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Old 06-10-2015, 04:35 PM   #41
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That sounds a very US orientated response.

Again, US citizens resident in a foreign country have a primary tax responsibility to that other country. As a result, the normal procedure is to pay the other countries tax bill first and then offset tax on the US return using the foreign tax paid.

Much can be made of treaties, offsets, and exemptions, but in the end it is quite possible to owe tax on a US return. Most other countries can impose a certain type of tax on its residents which is not recognised as a tax by the US (that type of tax doesn't exist in the US). Therefore, no tax offset. An example: the council tax in the UK is not equivalent to US property tax on your home, and thus not allowed as an itemised deduction on a US tax return. Other countries may also allow residents any number of "tax free" advantages. Since these don't occur in the US, the US will tax them. Therefore there are no foreign tax credits available to offset US tax due. Example: UK tax free cash ISA accounts. It may not happen often as one may go for ten years and owe the US nothing, but due to some activity, they may owe tax in the eleventh year, but none for the five years thereafter. Again, every situation is different.

Which is a long winded way of my getting to your tax on "imputed income". Such a tax, by a foreign country, may or may not be allowed as a foreign tax credit by the US. You'll need to check this out.

OK, now I get it. So here’s a rough outline (and hopefully this may help other expats googling):

1 --- I generate my income by logging into Vanguard and withdrawing $ from my IRA. VG withholds the mandatory 10% tax (that’s my punishment for living abroad). VG transfers $ directly to my EU bank account at the prevailing exchange rate in euros.

2 --- Next I file my EU tax return declaring the $ from Step 1 as US-borne worldwide income. I pay EU country of residence income tax on $, per their tax tables.

3 -- I file my US tax return (Federal only) and apply for credit for EU tax paid in Step 2. IRS refunds most of the 10% I’ve already paid in Step 1. They can’t refund directly to my EU bank account, so I have to transfer it myself. IRS may not refund the full 10% because as you explained above, each country treats your financial life based on their own rules (that’s punishment #2).

That’s it?

Alternate plan, based on the possibility that the repugnant tax on citizenship may be abolished sometime during the next 10 years:

I don’t withdraw income from IRA. Instead I use my regular taxable account for living expenses. It’s after-tax money, a US bond fund with trivial capital gain/loss, i.e. NO taxable income in US or EU other than dividends. You still have Steps 2 & 3 but a lot less income tax. A practice run as a permanent EU resident.
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Old 06-10-2015, 04:37 PM   #42
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As for option 1 above, I have done the permanent tourist thing in the UK for several years and as long as you keep track of the residency rules and your days present then it is indeed very doable. After 6 years of this we are going to set up a permanent house in the UK which changes things. (I keep a spreadsheet of nights in the UK to make sure I didn't fall foul of things)
Interesting. Suppose you drive to France for the weekend before the 6-month residency makes you permanent UK resident. When you drive back, the clock starts again and you’re still a tourist. What’s wrong with a trip to Calais or the Greek islands for that matter. If it’s the islands you can stay on my dinghy.
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Old 06-10-2015, 05:06 PM   #43
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Interesting. Suppose you drive to France for the weekend before the 6-month residency makes you permanent UK resident. When you drive back, the clock starts again and you’re still a tourist. What’s wrong with a trip to Calais or the Greek islands for that matter. If it’s the islands you can stay on my dinghy.

I would bet that just leaving the country does not stop the clock...


But, this is just a guess and I could be wrong...

I do remember reading that you could only live in NZ or Australia for 6 months in a 12 month period... I have thought about moving there and just going back and forth....
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Old 06-10-2015, 09:43 PM   #44
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Interesting. Suppose you drive to France for the weekend before the 6-month residency makes you permanent UK resident. When you drive back, the clock starts again and you’re still a tourist. What’s wrong with a trip to Calais or the Greek islands for that matter. If it’s the islands you can stay on my dinghy.
As TP surmises above it doesn't work like that. The UK residency rules changed recently but back in 2010 to 2013 when we were spending a lot of time in the UK the rules were >183 days in any tax year or a 4 year rolling average of >90 days, hence the need for a spreadsheet to keep track. We did take trips to Ireland, France, Spain, Norway, Portugal, Iceland and Denmark during those periods, returning to the UK each time, but staying within the non-residency rules.

In 2011 we arrived in the UK in March and left in October, but with various trips to EU countries from the UK. Shortly after we we got back to Texas in October our UK bank (that paragon of virtue, HSBC) wrote to us and said that HMRC (the UK IRS) required them to track overseas customers and it had been noted that from ATM withdrawals it appeared we had been in the UK for a long time, and would we please complete the attached HMRC form detailing the number of days we had spent in the UK this year, the previous 4 years, and expected future stays for the next 3 years.

