Depending on who you ask, the “American Dream” may be a fire burning bright or a dwindling spark on the horizon. While thousands of people still seek and obtain U.S. citizenship every year, thousands of others renounce it. David Lesperance, an immigration lawyer, tax consultant, and managing partner at Lesperance & Associates says the reasons people emigrate from the U.S. are myriad, with every individual having a unique story. However, one of the most common threads is finances. Here, attorney David Lesperance explains three of the most often-cited motivations for individuals to hand over their U.S. passport.
3 Financial Reasons to Renounce U.S. Citizenship
1) Citizenship-based taxes.
Although most other countries have long since abandoned the concept of citizenship-based taxation, the U.S. still requires that its citizens shall be taxed, regardless of where they live or how much or little time they spend on American soil, solely based on their U.S. citizenship. This may present significant problems for citizens living abroad who may end up paying several thousand dollars in taxes to the U.S. government despite living and contributing to the economy in a foreign nation. Although foreign income tax credits can offset some of the burdens, attorney David Lesperance says double-taxation is still a problem for many, particularly high-income earners and business owners. Giving up citizenship is the only legal way to fully free yourself from the U.S. tax burden.
2) Transition tax.
The Trump America First Tax reform, signed into law in 2017, includes a “transition tax.” The transition tax dictates that U.S. emigrants who have lived in other countries since the last tax reform in 1986 must now pay a transition tax amounting to about 15% of their retained earnings from the past 30 years, attorney David Lesperance explained. The retroactive nature of the tax, particularly for people living in high-tax countries like Australia and the U.K., is a significant blow, especially to business people and high net worth individuals. Renunciation of U.S. citizenship is, again, the only way to avoid this.
David Lesperance immigration and tax lawyer says FATCA, the Foreign Account Tax
Compliance Act dictates Americans are not only required to report, pay, and file all of their taxes regardless of residency but must also report and pay on foreign bank accounts, brokerage accounts and other accounts. “FACTA has made it more difficult for Americans living abroad as well as people who do business with them,” he said. In fact, some see it as a liability given America’s complex and archaic taxation system, which could hinder business dealings abroad. It can even make it more difficult for Americans to open accounts or work with financial institutions overseas.
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David Lesperance, Immigration and International Tax Consultant and Managing Partner at Lesperance & Associates, assists high net worth individuals in securing a financially stable future and a better quality of life. Now based in Sopot, Poland, David Lesperance attorney hails from Canada, where he attended and graduated from the University of Western Ontario, University of Windsor, and the University of Saskatchewan before working as a Canadian border official.
While working as a border official, he gained a unique perspective on U.S. and Canadian emigration and immigration policies and practices, as well as the motivation for wealthy individuals to emigrate from the U.S. This inspired him to pursue a law career specializing in tax and immigration. Over the past three decades, he has helped numerous individuals and families obtain second and dual citizenship, or renounce citizenship, with a particular focus on assisting high net worth clients in the U.S., Europe, and Asia.
Find more information about David Lesperance and his practice here: https://www.linkedin.com/in/davidslesperance/ or follow him on Quora: https://www.quora.com/profile/David-S-Lesperance