US dollar today compared to what it was in 1990, then according to the US Inflation Calculator website,which is I believe based on changes in the CPI – Customer Price Index, it takes $1.753 in the US to purchase what you could purchase for $1.00 in 1990. The conclusion therefore is that since there is no indexing of the $10,000 value in the FBAR legislation, given the appreciation of the Swiss Frank and the depreciation of the purchasing power of the US dollar, then your $10,000 tranlated into Swiss Francs back in 1990 is worth the equivalent of about $3,594 in dollars in the US today which is about 1/3 of what it was worth in 1990.
Having money deposited in a bank account abroad in a currency like the Swiss franc, Euro or Brazilian Real, all of which have skyrocketed in value with respect to the US dollar, means that the FBAR reporting threshhold today, compared with what it was just 16 years ago in 1990, has dropped by about 2/3. If you live abroad your funcional currency is not the US dollar but the currency of the country where you live.
And if information were available, to compare with 1970, which is certainly is somewhere, then the equivalent reporting threshold value today is even much lower.
That is why least some of the more recent tax legislation, such as the minimum income requiring the filing of a tax return, the foreign earned income exclusion, etc. have some sort of indexing. But FBAR did not and I don’t believe FATCA does either. But even the indexing that does exist in some of the more recent tax legislation still only considers the internal loss of the value of the dollar but never its loss of value with respect to other currencies thast US citizens living abroad use in their daily lives..
The lack of indexing just pours more salt into the wound to kill the US citizen who lives abroad in a country the vaolue of whose currency has appreciated with respect to the US dollar.
And that is just about everywhere in the world today. And it is just one more argument against any semblance of fairness in subjecting US citizens resident in another country to US tax laws as if they had never left home and were still living in the US. The cards are really srtacked against the person with US citizenship who lives abroad. there should be no surprise as to why they are l ining up by the thousands at US consulates around the world to renouce their citizenship as the onlyh way to eventually excape this brutal fiscal punishment for exercising the basic universal human right of residing anywhere in the world an American citizen might want to live. .
*@all: Correction: 1990 was 22 years ago, not 16. And 1970, when FBAR reporting was enacted, was 42 years ago.