London Mayor Boris Johnson to renounce US citizenship

[Free_at_49]

First, reading and understanding the relevant Double Tax Treaty between the US and "the other country" is imperative, provided one exists. No two treaties are exactly the same. The previous comments concerning how IRA, ROTH, etc. work in the UK may not apply to other countries. If a treaty exists, there will also be a "Technical Explanation". This is the treaty put in everyday english (to some degree), and may be easier to understand. It is also imperative to understand the "saving clause" contained in all US treaties. It comes about as the result of the US unique Citizenship Based Taxation. As a result, many of the benefits of the treaty do not apply to US citizens abroad. It is necessary to understand the limited number which may benefit the US citizen abroad, and if they apply to you.

For the UK double taxation of the IRA might be avoided by use of the resourcing basket of form 1116 where the US income is resourced as UK income in order to offset US tax by claiming the UK tax paid on the income.

Be aware that income primarily from US sources allows for the use of tax software. If the majority of income is foreign, and especially if it is retirement income possibly from more than one foreign country, tax software is useless.

I’m thinking of splitting my time between Italy and the Greek islands. If I live on a boat, do I even have an address? Is one forced to have a permanent address for IRS purposes?

My ideal solution would be to keep my US citizenship, login to Vanguard once a year from wherever I happen to be, withdraw whatever $ I need for living expenses, have VG withhold the appropriate % in tax, and file my US tax return online just as I do now. That seems very compliant to me, because I’d be doing exactly what I do now, except I’d be living in whatever country I chose.

As a retiree, I will have no EU-borne income, only US income from mutual funds. To avoid tax evasion, Italy and Greece have a so-called imputed income, based solely on the fact that one owns/rents a home, has a car, and other types of “luxury”. There is a tax credit for US taxes paid, so even though there is no outright double-taxation, each EU country considers your financial life by its own rules, so compliance is a huge problem for those of us that are not tax geeks. In any case, renouncing seems to offer no advantage unless you can also take all your money with you and sever all ties?

As for healthcare, I can walk into any public clinic or hospital in EU, but I don’t like doing it. I’ve lived most of my adult life in Canada & US so I feel I’d be taking advantage of the EU’s universal system. So I intend to buy private insurance. Likewise, by leaving Canada I’m forfeiting (the best) healthcare to which I’ve contributed. Ideally there should also be healthcare reciprocity treaties, as already exist between EU countries.

Any ideas?

 

[Alan]

Roth is still a custodial account. If I were to convert the entire IRA to a Roth, would I not be taxed at the same rate for the conversion? Can I even convert to Roth all at once? It seems you can only convert so much every year, which would take me a lifetime to do.

You can convert as much or as little from your IRA to your Roth so you can do it all at once or in stages to limit the amount of tax you pay each year. I have been converting every year since retiring and have another 10 years before RMD's take effect.

I'm not clear on this one. Are not IRA distributions considered taxable income in both countries?

For the UK, yes, but then any tax paid on an IRA distribution is offset as a credit in the US tax return so the tax is only paid once.

For the UK, the treaty states that transfers between pension accounts are taxable in the country of origin so IRA conversions to a Roth are only taxable in the US.

At the end of the day taxes are due on the IRA's and for the UK/US the treaty details which country receives those taxes.

 

[Alan]

I’m thinking of splitting my time between Italy and the Greek islands. If I live on a boat, do I even have an address? Is one forced to have a permanent address for IRS purposes?

My ideal solution would be to keep my US citizenship, login to Vanguard once a year from wherever I happen to be, withdraw whatever $ I need for living expenses, have VG withhold the appropriate % in tax, and file my US tax return online just as I do now. That seems very compliant to me, because I’d be doing exactly what I do now, except I’d be living in whatever country I chose.

As a retiree, I will have no EU-borne income, only US income from mutual funds. To avoid tax evasion, Italy and Greece have a so-called imputed income, based solely on the fact that one owns/rents a home, has a car, and other types of “luxury”. There is a tax credit for US taxes paid, so even though there is no outright double-taxation, each EU country considers your financial life by its own rules, so compliance is a huge problem for those of us that are not tax geeks. In any case, renouncing seems to offer no advantage unless you can also take all your money with you and sever all ties?

As for healthcare, I can walk into any public clinic or hospital in EU, but I don’t like doing it. I’ve lived most of my adult life in Canada & US so I feel I’d be taking advantage of the EU’s universal system. So I intend to buy private insurance. Likewise, by leaving Canada I’m forfeiting (the best) healthcare to which I’ve contributed. Ideally there should also be healthcare reciprocity treaties, as already exist between EU countries.

