Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part Two
Ask your questions about Renunciation and Relinquishment of United States Citizenship and Certificates of Loss of Nationality.
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NB: This discussion is a continuation of an older discussion that became too large for our software to handle well. See Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part One
@George
The banks can freeze your account.
What if I don’t want to give up my US citizenship, but choose to take on a second citizenship? Can I be forced to relinquish my US citizenship after the fact?
I live in Germany and normally would be required to give up my US citizenship in order to become a naturalized citizen here. There are, however, a few exceptions; one of them being if the cost of renouncing is prohibitively high.
If I were granted the exception, I could have German citizenship, have the right to live and work indefinitely anywhere in the EU, leave Germany for months or years at a time without issues with my visa, and still retain US citizenship. That is, if the US can’t corner me into renouncing/relinquishing after the fact.
I don’t make too much money, so the tax issues aren’t such a big deal for me. The German naturalization application specifically asks if you have the intention of giving up your original citizenship. If I check “no”, I assume that the rules regarding loss of citizenship would not apply since I would make it clear that I have no intention of giving up my US citizenship.
Until this point, the Germans rejected US citizens’ applications for exceptions on the basis of cost because relinquishing US citizenship didn’t cost anything before. Now they can’t do that, apparently. I hope I have a shot, and I hope someone out there can help me out here.
Thank you!
… So googling around, and I think I have found the answer to my question above.
The fee for relinquishing is only if you want some sort of formal certificate of loss of citizenship? Is this correct?
Jean,
If anyone would force you to relinquish your US citizenship, it would be Germany if you seriously want their citizenship, i.e. not the US. The US is seemingly trying to hang on to its citizens as those US citizens are subject to US citizenship-based taxation, an anomaly from the residence-based taxation practices of the rest of the world. It has more to do with your yearly tax and bank account reporting compliance obligations than to do with any tax, especially if you fall under the thresholds for filing.
It appears you want the second German citizenship for convenience of working and travelling in the EU. If you find you don’t have a problem in retaining your accounts or opening new ones in what the US considers *foreign financial institutions*, you will be fortunate as under the new IGAs EU countries have signed with the US to implement US FATCA law there, that is becoming more difficult. Good luck in your endeavours.
Most in discussion here wish to renounce or relinquish their US citizenship for the consequences with that citizenship in having chosen to live abroad. This site may not be the best source of information for you. It sounds like you do not wish to permanently work and live abroad but would want to retain your US citizenship to one day return to your homeland.
Here is some discussion on the new fee for relinquishment: http://citizenshipsolutions.ca/2015/09/07/the-2350-relinquishment-fee-does-not-mean-that-people-should-simply-renounce-citizenship/.
With an act of relinquishment, one must have the intention to lose that US citizenship (in your case, by becoming a citizen of Germany). You can inquire at your nearest US Consulate, but it sounds like relinquishment, either for the new fee or no fee, is not for you as you very much wish to retain your US citizenship.
@Jean, the US can’t force you to relinquish just because you take on another citizenship, US law says that the presumption is that you intended to retain your US status – unless you undertake to provide sufficient specific statements and proof to them that you actually intended to relinquish – which you would have to do in person at a US Embassy or Consulate using the specified forms, plus a formal interview with a consular official.
Don’t be fooled into thinking that a lower income means that US extraterritorial taxation isn’t a burden though. People are being denied bank and mortgage accts in the EU because their banks don’t want to deal with US persons – or even their spouses, family and business partners. There is the significant FBAR jeopardy, and the 3520 forms for whatsoever the US considers to be ‘foreign trusts’ – which in Canada for example includes almost all of our local tax preferred or tax deferred savings vehicles (for retirement, education, disability, etc.) set up by our local government. Then there are the treatment of our mutual funds as PFICs, the US capital gains tax levied on the sale of our family home (tax free where we live), the treatment of local businesses (including the private practices of doctors, etc.) as ‘foreign corporations’, etc. In some countries even retirement savings are taxable by the US because the local government tax treaty terms doesn’t exempt them (you’d have to know what the treaty with Germany says). And then there is the issue of the extensive reporting of your estate – even when no US tax is owing. And problems whether you are a beneficiary or and executor of a ‘foreign’ estate…..
Each of those above comes with one or more required forms and extensive complex reporting even if NO US tax is owed. The FBAR applies even to non personal accts belonging to other persons if you have signatory or co-signatory powers (ex. on employer accts, or a power of attorney). And almost every single form comes with significant confiscatory sized potential penalties for not filing – usually levied in units of 10,000. US, or a significant percentage of the asset, and can be applied in layers on the very same asset – even when there is no taxable income from it.
The US also demands that any accompanying forms to US income tax submissions be translated into English – by certified translators. That is very expensive.
I would investigate what is really required in terms of being and remaining US tax compliant from afar before you decide that a low income means you don’t have a potential burden or jeopardy – and also a burden to your non-US spouse, children, business partners, etc.
I speak from experience as a person also with limited income and means.
