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11 December 2023

Accidental American? Easier to renounce your US citizenship

Many GCC dual nationals are now looking at renouncing their US citizenship. (AFP)

By Staff

A proposal has been made by the US Government to make it easier for ‘accidental Americans’ to renounce their US citizenship, a gesture that could be well received by GCC nationals who unwillingly hold dual citizenship.

In GCC countries, dual citizenship is not permitted. When adopting a UAE passport, for example, this is the only passport one may have. However, citizens of the GCC region sometimes accidentally hold a second citizenship; the American one.

Earlier, Dubai-based US tax specialist Virginia La Torre Jeker, JD, noted that many GCC individuals seeking her advice are ‘accidental Americans’. Typically, these persons are GCC citizens who unwillingly and sometimes even unknowingly obtained US citizenship due to the binding and far-reaching laws regarding attaining citizenship in the western country.

“Many GCC dual nationals are now looking at renouncing their US citizenship,” she wrote in one of the posts on her blog ‘Let’s Talk About: US Tax’.

“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,” ,  wrote La Torre Jeker, a member of the NY Bar.

“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.”

The recent proposal is aimed at making it easier for certain individuals to renounce US citizenship, writes La Torre Jeker in her latest blog. “There is express recognition that many individuals who wish to expatriate have valid reasons, well aside from US tax, for doing so. For example, the proposal recognises that it may be illegal for an individual who is a citizen of a particular country to hold another citizenship.”

Renouncing US citizenship is not an easy task, particularly due to the fact that every US citizen seeking to give up his citizenship must be US tax compliant for the 5-year period prior to expatriation. This condition which is very hard to meet when US citizenship was never voluntarily attained, when the individual has lived abroad most or all of his entire life and has never understood the US tax rules.

“The administration seemingly recognises that worldwide taxation is simply not appropriate when an individual has had only very minimal contact with the US despite technically being a US citizen under the US laws,” writes La Torre Jeker.

If enacted into law, the proposal would be effective January 1, 2016, and make certain US tax obligations and laws completely inapplicable to a limited class of individuals, potentially saving them very significant tax dollars, elaborates La Torre Jeker.

The individual must have become a citizen of the US and a citizen of another country at birth, and held a dual citizenship at all times up to the expatriation date.

(S)he must not have been a resident of the United States since the age of 18.5 years, and never held a US passport unless for the sole purpose of departing from the United States.

Further, the rule will apply to individuals who relinquished US citizenship within two years after the later of January 1, 2016, or the date on which the individual learnt that he or she is a US citizen, and certifies under penalty of perjury his or her compliance with all US Federal tax obligations that would have applied during the five years preceding the year of expatriation if the individual had been a non-resident alien during that period.

“While the proposal is untenable for many ‘accidental’ dual nationals, I believe it may still be a good sign,” wrote La Torre Jeker.

“The administration’s proposal may be quite significant in that it arguably indicates it is beginning to see that the law should recognise there is indeed a difference between a ‘technical’ and ‘formal’ definition of US citizenship and the substantive or meaningful definition, the latter of which is the only one that should attract citizenship-based worldwide US taxation.”