[1] https://www.irs.gov/individuals/international-taxpayers/expa...
> Crowded Building Collapses in Foreign Country, Two Americans Die
...because those two were the only balance-sheet relevant humans in the building. If you don't have to write off the debt when they die, why bother accounting for their lives at all?
Mark-to-market on all assets and tax as per normal capital gains.
And Canada doesn’t have exceptions like the US (if your assets are <$2M, $600,000 deduction on any value before taxes are applied, etc).
There’s a reason people around the world want to invest in America.
> USCIS funding comes primarily from fees we charge applicants or petitioners requesting immigration or naturalization benefits. These fee collections fund the cost of fairly and efficiently adjudicating immigration benefit requests.
[1] https://www.uscis.gov/about-us/budget-planning-and-performan...
If renouncing citizenship would get you out of that obligation people would do so regularly as a tax break then reapply.
When you leave they want all accounts to zero out which seems eminently reasonable.
[edit] It's mostly problematic for people who find themselves subjects of the IRS, being born abroad for instance - and they may never have even realized their obligations. They are stuck with paying the IRS forever or renouncing and paying capital gains tax on all their assets. Meanwhile, someone who lives in the US for 8 years as an LPR and decides to leave is free to go after filing an I-407 and picking up their 1040-C sailing permit. The whole taxation on the basis of citizenship instead of residency is fundamentally unfair and broken IMO.
Now, if you taxed capital gains when they occurred rather than when the asset was sold then I would absolutely agree it should be tied to residency. But by deferring it for decades suddenly there’s a major incentive to get out of that obligation.
If Bezos paid up when he relinquished residency and then Amazon went down, should he get a refund? 10 years later? Why not - why should he only owe money if it goes up?
He can do the same exact thing by renouncing his citizenship today and paying the capital gains due, today. It's not a 'loophole' that doesn't already exist. In fact, that's exactly what Eduardo Saverin did. [1]
[1] https://www.reuters.com/article/us-facebook-taxes-idUSBRE84G...
That’s equivalent to what the IRS is doing only moving things forward to residency vs citizenship. The current system is actually better for Bezos or other multi billionaires because they can move anywhere around the world and keep deferring capital gains until death when it disappears.
Though this is a serious edge case. 2k people renounced American citizenship in 2019 some years it’s ~10k but only a fraction have any kind of meaningful capital gains liability. The general cases is Americans who get to defer liability not expats with a surprising bill.
The loophole is putting all your assets into a trust and declaring beneficiaries of the trust. When you die the beneficiaries only have to pay capital gains from value at the time the trust was _created_. IE the closer to death the trust was created the less tax they pay.
There is slow moving efforts to remove this loophole.
If you inherit an asset your tax basis is its value when the owner died. This may be significantly less than what it is when you actually receive the asset, but it’s likely higher than when that person originally purchased it.
PS: Estates may chose an alternate date 6 months after someone died, which again generally helps.
Only on amounts above US$ 12.9M (federally), but there is no tax if the estate passes to the spouse:
* https://www.investopedia.com/estate-tax-exemption-2021-defin...
* https://www.investopedia.com/terms/i/inheritancetax.asp
How many estates are above that? In 2021, "only 2,584 estates paid a positive federal estate tax."
* https://en.wikipedia.org/wiki/Estate_tax_in_the_United_State...
* https://www.irs.gov/statistics/soi-tax-stats-estate-tax-fili...
I think that's a slightly odd way to think about it, the tax is due when you actually have a capital gain, which in the ordinary course of just owning something you don't.
Of course, many countries don't want to miss out on that just because you moved before you sold, so change in tax residency becomes an event that triggers it as if it had been sold.
What's unusual about the US (currently) is that citizens worldwide are considered resident for tax purposes (as other countries would call it I suppose, since it's typically more about residency than citizenship) whatever their living and working arrangement and wherever else tax may be due.
If it weren't for that, probably nothing about renouncing citizenship would be controversial, because it would be a much more niche desire. Surely the main reason to do it is because you moved and wish to be free of 'doing taxes' (maybe you moved somewhere where that's not even something you have to think about!) in the US?
Arguably it’s simply a question of practicality as nobody can accurately assess how much a painting is worth until it’s sold. Still, it definitely incentivizes bonds which pay on maturity rather than every year.
For most people who aren't insanely rich or aren't getting most of their income via a trust fund, this isn't very relevant. You have the foreign income exclusion (somewhere north of $100k now) and the foreign taxes paid deduction to insulate you from playing taxes in the states. The problem becomes when you are making > $100k in a low tax place like Singapore or Dubai, but even then there is a housing deduction that works for most working class people.
