As members approach retirement age, and if they no longer have plans to live in the United States, the question of citizenship renunciation has come up, as any US Social Security and other pensions are potentially taxable (after a certain taxable income level is reached) in both the US and the country in which they reside.
The following is a general guideline of possible things to be aware of, bearing in mind that each case is and will be treated individually by the State Department and US authorities.
The most common cases of renunciation are submitted by “accidental Americans,” who were born on US soil during a temporary stay in the US by their non-US citizen mother. These individuals, for the most part, never resided nor have had intentions of residing full-time in the US.
The Department of State (DoS) has a good outline of the process; the fees and forms are occasionally updated, so make sure to have the latest information. The link is provided at the end of this article. What should be clear is that prior to starting the renunciation process, the individual MUST have citizenship in another country. The DoS will NOT help with this. It is not their responsibility. Applying for citizenship in any country has different requirements and timelines. The US as a general policy allows its citizens to hold more than one passport. There are exceptions, but it is the individual’s responsibility to investigate this.
Dual citizenship is not available in all countries; several do not allow dual citizenship – again, find out first. If someone has not acquired citizenship in another country, they will be rendering themselves stateless and will not be able to get a passport or receive the protection and benefits of any country.
Renunciation for tax purposes only is generally frowned upon by US officials. While this may not affect the decision to allow someone to renounce, a variety of reasons for wanting/needing to renounce should be laid out to the DoS. Depending on the individual(s)’ assets, there may be an “exit fee” (potential “future taxes”) in addition to the filing fees, which in some cases might be substantial. The fee, if any, is determined through a case-by-case evaluation.
A parent cannot change the citizenship of a child automatically. If the child is under the age of 18, they can challenge the renunciation when they reach the age of majority. Please refer to the DoS link for more clarifications.
If the renunciation is approved, please be aware that the renunciation document must be issued to and accepted by the individual. This comes from the DoS. The renunciation is not valid until the actual document is in the possession of the applicant as of the date printed on the official renunciation document. It is not, as some people believe, effective when the US passport is returned at the US Consulate to be sent to Washington DC for cancellation.
After renouncing their US citizenship, the individual will be treated like any other foreign national from then on. There is no turning back once the process is completed. Having been a US citizen is not a determining factor when deciding whether the individual qualifies for a visa and/or when they apply for a visa waiver. Further, the individual would have to become a lawful permanent resident prior to applying for US citizenship. In most cases, this then requires the person to spend 3 to 5 years as a permanent resident before qualifying to become a US citizen. The person will no longer be able to enter the US without a visa, visa waiver or other document. Former US citizens planning to study in the US will be obligated to meet the financial and educational requisites. In case of emergency, a request to expedite an entry visa/permission may be requested. The former US citizen will be treated like any other foreign national and will no longer be allowed into US territory without permission.
As previously stated, this is purely general information regarding the renunciation of US citizenship, and every case should and will be considered individually.
For more information please refer to the Department of State website. We also recommend speaking with a tax consultant (familiar with foreign and US tax consequences) and possibly an attorney.