Any ideas?

I think this is too specialized a problem for the expertise available on this site. (I may be wrong of course).

Once I started looking into moving back to the UK I found sites that focused on US/UK expats (in both directions) and found lots of good advice and resource references, not just on tax issues, but healthcare, retiree benefits etc.

 

[photoguy]

My SIL is a tax lawyer and spent hours looking into this issue for my brother (an "accidental american"). In the end I think she paid for professional help.

Sent from my Nexus 5 using Early Retirement Forum mobile app

 

[theOAP]

That seems very compliant to me, because I’d be doing exactly what I do now, except I’d be living in whatever country I chose.

And therein lies the problem.

As Alan indicated, this is the territory of international tax experts and beyond the scope of a public forum. Nonetheless, some points are obvious as I would guess you've already established.

As a resident of a foreign country, you are subject to their tax legislation first. They will have the first go at your income. The US is second, but is and always will be present and will never go away if you are a US citizen. As a US citizen, you will always remain as resident in the US for tax purposes. If there is a treaty with the US it may offer some relief.

There seems to be three simple conclusions, and beyond those is the creativity of the international expert.

The first solution is to remain a US citizen, establish residence in a foreign country, and employ a dual (US/other country) tax specialist to best capitalise on filing both in the US and in the other country. Advice should be sought as to the best management of the funds in the US.

The second is to maintain a residence in the US, travel as you wish, never establish residence in any foreign country (you're always on the go and never in one place long enough to establish residence according to local rules, and always declare an ultimate return to the US), and maintain filing in the US as at present. Remember, you are always resident in the US for tax purposes no matter what, but you will not have the advantage of claiming tax concessions for physically being abroad. Your retirement income will be passive (not earned income), so the only offset for US tax is foreign tax paid, and you'll have none. This solution is aggressive tax wise, and would require the input of professional advisors.

The third is to renounce US citizenship and establish yourself abroad. There are two catches: the source of your income, and the exit tax. The US exit tax is quite punitive. Most get caught out on the $2 million threshold. $2 million sounds like a lot, but it encompasses all your assets. For example, if your current IRA will pay $50,000 a year on retirement, the exit tax will require the value of the total IRA funds to be determined at present, or by the amount needed to maintain that yearly amount for circa 30 years (there are actuarial charts to be computed for the exit tax), so that is $1,500,000. Add to that the value of any house, car(s), valuables, and ALL investments, and the $2 million threshold is easily breached.

As you've discovered, there are no easy answers.

 

[Free_at_49]

And therein lies the problem.

As Alan indicated, this is the territory of international tax experts and beyond the scope of a public forum. Nonetheless, some points are obvious as I would guess you've already established.

As a resident of a foreign country, you are subject to their tax legislation first. They will have the first go at your income. The US is second, but is and always will be present and will never go away if you are a US citizen. As a US citizen, you will always remain as resident in the US for tax purposes. If there is a treaty with the US it may offer some relief.

There seems to be three simple conclusions, and beyond those is the creativity of the international expert.

The first solution is to remain a US citizen, establish residence in a foreign country, and employ a dual (US/other country) tax specialist to best capitalise on filing both in the US and in the other country. Advice should be sought as to the best management of the funds in the US.

The second is to maintain a residence in the US, travel as you wish, never establish residence in any foreign country (you're always on the go and never in one place long enough to establish residence according to local rules, and always declare an ultimate return to the US), and maintain filing in the US as at present. Remember, you are always resident in the US for tax purposes no matter what, but you will not have the advantage of claiming tax concessions for physically being abroad. Your retirement income will be passive (not earned income), so the only offset for US tax is foreign tax paid, and you'll have none. This solution is aggressive tax wise, and would require the input of professional advisors.

The third is to renounce US citizenship and establish yourself abroad. There are two catches: the source of your income, and the exit tax. The US exit tax is quite punitive. Most get caught out on the $2 million threshold. $2 million sounds like a lot, but it encompasses all your assets. For example, if your current IRA will pay $50,000 a year on retirement, the exit tax will require the value of the total IRA funds to be determined at present, or by the amount needed to maintain that yearly amount for circa 30 years (there are actuarial charts to be computed for the exit tax), so that is $1,500,000. Add to that the value of any house, car(s), valuables, and ALL investments, and the $2 million threshold is easily breached.

As you've discovered, there are no easy answers.

Thank you

So far I’ve only considered your Solution#1. I had a tax specialist do a hypothetical EU tax return for me. All my income is US-borne, so I get a credit for US income tax already paid (as I posted above). My total EU tax bill would be $400 to $1000 depending on how much I withdraw from my IRA. Living in EU means no US State tax or property tax (house sold), so overall it looks like a net saving!