I have a cousin who with her husband own a flat in London and a house (gite) in France. They tell me that they also keep a spreadsheet detailing the number of days they spend in France as they don't want to become resident in France for tax purposes.
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Old 06-11-2015, 07:19 AM   #45
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As TP surmises above it doesn't work like that. The UK residency rules changed recently but back in 2010 to 2013 when we were spending a lot of time in the UK the rules were >183 days in any tax year or a 4 year rolling average of >90 days, hence the need for a spreadsheet to keep track. We did take trips to Ireland, France, Spain, Norway, Portugal, Iceland and Denmark during those periods, returning to the UK each time, but staying within the non-residency rules.

In 2011 we arrived in the UK in March and left in October, but with various trips to EU countries from the UK. Shortly after we we got back to Texas in October our UK bank (that paragon of virtue, HSBC) wrote to us and said that HMRC (the UK IRS) required them to track overseas customers and it had been noted that from ATM withdrawals it appeared we had been in the UK for a long time, and would we please complete the attached HMRC form detailing the number of days we had spent in the UK this year, the previous 4 years, and expected future stays for the next 3 years.

I have a cousin who with her husband own a flat in London and a house (gite) in France. They tell me that they also keep a spreadsheet detailing the number of days they spend in France as they don't want to become resident in France for tax purposes.

There are also Schengen Area rules. A friend of mine overstayed in EU by 3 days and made the mistake of presenting his US passport on exit (instead of EU passport). He was fined 1500 € at the airport prior to boarding.

The “clock” thing is worth looking into. Are residency laws unconstitutional on grounds that they are oppressive? It’s worth looking into our freedom to roam, and the right to enjoy our life as we please, without spreadsheets and without being punished or treated like a common criminals by governments whose purpose must be to serve.

And I’m only on my first cup of coffee
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Old 06-11-2015, 07:29 AM   #46
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our freedom to roam
Which, since the beginning of time, has been restrained when we step onto someone else's turf.
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Old 06-11-2015, 07:37 AM   #47
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I would bet that just leaving the country does not stop the clock...


But, this is just a guess and I could be wrong...

I do remember reading that you could only live in NZ or Australia for 6 months in a 12 month period... I have thought about moving there and just going back and forth....

There are lots of retired people of many nationalities that live on boats on the Mediterranean. That may also be true in NZ or Australia. I know that they live on their boat because they hang laundry to dry on the rigging. That’s a dream of a lifetime for many. Should they be taxable by every country into whose waters they travel to?
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Old 06-11-2015, 10:12 AM   #48
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There are lots of retired people of many nationalities that live on boats on the Mediterranean. That may also be true in NZ or Australia. I know that they live on their boat because they hang laundry to dry on the rigging. That’s a dream of a lifetime for many. Should they be taxable by every country into whose waters they travel to?

If they stay long enough to gain residency.... then yes...

Where ever you live, you are using gvmt infrastructure and someone has to pay for it.... if you are a tourist, you are paying taxes and paying your part...
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Old 06-11-2015, 11:47 AM   #49
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If they stay long enough to gain residency.... then yes...

Where ever you live, you are using gvmt infrastructure and someone has to pay for it.... if you are a tourist, you are paying taxes and paying your part...
That's the crux of it.

On a side issue, We are in Alaska at present and have been pleasantly surprised to find no sales taxes however I'm sure that tourists spending money still provide income to the State, just not as directly as a sales tax.

When we spent 5 months in Australia last year we could either send off our passports to apply for and pay for a 6 month visa or get a free electronic visa valid for 12 months but you could only stay 3 months at a time. We chose the latter and took the chance to visit somewhere new, with a few days in Vanuatu.
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Old 06-12-2015, 03:11 PM   #50
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So, I'm adding Punishment #3 to my post above:

You have to work around the penalty for not having US-based health insurance per ACA. Duh! If you have a foreign address shouldn't that be self-evident.


Feel free to add more
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Old 06-12-2015, 03:24 PM   #51
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So, I'm adding Punishment #3 to my post above:

You have to work around the penalty for not having US-based health insurance per ACA. Duh! If you have a foreign address shouldn't that be self-evident.


Feel free to add more
If you meet either the Bona Fide Residence test or the Physical Presence test you are exempt from the ACA individual mandate.
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Old 06-12-2015, 03:39 PM   #52
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If you meet either the Bona Fide Residence test or the Physical Presence test you are exempt from the ACA individual mandate.

