A First-Hand Expatriation Guide
for Americans (IV) – How-to
Here’s an overview of the five steps to renunciation:
1.) Get a second passport from another country. You must have one before you expatriate.
2.) Carefully review the State Department’s renunciation forms and prepare DS-4079.
3.) Book an expatriation appointment at a U.S. embassy or consulate.
4.) Go to the appointment, complete all the forms and turn in your U.S. passport.
5.) Celebrate after filing your final tax return.
Pretty straightforward for something that initially seems so mysterious and intimidating. Still, there are details to know and mistakes to avoid.
STEP 1: Get a Second Passport
You are required to bring a second passport to your renunciation appointment. Even though expatriation is your right, the State Department will deny your renunciation if you don’t have a second passport.
No doubt you’re too bright to fall for it, but I’ll say it anyway. Ignore the scams on Internet sites offering passports for sale. If your passport is not being issued directly by a government, you’re getting a fake or stolen one.
There are many ways to get a second passport. But you can split the different approaches into two categories: the fast track and the conventional track. The fast track can be as quick as three months, plus you don’t have to move from wherever you are to get the passport.
In contrast, the conventional track can take five or more years, and you’ll most likely have to move to that country.
Let’s address the conventional track first. There’s lots of information online about getting citizenship (and thus a passport) from any number of nations. Search for “immigration to _______” and you’re off to the races. It’s generally much easier if you’re already married to a national of that country, but you’ll still probably need to move to that country for six months or more. Another route is citizenship through ancestral claim. That too varies from country to country, but if you can produce birth records for your parents (and sometimes grandparents), then you may be on your way. The super slow conventional way is – while you’re still a U.S. citizen – to immigrate to that country and go through the full residency and naturalization process. This path takes many years…three, five, sometimes much longer depending on the country. The best way to research these conventional options is to read online, write down any questions, and then contact an immigration attorney in the capital city to get your questions answered.
Now onto the fast track. Most people who feel motivated to expatriate don’t want to spend years trying to do so. Although it’s quick, convenient and legitimate, the fast track is not cheap. It’s called economic citizenship. That means purchasing a passport directly through a government’s economic citizenship program. There used to be several countries that offered this path. But over the years the U.S. has successfully pressured nation after nation to shut down the programs. Only two countries are still standing. The first is the Federation of St. Kitts and Nevis. The second is Dominica (not to be confused with the Dominican Republic). For people anxious to break free of the U.S. government’s grip, these economic citizenship programs are a Godsend. That’s why I fear they won’t last.
St. Kitts-Nevis and Dominica are English-speaking British Commonwealth islands. Either passport will do the trick for renouncing your U.S. citizenship. That said, the St. Kitts-Nevis passport is generally more desirable because it has better travel privileges. By better travel privileges, I mean visa-free entry into almost any country the U.S. passport gets you into, including the EU nations and Canada. Dominica gets you visa-free entry into scores of countries too, but not the EU or Canada. You should compare the two closely and determine how important the price difference is to you. If you’re more financially constrained and intend to get another passport a few years down the road anyway, the Dominica route may be well worth the inconvenience of getting visas.
Citizens of both St. Kitts-Nevis and Dominica enjoy freedom from income tax, corporate tax, capital gains tax, and any other taxes on all assets and income originating outside each respective country. Also, neither nation charges its citizens death tax.
If you have substantial assets, the cost of either passport will be more than recouped from your first year of tax savings alone. For an individual, the St. Kitts-Nevis passport is $200,000, and Dominica is $75,000, plus legal and processing fees. The cost increments higher if you include a spouse and children. The price of both passports has increased over the years as demand has risen. I expect that trend to continue – assuming the programs don’t get shut down.
St. Kitts-Nevis also offers an economic citizenship route that’s based on investing in real estate. That approach costs more up front – from $400,000 to several million depending on the property. If you’d enjoy vacationing or living there, it may be a good choice. However, the real estate investment option is more involved and takes at least nine months to get your passport, about three times longer than the direct route.
St. Kitts-Nevis and Dominica require you to submit your citizenship application through a local attorney. Both have a deal worked out with an international firm called Henley & Partners, but that’s just one choice among many. The links below list local attorneys who are authorized to submit your application, so it’s probably worth contacting a few to ask some questions and compare fees.
As part of the application process, you need a medical exam to demonstrate you’re in passable health. You’ll also be required to submit criminal background clearances. For U.S. citizens, this means getting an FBI clearance certificate to show you don’t have a storied criminal record. FBI clearances are very common and nothing to be jittery about. Any immigration lawyer will tellyou they’re used all the time for residency and naturalization purposes. You send a card in with your fingerprints, and you get the clearance letter back. The process of how to do it is here: www.fbi.gov/hq/cjisd/fprequest.htm.