I’ve considered your Solution #2, i.e. moving between Italy & Greece without spending long enough time to become permanent resident, and therefore not EU taxable. i.e. I’d remain a permanent EU tourist, but it requires not owning a house or a car.

Solutions #1 and #2 would have to become very painful compliance-wise before I consider Solution#3. If the US punishes you so hard for living abroad that you’re forced to renounce, so be it.


I’m trying to keep everything simple and honest so as to minimize need for international tax lawyers. I only mentioned “imputed income” which is a way they use to tax people that report little or no income but have a yacht on the Mediterranean and a villa on a Greek island. BTW I’ve met quite a few Americans living & working in EU for many years who simply have nothing to do with US.

 

[youbet]

If the US punishes you so hard for living abroad that you’re forced to renounce, so be it.

This does seem somewhat overstated. Several posters pointed out reciprocal treaties, etc. that sometimes exist which dampen the tax bite. Although, it does sound like doing the taxes might be a challenge for the diy'er.

BTW I’ve met quite a few Americans living & working in EU for many years who simply have nothing to do with US.

If they literally have nothing to do with the USA, the financial impact of being a USC must be minimal otherwise they'd renounce. Why keep the citizenship at a significant expense if you don't have, and intend to never have, anything to do with the USA?

 

[theOAP]

BTW I’ve met quite a few Americans living & working in EU for many years who simply have nothing to do with US.

FATCA is now making "nothing to do with the US" rather difficult these days and is likely the impetus for the large increase in renunciations.

There seems to be two diverse groups who are renouncing. The first are the super-rich; a very, very small number of those renouncing. They have the assets to pay the Exit Tax without sustaining a crippling blow to their finances.

The second seem to be either the "accidental Americans" or the Americans who have lived abroad for many years, and who have basic or minimal assets. It may be easier for them to escape the Exit Tax by being below the threshold, but they may also struggle with the $2,350 fee.

The silent majority (to use US political speak), and those feeling the brunt of the increased reporting burden, are likely those Americans who have lived abroad for many years, done reasonably well, and have pensions, savings, a home, investments (unfortunately, often local to them, but foreign to the US), etc. In other words, those who have planned for retirement. The most vociferous outcry usually comes from those in the 50 to 70 year old range. They often come very close to the Exit Tax threshold. Obtaining a date to renounce can require a 6 month to 1 year wait for an appointment, and exchange rates can vary from the time of planning to the day before the appointment (when your assets are valued). Most are just average people in local terms, but can be hit by the Exit Tax once their homes, pensions, and savings are included for US purposes. It then becomes a difficult decision. Most are waiting, suffering the US tax reporting, and hoping that reason will eventually prevail.

I enjoyed the recent thread on the variation of Euro rates when planning a vacation. Imagine trying to forecast the consequences when your entire assets are involved!

As was said in my first post, one cannot generalise on any of this. Each individual has their own unique situation. Once you have established yourself abroad, you'll have to make the judgement as to whether the burden becomes oppressive. Since your retirement income is US sourced, you already have an advantage over those above regards US tax reporting. I wish you good luck with your plans.

 

[meierlde]

And therein lies the problem.

As Alan indicated, this is the territory of international tax experts and beyond the scope of a public forum. Nonetheless, some points are obvious as I would guess you've already established.

As a resident of a foreign country, you are subject to their tax legislation first. They will have the first go at your income. The US is second, but is and always will be present and will never go away if you are a US citizen. As a US citizen, you will always remain as resident in the US for tax purposes. If there is a treaty with the US it may offer some relief.

There seems to be three simple conclusions, and beyond those is the creativity of the international expert.

The first solution is to remain a US citizen, establish residence in a foreign country, and employ a dual (US/other country) tax specialist to best capitalise on filing both in the US and in the other country. Advice should be sought as to the best management of the funds in the US.

The second is to maintain a residence in the US, travel as you wish, never establish residence in any foreign country (you're always on the go and never in one place long enough to establish residence according to local rules, and always declare an ultimate return to the US), and maintain filing in the US as at present. Remember, you are always resident in the US for tax purposes no matter what, but you will not have the advantage of claiming tax concessions for physically being abroad. Your retirement income will be passive (not earned income), so the only offset for US tax is foreign tax paid, and you'll have none. This solution is aggressive tax wise, and would require the input of professional advisors.

