# FATCA and Renouncing citizenship



## Jorgeb

Hi, 

I've been living and working in Spain since 1999 and became a naturalized Spanish citizen in 2005. At the time I swore an oath of loyalty to the Spanish crown and renounced my American citizenship before a Spanish judge at the ministry. Being a naive, I thought that was the end of it. I haven't worked or lived in the US since 1999 and have only used my Spanish documentation.

Recently my bank, ING Direct, has been asking me to fill out a W9 form to be in compliance with FATCA because on my Spanish ID it says I was born in the USA. I thought I wasn't an "US person" and have only been willing to fill out a W8, but they are insisting and threatening to block the account, so I started looking further into the issue.

So I now realize that, for tax purposes, I needed to officially renounce my US citizenship to the State Department, that there is a hefty fee over $2000 and possible tax implications. Damn.

Unfortunately, I do not have much to show for my nearly 20 years in Spain. I have now assets of note and little money in savings after a recent divorce. 

I was wondering what steps should I take to deal with this FATCA issue and how important is it for me to formally renounce my US citizenship. 

Any and all advice is welcome!


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## Bevdeforges

Given your US birthplace, the easiest way to deal with the situation would be to fill out the W9 form and let it go with that. The W9 is kept by the bank (i.e. NOT sent to the IRS) for their purposes only. They will continue to report your accounts and year-end balances to the US Treasury Dept. but chances are that will be the end of that.

You can decide whether or not you want to report your foreign bank accounts on FBAR statements each year - but at least up until now there have been no real enforcement of the FBAR filing requirement for overseas residents unless the taxpayer has other tax issues. And there are plenty of valid reasons why someone with 6-figure foreign bank accounts may not have enough income to have to file US taxes anyhow.

Technically you are supposed to be filing US income tax returns (if your worldwide income exceeds the filing threshold for your filing status) and declaring your foreign bank accounts via FBAR if the total of all your accounts exceeds $10,000 (maximum balance) at any time during the year. Practically speaking, if you haven't been filing tax returns all this time, and have no income coming from the US nor any financial assets in the US, it's kind of up to you.

Renouncing will cost you $2350 at your local US consulate (and actually, the consulate staff are often very sympathetic). There is a sort of an "out" in that if you can honestly claim that you intended to renounce your US citizenship when you went through the process with the Spanish judge, you can claim to have renounced. The "catch" (and there always seems to be one) is that the only proof acceptable to the US government (IRS, mainly) of loss of citizenship is a Certificate of Loss of Nationality (CLN) and to get one of those, the fee is (ready for it) $2350.
Cheers,
Bev


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## Nononymous

So here's my take. 

As far as the bank is concerned, you are a US citizen until you can show them a CLN. More than likely they won't accept your argument about having relinquished when you took Spanish citizenship, and they won't let you sign a W8.

You have two options at this point:

Renounce US citizenship at a cost of $2350. You do not need to be tax compliant before or after renunciation unless it's important to you to properly exit the US tax system (if for instance you were planning to leave a substantial estate to a US taxpayer). Then bring the CLN to the bank and sign a W8.

Sign the W9 and be done with it. The bank may, depending on how much money you have and where the reporting threshold is, send your year-end account balance and other info to the US government. Currently, nothing further will happen, but it's hard to predict the future. You could at this point file FBARs without tax returns, or both, or do nothing. What's important to know is that the US has no ability to penalize you if you do not have US assets.

One minor point. If you had relinquished in 2004 you would have no obligation to make any tax filing after obtaining your CLN. But you took Spanish citizenship in 2005 so to exit the US tax system you'd still need to do the silly five years of returns plus 8854 filing etc. It will still cost you $2350 in both cases though.

Also, as Bev pointed out, if you really are earning little income or have minimal bank balances, you may already be in compliance by virtue of falling under the filing and reporting thresholds.


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## lat19n

I just wanted to make a brief comment about the naturalization process. My wife and I are in the final stage of getting naturalized in Mexico (the docs are printed, waiting for them to arrive) and at that time I understand we will ALSO have to renounce our US citizenship, but I think it is 'implied' that pertains to when we are in Mexico. I suspect that if we made a trip to the States, they would not recognize our Mexican citizenship there - but it is just my assumption.


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## Bevdeforges

I think you may be misunderstanding the situation.

If you naturalize as Mexican (or any other non-US nationality) it has no effect on your US nationality. Some countries (Germany and Austria are the two I know of) may require you to renounce your previous nationality BEFORE they will naturalize you. But the only way you lose your US nationality (legally, at least) is by renouncing in front of a US consulate official (and paying $2350 for the privilege).

If you make a trip to the US, you are supposed to use only your US passport to enter the country. If you have a US birthplace, the Immigration officials will assume you are a US citizen unless you can produce a CLN (certificate that you have formally renounced). I'm hearing more and more about people being pulled aside for "questioning" if they are found to be entering the US on a foreign passport that indicates that they were born in the US. 

You may want to take a look at the information posted on the US Consulate website about renouncing: https://mx.usembassy.gov/u-s-citize...14.1348596807.1539200116-472307252.1538927717
Cheers,
Bev


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## Nononymous

lat19n said:


> I just wanted to make a brief comment about the naturalization process. My wife and I are in the final stage of getting naturalized in Mexico (the docs are printed, waiting for them to arrive) and at that time I understand we will ALSO have to renounce our US citizenship, but I think it is 'implied' that pertains to when we are in Mexico. I suspect that if we made a trip to the States, they would not recognize our Mexican citizenship there - but it is just my assumption.


There's a bit of nuance to this. In your case if you traveled to the US it's not so much that they wouldn't recognize your Mexican citizenship, but rather that they'd still consider you a US citizen so would want you to enter on a US passport. 