I received my clearance in a few weeks, though the site at the moment says it takes considerably longer. If that’s still the case when you read this, ask the lawyer you pick if he can file your passport application while waiting for the clearance letter to arrive. That way if the FBI is slow to respond, it won’t delay the overall processing of your application. Of course once you decide to begin the passport process, you can get a jump on this and send in the clearance request right away.
You’ll also need to get a “police clearance certificate” from any state you’ve lived in over the last several years. Send in a request with the processing fee, and you’ll get a letter back in a few weeks. Some states require you to send fingerprints, and some don’t. This site lists contact details for obtaining police records from your state.
One other consideration: the Dominica passport application requires you to visit Dominica for an interview. It says on the St. Kitts-Nevis application that an interview might be required, so you could ask a lawyer how often that happens. More than one person has told me the Four Seasons resort in Nevis is worth a visit. Either way, a mini-vacation is never a bad thing.
When you receive your second passport, it’s best to stop using your U.S. one. Travel exclusively on your new passport. You’ll of course need to bring your U.S. passport to your renunciation appointment, but use your other passport at airports and wherever else it’s going to be scanned and stamped.
St. Kitts & Nevis citizenship links:
– Main government website
– St. Kitts & Nevis Citizenship-by-Investment Program website
– Citizenship By Investment Programme
– St. Kitts Investment Promotion Agency (several attorneys listed here)
– St. Kitts & Nevis Citizenship Application (See Form C1)
Dominica citizenship links:
– How do I apply for Economic Citizenship of the Commonwealth of Dominica?
– Government Approved Economic Citizenship Agents 2010 List
– Dominica Citizenship Application (PDF)
STEP 2: Review the Renunciation Forms and Prepare DS-4079
The documents listed below are the ones required by the State Department to process your renunciation. You only need to fill out DS-4079 before your appointment. DS-4080, 4081, 4082 and 4083 are forms that you should review beforehand but complete at the appointment, since they just have a few check boxes, dates and signature.
DS-4079 (PDF) Questionnaire – Information for Determining Possible Loss of U.S. Citizenship
DS-4080 (PDF) Oath of Renunciation of the Nationality of the United States
DS-4081 (PDF) Statement of Understanding Concerning the Consequences and Ramifications of Relinquishment or Renunciation of U.S. Citizenship
DS-4082 (PDF) Witnesses’ Attestation Renunciation/Relinquishment of Citizenship
DS-4083 (PDF) Certificate of Loss of Nationality of the United States
Let’s talk about DS-4079, the one with lots of questions. Just be brief and direct. No need to write essays. If a question has room for several sentences under it, there’s nothing wrong with answering it with a single sentence. For example, there’s a big space where it asks what ties you have to the country of your second passport. If you just got your passport through economic citizenship and don’t have any ties, then it’s fine to simply say you have no ties. On question 8 it asks what ties you still have in America. It might be friends, family, business…whatever happens to be the case. But you don’t need to list names. You should also add the filing of income tax returns to the list on question 8, since you’ll be filing your final return after your renunciation.
DS-4081 asks if you’d like to make a separate written statement of your reasons for expatriating. My suggestion is not to since it isn’t required, and you have nothing to gain by doing so.
The CLN: Your Golden Ticket
DS-4083, called the CLN for Certificate of Loss of Nationality, is what you get at the end of your renunciation appointment. Handle with care, as it’s your one piece of physical proof that you’ve expatriated. It’s signed and affixed with an official seal at the appointment. However, you get another copy of the form several months later with an ink stamp from the State Department in the right-hand corner of the page.
I was given the CLN at the end of my appointment but told that the processing wouldn’t be final until I received the stamped version from the State Department. I suppose the State Department could reject a renunciation, but I’ve never heard of it happening under normal circumstances.
In any case, make sure you leave your renunciation appointment with your CLN in hand. If for some reason they don’t give it to you automatically, tell them you’d like one of the CLN copies (you’ll have signed several) as a record that you completed the process here today, even though you know it’s not final until the State Department approves it. Why am I making a fuss over this? Because CLNs are now taking a long, long time to be processed by the State Department. We’re talking several months to as long as a year. I believe this is because they’re swamped with renunciations, but regardless of the reason, you need your CLN, even if it’s not the stamped version. I recommended making a couple copies of it right away and storing them safely.
Why is the CLN so important? For starters, the date of your renunciation is on your CLN, and that’s the day you’re cut free from the global U.S. tax net. Beyond that, say that you want to open an account in one of the world’s private banking centers such as Switzerland or Singapore. Behold! They’ll actually want you as a client. To establish international banking relationships, you’ll need to show your CLN as proof that you renounced your citizenship.
To give another example, say you want to get a mortgage from a local bank to buy a lovely house somewhere in the European countryside. Overseas banks generally won’t give Americans mortgages because having them as customers is not worth the cost, hassle and liability. So again, you’ll need your CLN to prove you’re no longer a U.S. citizen. Just showing them your other passport won’t be enough.
