Reasons to renounce US citizenship

We often counsel clients who are considering renouncing their US citizenship. Most of these individuals understand that by expatriating, they will lose their right of access to the United States. They have also done enough research to know that expatriating for tax avoidance purposes will make it difficult to visit the United States in the future.

So, what are the reasons people typically renounce their US citizenship?

It usually comes down to a lack of ties to the United States. Almost everyone I speak to about this topic has lived outside the United States for many years. Some have never lived there at all. They may also have minimal family ties and no plans to live in the United States in the future.

Although the impetus for many in exploring the renunciation process is to escape the administrative burden of filing US tax returns and FBARs, most people are not actually aiming to avoid taxation. Fundamentally, these individuals simply don’t want to be US citizens anymore, which should be a sufficient justification for taking the oath of renunciation.

What to consider before renouncing US citizenship

That said, there are some good reasons not to go forward with renunciation. For example, eligibility to pass on US citizenship to children or grandchildren may be forfeit. Some people may find the expatriation tax too steep. And others may have historic criminal records that would prevent them from travelling to the USA as a visitor.

If you are considering renunciation, note that a typical consultation on renunciation of US citizenship would include:

1. Discussing the reasons why the individual wishes to renounce

2. Ensuring that the individual has received adequate advice on the tax consequences of renunciation

3. Assessing the potential consequences of renunciation on the individual’s circumstances

4. Advising on the interplay of the oath of renunciation and a final US tax filing

5. Outlining the process and timings.