Well, sure, it is an extreme course of action, and not one to be considered with the same hangover I have this morning, you may want to keep your options open. So, here is a basic guide to renouncing your American citizenship.
It seems like the most basic of things: the ability to give up one’s American citizenship. But it’s not; the American government must approve your renunciation of citizenship and can say NO, no matter how loudly you say YES. Of course, there are forms to be filled out.
And taxes. Potentially lots of taxes.
The Very Basics
You have to be an American citizen. If you only think you might be, no matter that the Swiss authorities say you are, or what grandma told you, you have to be a full-fledged, documented American, or the renunciation process stops. You can only renounce while overseas. You must have another nationality, and be able to prove it, because the U.S. government will not take part in something that will render you stateless. Only an adult can renounce, and no one can renounce on behalf of someone else, including children.
You can’t renounce your citizenship for the explicit purpose of avoiding U.S. taxes, or to try and skip on an arrest warrant, go AWOL from the military, or otherwise evade the law. You also can’t be of unsound mind.
The Other Basics
Despite what you may see on TV or in the movies, there is only one way to voluntarily renounce citizenship. You can’t do it by tearing up your American passport, or writing a manifesto. It’s done by appointment only.
You start by making an appointment at the nearest American embassy or consulate. You technically can complete the renunciation procedures anywhere a properly-empowered American diplomat will meet you abroad, but in reality it is unlikely s/he will drop by your villa, or come by your prison cell.
At the embassy (the rules are the same at a consulate) you’ll fill out some forms. You can Google and complete, but not sign them, ahead of time if you wish: DS-4079, DS-4080, DS-4081, and DS-4082. Have a look; most of the requested information is pretty vanilla stuff, and is largely to make sure you understand what you are doing and the consequences of doing it.
The reason for making sure of all that making sure stuff is two-fold.
One, the State Department, who handles all this, has been sued by people in the past who claim they were tricked or mislead and did not know what they were doing, and want their citizenship back. The other reason is that barring certain highly-specific situations, renouncing citizenship is a one-way street. The U.S. government considers it a permanent, unrecoverable, irrevocable, decision. You gotta get it right the first time.
At the embassy, one or more staff will go over everything with you, you’ll swear to everything and sign everything. You can usually (but not always, practices vary from embassy to embassy) have a lawyer with you, but often all of the interaction is between you and the embassy people, and is pretty straightforward.
At larger embassies, particularly at the American embassies in places like Canada and the UK, renunciations are frequent, regular parts of a day’s business, and are handled in most cases almost mechanically. Expect them to have to look stuff up and maybe call you back the next day if you try this in some remote African post.
That’s why some Americans suggest more cumbersome processing has taken place at smaller consulates unfamiliar with the process. Persons far from home, such as an American resident in Japan seeking to renounce in Portugal while on vacation, may encounter difficulties. The overall feeling most renunciants encounter is that of a bureaucrat more concerned with getting his paperwork in order than really caring about your life-altering decision. It is rare that the embassy official will actively try to dissuade you, though some may poke at it. Just smile and say thanks.
After your brief appointment at the embassy, all the paperwork goes off to Washington, where your renunciation is approved or denied. The embassy can but is not required to write a memo regarding your case. Those memos, when written, usually argue against approval. In an extreme version, such a memo might say “Mr. Roberts appeared unorganized in thought, and was unable at times to focus on the documents in front of him. He referred often to a Swedish dog who was guiding his actions, and stated his goal in renunciation was to assume the Swedish throne.” It happens.
No one at the embassy can approve or deny your application to renounce. That is done by someone you will never meet, located in Washington, DC. Without that approval, you remain an American citizen. Approval is formally made by issuing a DS-4083, called the CLN, Certificate of Loss of Nationality. Think of this document as an “un-birth certificate.”
CLNs are processed slowly; it can several months or more for yours to be approved or denied. They are usually mailed out to you.
Oh, yes, one more thing.
You have to pay a fee for all this. Note it is a “processing fee,” meaning you pay it whether or not your renunciation is ultimately approved. As the world’s exceptional nation, the U.S. also has the highest fees in the world to renounce citizenship, a cool $2,350 per case, with no family discounts. By comparison, Canada charges it’s soon-to-be-former citizens only $76; for the Japanese and Irish it is free.
Despite these hurdles and costs, in 2015, 4,279 Americans bid Uncle Sam farewell, up 20% from 2014. That’s the third year in a row that’s set a new record. While the U.S. government generally states that every case is a unique, heartfelt choice, the not-so-secret reason behind most renunciations is America’s rapacious tax laws.
Taxes, Taxes, Taxes
If you are a high-wealth individual, this stuff gets complicated, and expensive, very quickly.
After losing your American citizenship, you file a final tax return for your time as a citizen for the period January 1 through the day your renunciation is approved. In addition to all the other tax forms needed for your situation, you must also include IRS Form 8854, the Expatriation Information Statement, otherwise known as the exit tax form. Almost no one files this without help from a tax professional.
Form 8854 is targeted at “covered expatriates,” former American citizens who have a large net worth, certain tax burdens or owe back taxes. The numbers vary from year-to-year and are subject to all the manipulations the U.S. tax code is full of, so actual figures can be slippery. As a very rough guide, while net worth for this purpose is measured in the millions, a yearly tax burden of about $160,000 can trigger things.
There are many, many websites and forums discussing taxes for former American citizens. Many of those sites are well-meaning, some even accurate to an extent. One of the oldest is run by the non-profit group American Citizens Abroad.
But taxes in the American scheme are very much based on an individual’s personal situation, so anything short of specific advice from a competent tax professional is sort of just a way to pass time waiting for your CLN to arrive.
A good way to think of the process of renunciation is that you need to exit two American systems — passports and taxes — and join another set of foreign ones. Miss a step and trouble will follow. This is not a quick process. Patience and good legal/tax advice are requirements.
After you have successfully renounced your American citizenship, you are, well, no longer an American.
That means (for example) as Swede you must follow all the U.S. immigration laws applicable to Swedes visiting, working or otherwise in the U.S. You suddenly become a Swede in the eyes of wherever in the world you do live, whatever that means for say, a Swede living in Mongolia. So if your working visa for Mongolia was in your U.S. passport, you may not have a valid visa anymore. Some former Americans instantly become eligible for a military draft in their “new” country.
And dammit, you may still have tax obligations in the U.S. depending on what you own there in terms of investments and property and…
Renunciation of citizenship is an extremely significant decision, with life-changing social, economic and other considerations. This article is for general information purposes only, and is not legal advice. Persons considering renunciation should consult an attorney and financial-tax planner. Any opinions expressed here are the author’s personal beliefs and do not represent those of any former employer.
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