STEP 3: Book Your Renunciation Appointment
Ideally you would book your appointment at the embassy or consulate in the country (and possibly city) where you plan to be once you renounce. However, other embassies and consulates will take you, so it pays to “appointment shop” as the wait times can fluctuate greatly among locations. It’s also worth noting that the paperwork process and appointment procedures vary slightly from place to place. Some may make you jump through hoops to book an appointment. For example, if you’re trying to book an appointment in Dublin, they may ask if you live there. If the answer is no, they may ask why you want to show up there in particular. In that case you could explain that you have plans to be traveling there anyway, so you’d like to see what appointment slots are available.
When you book the appointment, make sure to indicate how many people are renouncing if it’s more than one. If you don’t want to book the appointment yourself, you can have your expat lawyer do it for you. However, having a lawyer book the appointment for you can delay the process some places, as they may require written proof that your lawyer represents you. They ask for this proof via Form G-28.
STEP 4: Attend Your Renunciation Appointment
Obvious stuff first: Show up early. Dress decently. Be courteous and polite. Don’t forget both of your passports. The deal is sunk if you do. Bring your birth certificate, and if you have a certificate of naturalization from the country of your second passport, bring that too.
There may be a long line just to get inside the embassy or consulate. If there is, politely let them know you have an appointment booked. If they’re running way behind, then they can notify the official that you’re there. Dealing with any bureaucracy can be a test of your mental strength. Don’t flunk.
You’ll be completing many copies of each form at the appointment. Keep them organized in stacks. Proofread everything you and the official put on the papers. Make sure the signatures are in the right place. All this may sound obvious, but there’s a lot to track. It’s deceptively easy to make mistakes. Just remember it’s your job – not the official’s – to be organized and carefully proofread everything. For instance, if the official forgets to sign one of the forms, politely point out that in the midst of all the signing one was missed. If they are slow, bumbling or incompetent, suck it up and keep your cool.
STEP 5: File Your Final U.S. Tax Return
Your final tax return will be from January 1st through the day you expatriate. However, the fair market valuation for all your assets is as of the day before. That’s because on the day you renounce, you are no longer a taxable person to the IRS.
If your renunciation date is any day other than December 31st, you’ll be filing your final tax return on Form 1040NR.
IRS Form 8854, the Expatriation Information Statement, is the exit tax form, and it’s filed along with your final return. It’s not especially difficult, but you want to make sure you do it right. Here are Form 8854 and its instructions (PDF).
IRS forms are periodically updated, so make sure you have the most recent one. The 8854 is targeted at “covered expatriates.” A covered expatriate is someone who meets the wealth criteria established by the IRS. It’s based on having a net worth of $2 million or more, or a threshold annual tax liability from the preceding five years. To read the full definition and see if it applies to you, go here.
If you’re a “covered expatriate,” I recommend filling out the 8854 with the assistance of an accountant, preferably one who has done them before. There’s no need to pay for his learning curve. If you have any questions that might be sensitive, consult a tax attorney first. You have attorney-client privilege with your lawyer – not your accountant.
If you have foreign accounts already extant before you expatriate, you’ll also need to file a U.S. Treasury form called the “FBAR” (TD F90-22.1). You may have done this before since the form applies to all U.S. citizens and is not related to expatriation.
The World’s My Oyster, But Where Do I Go?
Before you expatriate you need to decide where you want to live, at least initially. Look around and pick your top candidates. Then find out what it takes for you to be there for a given length of time. Most places are free to visit as a tourist for quite a while, often six months. Then see what it takes to establish residency if you should choose to do so.
There’s nothing that says you must immediately put down residency roots somewhere. You don’t need an established residency outside the U.S. in order to expatriate. The only thing you need is a mailing address outside the U.S. to put on your renunciation forms. If you don’t pick up your State Department-stamped CLN in person, then that’s the address where you should instruct it to be sent, by overnight courier. It’s also the address to use on your final tax return.
There’s so much information online and in books about what it’s like to live in different places that you should probably start off by thinking about what’s important to you day to day. Being close to nature? Warm climate? Artistic culture? Shoreline? Good schools?
Say you only speak English, and you like living in or near larger cities. Maybe you’d feel intimidated moving someplace where English isn’t the default language and you’d “stick out.” Or maybe that would be exciting – but let’s say it was intimidating. In that case, you could start your search by looking at the major cities of Canada, Australia, New Zealand, England and Ireland. If you’re not a city person, you could check out the many English speaking sunny islands like the Bahamas, Barbados, Bermuda, or the Cayman Islands.