> Surely the main reason to do it is because you moved and wish to be free of 'doing taxes' (maybe you moved somewhere where that's not even something you have to think about!) in the US?
It isn't hard to file if you have simply income to consider. I did it by hand for many years, it took around 15-30 minutes a year.
Whenever you have a tax obligation like this, sell the stock and set the money aside. In the case of renouncing citizenship you can sell all your stock before you leave because you’re facing the same tax liability either way. The only risk is if you do something stupid.
> That’s identical to someone selling a stock then falling to set aside capital gains
You might think the only way to be forced to pay capital gains is on sale, but you’re literally complaining about people being forced to pay capital gains for something else.
The other example being Eritrea.
Yet I therefore still have to navigate the nightmare that is their paper based (and "refund/allowance" obsessed) tax system, despite not having resided in the US since the age of 3.
For example, it's not enough for me to simply earn less than the "foreign income tax allowance".
Instead I need to calculate the tax I would owe on one form, calculate the deduction to that tax on a different form, then write the sum from one form on to the other form (god help if you make an error transcribing that number).
The US tax form is full of things like "Add the numbers in 11a through 11g together and deduct this number from the number in 13 and write it down in 15".
It feels utterly hostile, as if it's trying to catch the person out, instead of guiding them to the accurate number.
You're gaining something by not renouncing it. The minimal cost of some trivial paperwork that you could if you wanted to offload to someone for a nominal fee is a really odd complaint.
> god help if you make an error transcribing that number
Why do people have such fear of taxes? No, it's not God. When you make an error the IRS helps you. They compute your taxes anyway and they send you a letter with your error and the updated number.
> When you make an error the IRS helps you. They compute your taxes anyway and they send you a letter with your error and the updated number.
You make this sound so simple. And yet, speaking from experience, it drags out for months and ends up costing 5-figures in penalties. If they can so easily compute the correct number anyway why continue with the whole charade of making us answer a whole bunch of barely decipherable questions?
You should look up what Intuit and H&R Block lobby for. They spend massive amounts of money to stop the IRS from just sending you a prefilled out form for you to verify. It's called return-free filling. There have been countless bills to introduce this but they always die. The IRS could technically do it easily, but it isn't authorized to by Congress.
This is one of those stories that breaks every year or two in major newspapers and people are outraged but it never gets better.
It's also unusual in having a tax system where the admin for the average person is a massive pain.
The summary is that if you have a full time job outside the UK or have spent less than 46 days in the UK (less if you were previously a UK resident) then you are never classed as a resident.
If that doesn't apply then working full time in the UK, spending at least half the year in the UK, or only having a home in the UK and using it for more than 30 days will automatically make the a resident.
If those don't apply, then there's a test to say if you have "significant ties" . The details for that are in the link and are applied on a sliding scale based on the number of days you spent in the UK.
To me, it looks pretty fair. You have a spend most of the year in the UK, have lots of "ties" here (property, family, etc), and not have a job elsewhere to be classed as a UK resident for tax purposes.
The definition of full time work is explicitly linked to actual hours worked (not contracted), so the admin involved in proving this is painful.
For friends who've left the UK for work, the only way to qualify without massive hassle has been to spend less than 16 days a year in the UK for the first 3 tax years (and thereafter less than 46 days).
The vast, vast majority pay $0.
Exiting Germany is similar, except they don’t tax stock of public companies when exiting, and they also allow ppl who only moved to Germany some years (up to seven?) ago to exit unscathed.
One would hope that the book value of your assets in the new country matches the exit value when leaving, otherwise you may get double taxed.
Most places have tax systems based on residence though.
And others if I start looking at their tax code. Americans just like to complain about their taxes.
* https://www.canada.ca/en/revenue-agency/services/tax/interna...
Further, to prevent double taxation, if you reside in a country that Canada has a tax treaty with, you may be deemed a non-resident of Canada:
* https://www.canada.ca/en/revenue-agency/services/tax/interna...
And the US has tax treaties with other countries as well, so if you pay taxes in say Japan or Canada you do not pay taxes in America as well. Unless you make over 150k a year, then you only pay the marginal difference.
No it doesn't stand.It's different from the american system. Tax residency is a concept that many countries have, independantly from your citizenship.
The US taxes you regardless of (tax) residency. There is no such thing as a non-tax-resident in the US: if you're a citizen, you pay.
With Canada, you can be continue to be a citizen but (potentially) not pay. There is "potentially" with the US.
That isn't by tax treaty, which is usually related to payroll taxes. You can always deduct taxes you pay to any foreign government, with a couple of exceptions (Cuba maybe?), even if they lack a tax treaty with the USA.