Below is a brief synapsis of the procedures and effects of a U.S. citizen renouncing US citizenship.
PROCEDURE
- One must “voluntarily and with intent, relinquish US Citizenship;”
- Appear before a US Embassy/Consulate in a foreign country to renounce, and sign an oath of renunciation;
- Complete a IRS Form 8854, DS 4079 and Expatriation Information Statement.
RESULT
- After US State Dept reviews and approves, they will issue a “Certificate of Loss of Nationality (COLN);
- If applicable, an Exit tax must be paid within 90 days of COLN issuance
- Even if approved, the person must still file US taxes for the year of expatriation/renunciation.
EXIT TAX
A citizen who renounces citizenship, may still be subject to an exit tax, which is basically the net gain of all worldwide assets the person has (as if he/she was going to sell all assets at that time). The Exit Tax is applicable if:
- Person has US liability of more than $124,000 for the prior year; OR
- Has a net worth of over $2 million; OR
- Has failed to comply with ANY US tax/IRS regulations in the last 5 years.
IMMIGRATION CONSEQUENCES
- Person will have a very tough time entering the US, connecting flights in the US, and/or obtaining a tourist visa (or any other US visa);
- If the person has no other nationality, the person will become stateless, and have trouble travelling worldwide;
- Cannot transmit US citizenship to children or grandchildren
- If the US government determines that you renounced citizenship to avoid US taxes, then you will be found inadmissible to the US under Section 212(a)(10)(E) of the INA.
- May still be bound to complete military service.
CONCLUSION
As per the information above, besides consulting on the immigration consequences of renouncing US citizenship, this is really more of process for a tax expert to handle. The forms are IRS forms, asset evaluation is involved, etc, and a proper financial evaluation is recommended before making the final decision.