If you don’t care about ethnically blending in, but still want widespread English, Hong Kong and Singapore are great choices. They both have thriving expat communities. Singapore is world- renowned for its low crime rate and outstanding schools, and Hong Kong is repeatedly ranked as the economically freest place in the world.
Many expats who speak some Spanish head south to Panama, Belize, Argentina, Uruguay or Mexico. Or maybe it would be fun to live in Europe for a while. Perhaps you have a boat and want to spend time cruising wherever your impulse takes you.
If you’re not sure where to begin looking, the global consulting firm Mercer formulates a list called “The World’s 20 Best Places to Live.” If you find someplace to settle down as a permanent resident, check first to see what the tax implications will be, as you will be stepping into a new tax net, at least while you are settled there. Some places let you become a permanent resident – and even a citizen – while keeping your assets out of their tax net. Other places are tax-free jurisdictions that have no tax net at all.
O Canada
Now let’s go from broad to specific to illustrate an example scenario. Among expatriation advisors, Canada is often recommended for American expats. It’s close to the U.S., which is an important consideration for those who plan to visit often. The schools are good; people are friendly and speak English; and blending into the culture is fairly seamless.
The biggest financial benefit Canada offers new residents is known as the five-year tax holiday. It allows new residents to place their assets in an offshore trust, thereby sheltering ALL non-Canadian sourced income and capital gains. Within that five-year tax holiday, if you choose, you can acquire Canadian citizenship. If you decide you don’t want to settle permanently in Canada, you can leave before the tax holiday is up and become non-resident for Canadian tax purposes. If you decide not to stay in Canada for the long run, you’ll still have another (excellent) passport and all the benefits of Canadian citizenship – without stepping into the Canadian tax net.
Another attractive feature for wealthier people who decide to take this route: You don’t have to get a job to secure permanent resident status, the precursor to getting citizenship if you qualify under the Canadian Immigrant Investor Program.
By the way, there’s no death tax in Canada.
I’ve singled out Canada because for many Americans it’s a great choice. The main thing is to enjoy the process of learning about different places. There’s so much good information online; the world really is at your fingertips. And for most people, there’s no time pressure because you don’t need to make any long-term living decisions before you expatriate. The world is open to you. For as long as you like, you can be a free (and tax-free) spirit, what some call a perpetual traveler (‘PT’).
Getting Started
Expatriation is in many ways a parallel process. What I mean is there are several things you can be doing at once to make the process go smoothly and efficiently. You should create a timeline and checklist for the overall game plan. That will keep you from getting bottlenecked along the way.
Since politicians have made the right of expatriation a tax issue, it’s wise to retain an attorney who specializes in this area. They’re out there, both in boutique firms and big name ones, often with offices outside the U.S. You’ll also want a tax attorney in whatever country you decide to move to if you’re going to establish permanent residency there.
Don’t underestimate the importance of good planning and advice. Think carefully about the assets you want to keep through expatriation versus what to sell in advance. You don’t have to move your assets offshore before you renounce, but many people do. One special consideration: If you own shares in an S-Corp, you must sell them or convert to an LLC or C-Corp before you expatriate.
A good way to start the advisor search is to call some international law firms and ask if they have anyone who specializes in U.S. citizenship renunciation. If they say no, request a reference. If they say yes, do an interview. Ask the lawyer when he first started handling renunciations, and how many people he’s walked through the process. Ask a couple questions about the mechanics to see how fluent he is. See what he recommends in terms of positioning your assets for expatriation. Ask which embassies he prefers for his clients, and what the current wait times are. Once you’ve found an advisor you trust, you’re well on your way.
I enjoyed browsing your site, but I am not sure that u are aware that ALL OF YOUR LINKS ARE BROKEN for this page.
Thank you. Not sure how that happened. But I went through and fixed them all. Thanks for letting me know.
Thank you for putting all the useful information together.
You said, “Your final tax return will be from January 1st through the day you expatriate….” and “If your renunciation date is any day other than December 31st, you’ll be filing your final tax return on Form 1040NR.”
So, does it mean, if your renunciation date is Dec. 20, you will only need to file 1040NR instead of filing both a 1040 for the time before Dec. 20 and a 1040NR for the days after Dec. 20? Could you please clarify on this?
Thanks.
Hi Jen, I didn’t write the report. Credit goes to a generous, anonymous former US citizen who just wanted to share the info.
But to answer your question, I believe you’d file 1040 for all your income up to your renunciation date (Jan 1 – Dec 20th, in your example). Then for the period from Dec 20 to the end of the year, you’d file 1040NR to declare and pay income tax on any US-sourced income, just as other non-resident persons who has any US-sourced income would do.
Of course, I’m not a tax attorney. But this is from another duo of former-US citizens here: http://renunciationguide.com/FAQ.html#TaxFilingsTheYearOfRenunciation
p.s. You probably know this, but don’t forget to get a 2nd citizenship & passport before renouncing.