Yes thank you, I read about that. It simply adds to the compliance burden. Also calling the US for help/info from EU with 6 hours difference can push one over the proverbial edge.
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Old 11-16-2015, 04:19 PM   #53
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I have been told, unoffically, that time spent in the airport in a country also is counted...eg. Even on a layover if you are just passing thru but for some reason leave the secure area and have to reenter thru customs. Can't imagine that happening often but guess is the layover was long enough and you left for a few hours to sightsee or visit with family and friends.


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Old 12-11-2015, 11:15 AM   #54
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If someone has dual citizenship, I do not see what the big issue is in revoking US citizenship.

Most especially for tax/financial reasons.

It seems to me that US citizenship is no better and no worse than citizenship in many other western countries. And if you do not plan to reside in the US again or you are just fine with your other citizenship then why bother with all the onerous IRS nonsense.

I do not blame Boris one little bit. I would do exactly the same. People are lining up at the US embassy where I live to start the revocation process for exactly the same reasons.
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Old 12-11-2015, 04:30 PM   #55
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If someone has dual citizenship, I do not see what the big issue is in revoking US citizenship.

Most especially for tax/financial reasons.
Exactly! A person with dual citizenship maintains the citizenship status with the secondary country because it is to their advantage to do so. It the situation changes and the advantage evaporates or is offset by a disadvantage, dissolve the secondary citizenship. Why is it such a big deal?
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I do not blame Boris one little bit. I would do exactly the same.
I don't blame Boris either. Actually, I don't understand why he would want to maintain the dual citizen status. His life is obviously in the UK. His change to single country citizenship will be detrimental to neither him nor the USA. Everyone wins......
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People are lining up at the US embassy where I live to start the revocation process for exactly the same reasons.
Canadians lining up at the US embassy to revoke seem to be doing the obvious thing too. Their lives are in Canada. The ability to own winter homes in the USA, vacation in the USA, etc., will not be eliminated by revoking USA citizenship. Seems like the thing to do and neither they nor the USA will be the worse for it.

As you say, why is it such a big deal? My guess is that the headlines are caused only by the media looking for things to sensationalize and attract listeners/viewers/readers to gain market share and therefore increase profits.
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Old 12-12-2015, 09:59 AM   #56
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As you say, why is it such a big deal?
I’ll attempt to keep this brief. I’ll likely fail.

Someone living outside the US may observe threads on EarlyRetirement concerning ACA, the marketplaces, etc.. They also read reports from abroad that ACA solves the problem of health insurance for everyone in the US, and everyone will have health insurance. That outsider may wonder “what’s the problem? When I last worked in the US, in 1980, I had BCBS through my employer and it was fine. Just sign up for the insurance. What is the big deal?”

Whilst comparing ACA to renunciation may not be a fair comparison, those suggesting that one “just renounce” may also be equally lacking in facts concerning renunciation, as the above outsider lacks a true understanding of the details of ACA.

In a nutshell , many cannot afford to renounce. Here’s two examples.


A retired professor, living in Toronto, Canada having moved there in their late 30’s, with the following assets:

A pension from the university of $50,000/year, with an asset value (for 8854) of $900,000, a home purchased in 1985 for $100,000 (the current average price of a detached home in Toronto is $1million+), an RRSP worth $500,000 (a Canadian government sponsored personal pension plan), and 500 common shares in a company with a mark to market gain of $10,495.
They are a “covered expatriate” with total assets over $2.3million. In short, they will owe the IRS $363,945 in tax, which is due immediately upon filing their 1040.

The RRSP cannot be sold and the university pension cannot be sold. The $10,495 will not begin to cover the tax due. That only leaves selling their home and moving elsewhere, simply to renounce US citizenship.

The above person is fictitious, but a tax return was prepared by a qualified US/Can. tax attorney. For anyone interested, here is their 1040-V, 1040, Sch. B, Sch. D, 8949, 1116, 8960, and 8965.
https://fatcalawyer.files.wordpress....es-canada2.pdf

And here is their 8854 final exit tax form:
https://fatcalawyer.files.wordpress....-f8854-bw1.pdf

Info on RRSP’s is here:
Registered Retirement Savings Plan (RRSP)


The second example comes from Allison Christians, a professor of tax law at McGill University. Allison gave the following presentation at the Tax Advocate Tax Conference in Washington D.C. last month (sponsored by the IRS). It concerns another fictional character, Lisa. Here’s a few selected comments from the presentation:

“The story I am going to tell you is about a woman named Tina. She's Canadian. She is 62. Tina is nearing retirement age and has been a cautious and diligent person all her life, carefully saving for her old age following the textbook investment advice that tells us we should invest in low-load pooled investment vehicles -- mutual funds -- and hang onto them for the long term…………………

So, no matter what, Tina the Canadian her finds herself considered American, and she is going to have to get compliant……………….