The third is to renounce US citizenship and establish yourself abroad. There are two catches: the source of your income, and the exit tax. The US exit tax is quite punitive. Most get caught out on the $2 million threshold. $2 million sounds like a lot, but it encompasses all your assets. For example, if your current IRA will pay $50,000 a year on retirement, the exit tax will require the value of the total IRA funds to be determined at present, or by the amount needed to maintain that yearly amount for circa 30 years (there are actuarial charts to be computed for the exit tax), so that is $1,500,000. Add to that the value of any house, car(s), valuables, and ALL investments, and the $2 million threshold is easily breached.

As you've discovered, there are no easy answers.

There is actually a fourth option, just never come to the the US and don't get a US passport. What countries extradite for us tax evasion? (The Swiss don't for example). Yes it might make some travel a bit more complex but it is a solution. Unless your fairly well off the US won't spend the money on extradition.

 

[Alan]

There is actually a fourth option, just never come to the the US and don't get a US passport. What countries extradite for us tax evasion? (The Swiss don't for example). Yes it might make some travel a bit more complex but it is a solution. Unless your fairly well off the US won't spend the money on extradition.

TheOAP was actually responding to a direct question from free_at_49 who already has a US passport, and an IRA in the USA so his choices are limited.

However, you are correct that if you never have a US passport and never work in the USA there is little chance you will be affected.

DD's partner was born in Dayton, Ohio, to Australian parents and returned to Australia when he was 5. However, at age 35 he moved first to Canada for 2 years and then to the USA where has been working for the last 3 years as a US citizen and now is paying tax accountants to try and sort out his past tax filings as a US citizen for all the time he worked in Australia and Canada. It's unlikely that he'll owe any taxes but it is costing him a pretty penny to sort out plus he has more than $10k in his Australian superannuation accounts (similar to an IRA) and hasn't been reporting that to the Treasury either. (no tax due but potentially large fines for failing to report foreign financial accounts). He had no idea about this tax bombshell when he left Australia.

 

[Free_at_49]

FATCA is now making "nothing to do with the US" rather difficult these days and is likely the impetus for the large increase in renunciations.

There seems to be two diverse groups who are renouncing. The first are the super-rich; a very, very small number of those renouncing. They have the assets to pay the Exit Tax without sustaining a crippling blow to their finances.

The second seem to be either the "accidental Americans" or the Americans who have lived abroad for many years, and who have basic or minimal assets. It may be easier for them to escape the Exit Tax by being below the threshold, but they may also struggle with the $2,350 fee.

The silent majority (to use US political speak), and those feeling the brunt of the increased reporting burden, are likely those Americans who have lived abroad for many years, done reasonably well, and have pensions, savings, a home, investments (unfortunately, often local to them, but foreign to the US), etc. In other words, those who have planned for retirement. The most vociferous outcry usually comes from those in the 50 to 70 year old range. They often come very close to the Exit Tax threshold. Obtaining a date to renounce can require a 6 month to 1 year wait for an appointment, and exchange rates can vary from the time of planning to the day before the appointment (when your assets are valued). Most are just average people in local terms, but can be hit by the Exit Tax once their homes, pensions, and savings are included for US purposes. It then becomes a difficult decision. Most are waiting, suffering the US tax reporting, and hoping that reason will eventually prevail.

I enjoyed the recent thread on the variation of Euro rates when planning a vacation. Imagine trying to forecast the consequences when your entire assets are involved!

As was said in my first post, one cannot generalise on any of this. Each individual has their own unique situation. Once you have established yourself abroad, you'll have to make the judgement as to whether the burden becomes oppressive. Since your retirement income is US sourced, you already have an advantage over those above regards US tax reporting. I wish you good luck with your plans.

I have a feeling that the IRS is being very accommodating to Boris Johnson. Because he’s famous if he were to renounce the worldwide publicity would sting?

There are huge numbers of naturalized Americans retired in EU birth country collecting Social Security, simple workers, unaware of International treaties, and they seem to be doing OK, probably because SS (pensions in general) are not double-taxable in EU? There was recent news item: Social Security agents physically visited a 100+ year-old to verify that he’s actually alive. Indeed he’s alive and well, they found him working in his olive grove.

(Re my posts above and your Solution#1) When you’re retired on US income only it’s easier to be a permanent EU “tourist”? i.e. compliance is vastly simplified? Most online tax preps allow you to file a Federal return with a foreign address. You can then use the $ income from your US return to file your local EU tax return with credit for US tax already paid. My hypothetical return was based on that scenario. That seems very compliant to me. I’m not asking for qualified advice, just thinking out loud, shooting the breeze…

 

[Alan]

I have a feeling that the IRS is being very accommodating to Boris Johnson. Because he’s famous if he were to renounce the worldwide publicity would sting?