@Jean I think you’re misunderstanding what the Germans are doing. If someone can’t afford to give up their American citizenship then Germany will allow them to keep it. You on the other hand don’t want to do this. If you tick no on the German citizenship box then a) they’ll simply stop the application there and then assuming you’re not serious about becoming German or b) will then investigate your financial situation to see if you qualify for the exemption or not. They will not simply take your word for it that you can’t afford the relinquishment fee.
The fee applies when you relinquish and yes you get a Certificate of Loss of Nationality (CLN as it’s shortened to). This is issued automatically when your relinquishment is confirmed by the State Department in Washington. You can’t avoid the fee by saying you don’t want a certificate. The problem would come if you told Germany you were relinquishing and then didn’t. The Germans will want to see that CLN as proof that you have relinquished your American citizenship. If you can’t provide it, then the German citizenship would likely be revoked as you have effectively committed fraud.
http://www.dw.com/en/german-court-citizenship-revocation-legal-in-case-of-fraud/a-2030619
Depending on your bank they may also want to see a CLN as proof that you’re no longer an American citizen so they don’t have to report your account/s to the IRS.
Finally as has been said the Americans aren’t interested in you having a second citizenship so long as you still have the US one. It’s the German end of things that will cause you problems, not the US.
@Jean
As far as I know, Germany doesn’t make dual citizenship a problem. Many years ago, America made it a problem. Then America retroactively returned citizenship – I guess they realised they could make money by doing so.
@Polly, actually they do, especially for non-EU nationals. If you come from an EU country/Switzerland then you’re not required to give up your other nationality but for people from other countries it’s a pre-requisite for gaining German citizenship, unless you meet one of the other exemptions.
“Generally, naturalization in Germany is only possible if the former citizenship is renounced. An exception exists for citizens of other EU countries and Switzerland. They may keep their home passport and have dual citizenship. For all others, dual citizenship will only be entitled if the renunciation of the former citizenship is a case of hardship or just not possible. This can be the case if the foreign country does not allow for a renunciation or if the requirements of a renunciation are hard to fulfil.”
http://www.integration-in-bonn.de/en/residence-permission/naturalization-receiving-german-citizenship.html
@Jean
I have to agree with Medea about checking ‘yes’ on your German citizenship application in order to go forward. At least this was the signal I also understood from the German case worker while informing myself about the application last year. That the financial exception applied to me first came out later in the process and I also believe mainly because 1) I was able to articulate and discuss the situation with her in depth and 2) because my case worker was ‘on the ball’ and not bothered by the extra work of having to look into this. I´ve heard of others having problems with their case workers being this helpful. I was lucky, but also because I´m a stay-at-home mom and the ‘support’ pulled over to me from my husband´s income was a bit under the $2350. It´s a tight rope act to prove to the Germans that you earn/have enough funds to support yourself financially, but on the other hand, have a monthly income under the amount of the renounce/relinquishment fee to be eligible.
@ChrisM
What bank was it? I am trying to get the word out to the clueless here in the UK and it would be very useful to know if it is one of the big players and likely to affect lots of people.
@Jean, also forgot to say that if you don’t qualify for the exemption and decide to go ahead the Germans will not finalise your German citizenship until that CLN is produced. You HAVE to give up your American citizenship before they finally grant you the German one.
You other option of course is to move to another EU country where you can keep both citizenships. Will delay the process obviously, but if you can’t meet the exemption then it’s your only option if you want to keep the US citizenship and have another EU one.
I was trying to get something to explain something to Polly and in doing that reasearch came up with the following in a revenue manual;
—–
11.3.25.5 (07-23-2015)
Disclosures to Foreign Countries in Collection Matters
The United States and five of its treaty partners assist each other in the collection of taxes covered by their respective tax treaties. This program is referred to as the Mutual Assistance Collection Program (MCAP) and falls within the scope of the Mutual Assistance Article of the tax treaties in question. The five countries that participate in the MCAP with the U.S. are:
Canada
France
Denmark
Sweden
The Netherlands
Under MCAP, a requested country will endeavor to collect taxes owed to the requesting country by a citizen of the requesting country who is residing in the requested country. Such data as name, address, identification number, type of tax, amount of tax and any other information deemed necessary to assist the collection process is exchanged with the participating treaty partner.
The Deputy Commissioner (International), LB&I, has re-delegated the authority to sign for matters relating to MCAP to the Manager, Overseas Operations and those officially acting for the Manager, Overseas Operations. See Delegation Order 4-12. The same disclosure provisions apply to exchanges made pursuant to MCAP as apply to other exchanges made under the tax treaties
____
More to follow
@Media, Jean may be unable to move to another EU country as an American. Unless there is an EU spouse or child….or Jean applies for entry and residency to another EU country.
@Canadian Brockers, you thought you were so special getting special treatment from the USA on the collection of taxes?
This has been puzzling and I give tanks to Polly for pushing the issue and yes it takes iron to sharpen iron. Being challenged is good.
I also have to give a hat tip to a solicitor who actually knew a thing or two about this.
We all now know of the Joint Committee report which lays out the limited ability to collect;
https://www.jct.gov/publications.html?func=startdown&id=4550
Here is what has troubled me.