I think you can understand why Tina might be more than a little overwhelmed at this point, and that's even before I tell you that the accountant is going to charge her $15,000 to $20,000 to get her compliant, and that if she had known any of these issues in advance, she surely would have made different choices over the years………

In any event, Tina didn't know any of this, and no one told her anything until she found out from her bank teller, some blogs, and an accountant in Canada that now she's at risk of losing her retirement savings because of a country she's stepped foot in only a handful of times. Tina doesn't know where to find the information she needs to confirm her status as a U.S. person, nor the proper treatment of her savings or income under U.S. tax law -- and the stories about the IRS imposing monstrous penalties on others who went through voluntary disclosure programs are terrifying.”


Tax Analysts -- Understanding the Accidental American -- Tina's Story

Is Tina able to “just renounce”?

Youbet, please don’t misunderstand. I don’t mean to belittle your comment. It’s a fair comment for many. Many are able to renounce without life altering consequences, but many are not. It’s a big deal to them.
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Old 12-12-2015, 11:06 AM   #57
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Depending on the country, renouncing can be a big deal.

A colleague recently denounced his US citizenship. He took advantage of some sort of IRS 'forgiveness' plan...even though he had not lived in the US for 20 years. He had to file with the IRS for, I think 3 most recent years. Paid a little tax plus about $500. CAD of accounting fees. In many countries, tax treaties allow you to deduct foreign income taxes from your tax return. This was the case for this individual.

Then he waited for the IRS assessment and clearance letter. He needed this in order to renounce. He was surprised when he went to the information meeting at the embassy. The room was packed with people doing the same. Could be because of the IRS forgiveness plan and the media attention. It was a fairly long process.

He was more concerned about the future. Every year that went by meant that he was not filing in the US and his situation was getting worse. So he bit the bullet as it were.

Definitely a major PITA-most especially for those who happened to be born in the US but never live there. Many do/did not even realize they had this unreasonable obligation.
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Old 12-12-2015, 11:10 AM   #58
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The OAP has described a serious problem for US citizens living overseas. It is increasingly difficult for them to organize their finances sensibly because of US tax compliance requirements and the loss of access to many foreign financial accounts because of FATCA. So many long term expats are renouncing US citizenship, not to avoid US taxation, but to try to have a normal financial life without the threat of large fines for breaking incomprehensible US tax laws. The cost of renouncing US citizenship is now $2350, but the numbers of people who are giving up their US citizenship is increasing every year.

I have considered renouncing my US citizenship if I move back to the UK, but my net worth is now over $2M so I would have to pay a large exit tax bill.
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Old 12-12-2015, 03:08 PM   #59
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In a nutshell , many cannot afford to renounce. Here’s two examples.
Thanks for those examples. I suppose I was poo-pooing those as I imagined them to be few in number and only involving the rich.

I would propose a limited time "tax and fee" holiday. People who do not want to live with FATCA and whose lives are really attached to another country would be granted a cheap and expedited renouncement process. Then, everyone could go on as they are with no hard feelings.


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Youbet, please don’t misunderstand. I don’t mean to belittle your comment. It’s a fair comment for many. Many are able to renounce without life altering consequences, but many are not. It’s a big deal to them.
Your comments are well taken. I was really speaking to the majority of situations and should have given more consideration to the outliers. Again, I'd be all for a "tax and fee holiday" so folks could cut and run with a minimum of expense and aggravation.
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Old 12-12-2015, 03:19 PM   #60
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Depending on the country, renouncing can be a big deal......

He had to file with the IRS for, I think 3 most recent years. Paid a little tax plus about $500. CAD of accounting fees.......

Then he waited for the IRS assessment and clearance letter......

He was surprised when he went to the information meeting at the embassy. The room was packed with people doing the same......

It was a fairly long process.

Definitely a major PITA-most especially for those who happened to be born in the US but never live there.
Great example, thanks. It does sound like the issue isn't so much FATCA as it is an unnecessarily complicated and arduous renouncement process.

It's apparently more of a hassle for certain people to renounce than I knew. This is an opportunity for the USA to do the right thing and make the exit process quick, simple and inexpensive. Something like, if any pre FATCA taxes due are paid, "slap of the rubber stamp," you're outta here!

BTW, my "it's no big deal comments" were directed more to the emotional, loyalty, moral, patriotic, etc., aspects of renouncing. And I still think, in that light, it is no big deal. It's just business.

To those pointing out that some significant money and aggravation can be involved, thanks. I agree with you that the cost and process should be fixed so folks, even the "rich," can cut the ties quickly and easily.
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