There are huge numbers of naturalized Americans retired in EU birth country collecting Social Security, simple workers, unaware of International treaties, and they seem to be doing OK, probably because SS (pensions in general) are not double-taxable in EU? There was recent news item: Social Security agents physically visited a 100+ year-old to verify that he’s actually alive. Indeed he’s alive and well, they found him working in his olive grove.

(Re my posts above and your Solution#1) When you’re retired on US income only it’s easier to be a permanent EU “tourist”? i.e. compliance is vastly simplified? Most online tax preps allow you to file a Federal return with a foreign address. You can then use the $ income from your US return to file your local EU tax return with credit for US tax already paid. My hypothetical return was based on that scenario. That seems very compliant to me. I’m not asking for qualified advice, just thinking out loud, shooting the breeze…

If Boris renounces it will not be for the hassle or cost of filing US tax returns if will be because he is going to make a run for Prime Minister and being a US citizen would give his opponents to much ammunition to attack his loyalities. (David Cameron has already announced that he will not run another term and has named Boris among several potential successors).

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)

 

[Meadbh]

If Boris renounces it will not be for the hassle or cost of filing US tax returns if will be because he is going to make a run for Prime Minister and being a US citizen would give his opponents to much ammunition to attack his loyalities. (David Cameron has already announced that he will not run another term and has named Boris among several potential successors.

Agreed. That's why Ted Cruz recently renounced his Canadian citizenship, though there was no economic incentive to do so.

 

[theOAP]

I have a feeling that the IRS is being very accommodating to Boris Johnson. Because he’s famous if he were to renounce the worldwide publicity would sting?

It's a lose/lose for both sides. Boris was recently elected to Parliament for a second time (as well as being Mayor of London). During the campaign, a past strategist for one of the opposing parties tried to make an issue of Boris being a tax cheat due to the US situation. Johnson's UK tax record is admirable (doesn't take loopholes), so the mud slinging soon stopped.

Also a sticky wicket was the Mayor's job. Does Boris have signature authority over the City of London accounts? If so, they all must be reported on an FBAR to the US Treasury - Financial Crimes Enforcement Network (as with all US citizens abroad). Boris is also not short of a bob or two, so the Exit Tax will also rear its head. Maybe a reason why Boris settled and has yet to renounce.

There's also some bad press in the UK regards financial customers who are British citizens only being forced to pay for yearly FATCA searches (@$600 a time) concerning certain trusts. In addition, normal banking accounts have been denied to a group of Boy Scouts and a group of church bell ringers due to them being unable to answer the now routine questionnaire about "US Person" status of all members when opening the accounts.

Tina Turner's renunciation was so much simpler.

There are huge numbers of naturalized Americans retired in EU birth country collecting Social Security, simple workers, unaware of International treaties, and they seem to be doing OK, probably because SS (pensions in general) are not double-taxable in EU?

It very much depends on the country and if they have a Totalisation Agreement with the US. In the UK, for example, the US Social Security payment to a US Person resident in the UK may only be taxed by the UK, and never by the US.

No other country on the face of this earth has citizenship based taxation besides the US. (I disregard Eritrea's 2% diaspora tax and its one page tax return.) All others have residence based taxation which allows all this difficulty to go away since expats are generally not taxed on income generated outside the home country.

(Re my posts above and your Solution#1) When you’re retired on US income only it’s easier to be a permanent EU “tourist”? i.e. compliance is vastly simplified? Most online tax preps allow you to file a Federal return with a foreign address. You can then use the $ income from your US return to file your local EU tax return with credit for US tax already paid. My hypothetical return was based on that scenario. That seems very compliant to me. I’m not asking for qualified advice, just thinking out loud, shooting the breeze…

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.

 

[theOAP]

Boris is also not short of a bob or two, so the Exit Tax will also rear its head. Maybe a reason why Boris settled and has yet to renounce.

May I correct an error I made in a previous post.

Boris was born a dual national and currently resides in the country of his other birth citizenship. Therefore, he is not subject to the US Exit Tax.

Apologies.

 

[Free_at_49]

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.

 

[Free_at_49]

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.

 

[Texas Proud]

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....

 

[Alan]

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.

 

[Free_at_49]

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

 

[Nemo2]

our freedom to roam

Which, since the beginning of time, has been restrained when we step onto someone else's turf.

 

[Free_at_49]

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?

 

[Texas Proud]

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...

 

[Alan]

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.

 

[Free_at_49]

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