45 According to Chapter 14, Annex J-Article 6* of 1951 Pakistani Nationality Law and the amendments 1952, 1972, 1973 and 2000 stated that holding dual citizenship was not permitted. But now the government of Pakistan, based on bilateral treaties signed by Pakistan, recognizes and allows its citizens to also hold citizenships of 16 countries, including Australia, Belgium, Canada, France, Iceland, New Zealand, Sweden, Switzerland, the US, the UK and others
46 Spain has dual citizenship treaties with Argentina, Bolivia, Chile, Costa Rica, the Dominican Republic, Ecuador, Guatemala, Honduras, Nicaragua, Paraguay and Peru. Spanish citizens residing in these countries do not lose their citizenship if they adopt that citizenship. For all other countries, Spanish citizenship is revoked upon the acquisition of foreign citizenship
47 In the case of the Czech Republic two specific exceptions apply. Most importantly, in the case of restoration of Czech citizenship (while keeping the one possessed to date, for example US citizenship) when the citizenship of former Czechoslovakia was illegally taken away between1948-1990 by the Communist regime; or without losing the Slovak one, thus becoming a dual citizen
48 India has introduced “overseas citizenship”, which is very close to giving Indians the possibility to hold full dual citizenship. It is therefore possible for an Indian citizen to acquire a foreign citizenship, thereby losing full Indian citizenship but immediately acquiring “overseas citizenship.” As an “overseas citizen” you have the same rights as Indian citizen as before, including the right to own property etc. in India, except political rights
49 In the South African Citizenship Act it is an offence for a South African citizen aged 18 years and older to enter or depart the Republic of South Africa using of the passport of another country; you can however obtain permission to travel on your foreign passport abroad
50 In Saudi Arabia there are even criminal penalties for exercising another citizenship; regardless, many Saudi citizens hold dual citizenship, mainly from the US
51 Limited dual citizenship allowed. See footnote 46 for Spain above
3
Giving up US Citizenship or a US Green Card
By Professor Marshall J. Langer52
Chapter Summary
Many US citizens dislike the amount of tax they must pay. This has led to an increase in the number of citizens who consider giving up US citizenship even though punitive exit taxes have been in place since 2008. With the threat of even higher US federal and state taxes in the near future, the interest in leaving permanently continues to rise.
The exit taxes are deliberately punitive, and have been designed specifically to prevent the highest taxpayers from leaving by removing virtually all of the financial benefit gained by doing so.
Giving up US citizenship is a complicated business, and a wide range of factors must be taken into account, including residence, domicile and citizenship, marital status and the status of beneficiaries, sources of income and location of assets, and the timing of any move. You must also acquire another citizenship to replace the one given up.
The exit taxes do not apply to everyone who gives up US citizenship; there are two key tests to determine whether you are caught by it. The first is based on income tax liability over the past five years and the second is based on your net worth. There are exclusions for certain items when calculating your net gain, and gains and allowable losses are taken into account.
Once you have relinquished or renounced US citizenship, and paid exit taxes if necessary, you must still take care not to fall back into the US tax pool by spending too many days there.
Depending on your new passport, you may need to obtain a visa to enter the US again. There is also a significant tax on gifts or bequests that you subsequently give to any other US taxpayer once you have left.
Some wealthy Americans feel that their federal, state and local governments tax about 50% of their income while they are alive and try to take the rest when they die. They are aware that it takes a lot of “other people’s money” to pay for a vast system of political featherbedding, to reward political campaign contributors and to pay for give-away programs designed to assure the loyal vote of grateful recipients.
The debt of the federal government is astronomical. The US is the richest nation on earth and most of its states are essentially bankrupt. The US social security system is a fancy Ponzi scheme. Anyone in the private sector who did what the government does every day would be sitting in jail for the rest of their lives.
The US legal system is also driving some people to take action. The trial lawyers are protected by Members of Congress who rely heavily on the lawyers’ massive political campaign contributions. Many businessmen and professionals live in constant fear that they will be wiped out by lawsuits and huge judgments. It is no wonder then that some US citizens and long-term residents are seeking to protect what they have by moving themselves and their assets abroad.
Taxation is not the only reason why Americans give up US citizenship or terminate long-term US residence, but it is frequently considered by wealthy individuals who are already living abroad or plan to do so permanently. Unlike citizens of France, Germany, Switzerland, the UK and other countries, US citizens remain almost fully subject to US income and death taxes even if they never intend to return to live in America. Despite tax treaties, they are often subject to at least some double taxation.
Thousands of wealthy British residents have already left Britain to avoid the maximum income tax rate which has been as high as 50% and is currently 45%. They have tried to escape British taxes by changing both their residence and their domicile. They can retain their British citizenship and their British passports which are also EU passports. Many wealthy Americans do not yet fully realize that they may now be facing combined federal and state income taxes that exceed the rates that have caused people to leave Britain. In some cases, the combined corporate and individual income taxes on dividends received from US corporations may exceed 60%.
The US applies all eight tentacles of the “tax octopus.” To escape US income, gift and death taxes, you must consider each of the eight tax tentacles:
• Residence: you cannot have a green card, and you must avoid meeting the substantial presence test by spending too many days in the US
• Domicile: you must terminate your domicile in any US state or territory
• Citizenship: you cannot be a US citizen since the US taxes its citizens on a worldwide basis
• Marital Status: you must take steps to eliminate the application of any “community property” rules under which each spouse is entitled to a half interest in most income and property acquired by the other spouse during the marriage
• Source of Income: you must eliminate or minimize any taxable income from US sources
• Location of Assets: you must eliminate or minimize holding any assets that would be subject to federal or state gift or death taxes
• Timing: the timing of various acts must be carefully considered (for example, you might sell your family home before you leave but try to postpone receipt of foreign-source income until after you go)
• Status of Beneficiaries: several special factors must be considered if your spouse or any of your other intended beneficiaries will remain US citizens or residents
More than a million US residents become US citizens each year but, at least until recently, fewer than 1,000 Americans per year have given up US citizenship. Many of those who have done so were returning to a country in which they were born (such as South Korea) that does not permit them to retain