I kept hearing the words of the late Canadian Finance Minister and the “special exemption” that was negotiated.
But that also sounded like the clanging of cheap pots which I just heard about the “negotiated special exemption” for registered Canadian accounts. That was BS because it was the same exemption that everyone was getting!!
I scratched my head, did Canada really negotiate something special on collection?
Here are cold facts;
1.) There are only five countries on earth where the USA has bilateral collection and those countries are Canada, France, Denmark, Sweden and Holland.
2.) The USA opted out of everything other than using the mail with respect to the Multilateral Convention on Mutual Assistance….the big collection treaty. They had to opt out because Congress we know would never agree and it was clearly a treaty.
OK, but what about those infamous Canadian Politicians who struck a hard bargain? I had been puzzled because I understand the French a small but and they are highly protective of her Citizens. But alas I do not speak French, nor Swedish, nor Dutch…….
But wait all these treaties have an English counterpart. :
Guess what boys and girls in Canada? YOU ARE NOT SPECIAL.
All FIVE COUNTRIES have the same provision protecting collection against their own Citizens!!!
Here is the actual treaty language from the five countries.
@Canadian Brockers, sorry for squashing the thought you had something special.
@ADCS, this may be useful to Arvey!!!
Netheralns page 60
“4. The assistance provided for in this Article shall not be accorded with respect to the citizen, corporations, or other entities of the State to which application is made”
Sweden page 26
“The assistance provided for in this Article shall not be accorded with respect to the citizens,
companies, or other entities of the State to which the application is made”
Denmark page 32
“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,
France page 31
“The assistance provided for in this Article shall not be accorded with respect to citizens,
companies, or other entities of the Contracting State to which application is made”
Ohhhh Canada;
“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”
__________________________
What does this mean?
1. The treaty language “negotiated” by Canada is IDENTICAL to the same boiler plate language of Denmark!! There is nothing special about it.
2. The boiler plate treaty language “negotiated” by Canada and Denmark is WORSE than the language that France, Holland and Sweden have because French, Dutch and Sweeds are protected no matter what and no matter when!!!
3. ALL other tax treaties have no mutual collection
4. Landed USA immigrants in Canada and Denmark were intentionally thrown under the bus. Landed USA immigrants in France, Holland and Sweden were thrown under the bus too but with a little less thought.
@George
Thx for going to the trouble to research this topic. But Israel is not on your list and their banks froze accounts of americans/duals there who could not prove they were paying their US taxes. So I have the feeling that a lot of bad things can happen no matter what treaties or not have been arranged between governments.
As for getting german citizenship…. this must be new. I lived there for many many years and never heard of any problem before. But then, the laws are changing like quicksand all over the place.
ABC News’s Nightline would like to interview an American overseas who is IN THE PROCESS of renouncing his/her US Citizenship. Geoff Martz who is the show’s producer and with whom I am working on this story about our plight is especially interested in those who are renouncing because of the consequences of FATCA (Foreign Account Compliance Agreement). If necessary, Nightline would be willing to wait to broadcast until after the renunciation is complete (i.e. until the individual obtains his/her Certificate of Loss of Nationality (CLN)). If you are interested in letting Nightline chronicle the days leading up to your renunciation, please contact Geoff Martz at geoff.martz@abc.com or private message Keith to discuss further.
https://www.facebook.com/groups/AmericanExpatriates/523975671101843/?notif_t=group_activity
@Polly
My understanding is that the crackdown on Israel came about because the Treasury Department was concerned during the Swiss crackdown about U.S. person money that had flowed from Switzerland to Israel and was giving Israeli banks a hard time because of that.
@Publius
Thats only part of it. Many people have money hidden in Israel too.
Hi,
Thanks again everyone for the thoughts on streamlined process in relation to renunciation. I guess I have some more digging to do. But (luckily?) I don’t have much money, or a complex financial history. So I hope that the returns will not be too terrible to file…
Over 7 months now since my renunciation, and no sign of my CLN. Has anyone waited much longer than this?
@Publius, the bank was Santander. We had only just opened it as a joint account to take advantage of the favourable rates on savings. For some reason, my main bank HSBC has not asked for anything, but they did recently ask for a copy of my British Passport, which was odd. There was no FATCA side stated about it though. Two different approaches to the same problem maybe?
Chris
If any person in the process of renunciation is interested in an ABC News Nightline interview opportunity, open http://isaacbrocksociety.ca/2015/10/19/interview-opportunity-abc-news-nightline-would-like-to-interview-an-american-living-abroad-who-is-in-the-process-of-renouncing-his-or-her-us-citizenship/
@ChrisM
Yes, many have waited longer than 7 months but I believe reports from London renunciants had been faster. Have you emailed the embassy to ask about the delay? This sometimes speeds the process.
@ChrisM
Thanks. That is a very big one (my bank in fact). I was wondering when they were going to get a shift on. It’s so late. Lots of people are going to be caught out.
@Publius
I remember reading somewhere that the reporting is to take place in stages, new accounts this year, existing accounts next year.