Many GCC nationals plan to give up US passports

Most countries do not allow dual citizenship. Although citizens are mostly well aware of rules in their country of residence and/or birth, it is possible they are less aware of rules of a country they may hold a new passport to; like the US.

It may sound a little far-fetched, but the situation is not at all erratic in the GCC region, knows Virginia La Torre Jeker, a Dubai-based US tax lawyer and author of the ‘Let’s Talk About: US Tax blog’.

“Many GCC dual nationals are now looking at renouncing their US citizenship.

Many more thought they had already given up their US citizenship years ago when they took on, say, Saudi citizenship (usually after marriage to a Saudi national) and pursuant to Saudi law specifically renounced their US citizenship at such time,” she writes in her latest blog post.

“They are now learning, many years later, that this might not have been enough and that they are still US citizens because they did not give notice to the Department of State that they had the intent at that time to give up their US citizenship.”
 

How does someone become a US citizen?

There are people who intend to become an American citizen. They go through a lengthy process and after years happily receive their US citizenship they so wished to have. This category of people will most probably be aware of the strings attached to their new passport.

But there is another category of new US citizens, who take on US nationality in a much less apparent way. "When somebody is born in the US, (s)he automatically receives US citizenship. This is called the law of the soil, a rule of common law also followed by the US," said Virginia.

Similarly, when a child is born outside of America and one of the parents is a US citizen who has lived in the US for a certain period, (i.e., 5 years; with 2 of the years after age 14) the child is automatically born a US citizen. The child receives US citizenship involuntarily, and maybe even unaware.

"Take the example of a Lebanese family. A Lebanese couple, while studying in the US, gave birth to a son.

“This son is now a US citizen at birth. At a young age he returns to Lebanon with his parents. He goes back to the US for college and stays there another few years to work. He then returns to Lebanon, marries a Lebanese lady and has a child.

“This child is now a US citizen at birth based on the US immigration rules of having a parent who was born a US citizen and lived a certain number of years in the US prior to the birth of the child overseas.”

Where the problem arises

With the enactment and the enforcement of the US tax compliance scheme under the Foreign Account Tax Compliance Act (FATCA) information about these citizens is more in the open now.

“Not only are many desperately struggling to become US tax compliant, many GCC nationals are becoming quite concerned that their government will learn they hold a prohibited “second” nationality,” writes Virgina.

“Under FATCA, foreign financial institutions must agree to verification and due diligence procedures – meaning they must be on the look-out for customers, owners or beneficiaries evidencing any “US indicia”.

They must identify and report directly to the US Internal Revenue Service or to their own government via an intergovernmental agreement (IGA), information on US account holders.

“FATCA will help expose GCC nationals who hold US citizenship by a financial institution’s transmission of that information directly to the home country government agency responsible for gathering information under the IGA."

According to Virginia, many US-GCC dual nationals are unsure of the right steps to be taken.

Not only are they unfamiliar with their US tax obligations or the procedures to become tax compliant by filing US tax returns, but many are unsure of their legal status vis-à-vis their US citizenship because they may never have obtained that critical document called a Certificate of Loss of US Nationality (CLN) .

“If they try to get the CLN now with a retroactive relinquishment date, they will have to demonstrate they had the intent to relinquish US citizenship at that earlier time. This is often a very difficult burden to meet,” she writes.

“Many Saudi-Americans, for example, live in limbo – they are unsure of their legal status and unsure what may happen to them under the citizenship laws in their homeland that prohibit dual nationality."

[Image via Shutterstock]

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