In some countries (Spain and Mexico among them) when you acquire citizenship you swear a little oath that you are giving up your other citizenships. What this means in the real world is that you give up the rights of a foreign national (you can't ask the US consulate for help) but it's not necessary to actually document the loss, so you remain a dual citizen. 

In other countries (Germany the one I know of) you actually do need to go renounce and obtain a CLN before you can naturalize. This actually leaves you stateless for a short period of time while the application is finalized. The only exception allowing you to preserve dual citizenship is if you can prove that the renunciation fee will cause financial hardship.

As far as the US is concerned, you may have performed a relinquishing act when you took another citizenship, but unless you report it to the consulate and pay the $2350 fee to obtain a CLN, you are still a citizen as far as they and the IRS and CBP and DHS are concerned. Not a coincidence that it's the same fee to renounce or to document relinquishment (some years back the latter was free, so it was very much to your advantage to prove that an expatriating act had been committed). It's simpler to renounce but there may be tax reasons to document a relinquishment prior to 2004. Note also that it's near-impossible to claim relinquishment if subsequent to naturalizing elsewhere, you voted or renewed a US passport or otherwise behaved like a citizen.


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## lat19n

Once naturalized in Mexico there are several ways we could lose our new citizenship. Once way is if we were to enter Mexico using a passport other than our Mexican passport. I also think (thin ice), that if we were to not be in Mexico for an extended period of time we could lose our citizenship. 

And briefly - as Bev pointed out in the past - if you renounce US citizenship and receive social security, you will likely get hit with hefty withholding fees (which you may not be able to recoup).


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## Bevdeforges

lat19n said:


> And briefly - as Bev pointed out in the past - if you renounce US citizenship and receive social security, you will likely get hit with hefty withholding fees (which you may not be able to recoup).


Just to clarify - if you receive US Social Security while living outside the US, how you are taxed and/or withheld will depend on whether or not you have US citizenship and the tax treaty between your country of residence and the US.

There are a range of possibilities - from only the US has the right to tax your US Social Security (so that if you are not a US citizen, up to 30% of 85% of your benefit will be withheld as non-resident taxes) to those treaties where only your country of residence has the right to tax your US SS benefit whether you are a US citizen or not. Probably a few somewhere in the middle.
Cheers,
Bev


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## Jorgeb

Bev, thanks so much for taking the time to answer my questions. It's really appreciated. 

I'm a bit unclear on this part:

"Renouncing will cost you $2350 at your local US consulate (and actually, the consulate staff are often very sympathetic). There is a sort of an "out" in that if you can honestly claim that you intended to renounce your US citizenship when you went through the process with the Spanish judge, you can claim to have renounced. The "catch" (and there always seems to be one) is that the only proof acceptable to the US government (IRS, mainly) of loss of citizenship is a Certificate of Loss of Nationality (CLN) and to get one of those, the fee is (ready for it) $2350."

Do you mean that if I can convince the people at the consulate that I meant to renounce during the naturalization process they would waive the fee? But I would still have to come up with the same amount for a different document for the IRS? Another question: if I pay the fee at the consulate, will I have to pay again for the IRS document?

Thanks again!


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## Bevdeforges

Jorgeb said:


> Do you mean that if I can convince the people at the consulate that I meant to renounce during the naturalization process they would waive the fee? But I would still have to come up with the same amount for a different document for the IRS? Another question: if I pay the fee at the consulate, will I have to pay again for the IRS document?
> 
> Thanks again!


No, sorry, I was being a bit of a wise ass here. A few years ago, someone here on the forum thought they had found a way around paying the fee to renounce if they had intended to to "forswear" their allegiances when taking another nationality. That used to work - at least until they implemented the fee to renounce, when they decided the same fee applies to the CLN.

But nowadays, you can only lose your nationality by renouncing before a consular official at a US Consulate (and that costs you $2350). The CLN is the one and only document that "proves" that you have lost your US nationality - and either you get one of those sometime after you formally renounce at the consulate, or you try to get them to recognize some "act of relinquishment" you committed in the past - but that will also cost you $2350 for the CLN.

I only mentioned the consulate staff because a friend of mine recently renounced and was pleasantly surprised to find that her reception at the consulate was quite cordial. (And that she was one of about 30 folks with their appointments at the same time - so it's getting to be a popular thing to do.)
Cheers,
Bev


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## Pacifica

Jorgeb said:


> Do you mean that if I can convince the people at the consulate that I meant to renounce during the naturalization process they would waive the fee?


The fee for a CLN based on a relinquishing act such as naturalisation is the same as it is for one based on a renunciation, $2350. At one point a fee was only charged for renunciations (which is a form of relinquishment and listed under _Immigration and Nationality Act_ s. 349(a)(5)) but in 2015 they extended the fee to cover all methods of relinquishment. 

Naturalising, if done with the intent of relinquishing US citizenship, is a relinquishment under _Immigration and Nationality Act_, s. 349(a)(1). 

"_ A person who is a national of the United States whether by birth or naturalization, shall lose his nationality by voluntarily performing any of the following acts with the intention of relinquishing United States nationality (1) obtaining naturalization in a foreign state upon his own application . . . after having attained the age of eighteen years. . . .”_
https://www.law.cornell.edu/uscode/text/8/1481


The burden of proof is on the party claiming that loss of nationality occurred -- basically you show that you didn’t act like a US citizen after naturalising; eg, did not renew US passport, did not vote in US election, etc.; your ties to your home country and lack of ties to the US, etc. See the questions on DoS form DS-4079. https://eforms.state.gov/Forms/ds4079.pdf




Jorgeb said:


> But I would still have to come up with the same amount for a different document for the IRS? Another question: if I pay the fee at the consulate, will I have to pay again for the IRS document?


No, the CLN is the document which the IRS accepts as proof of loss of citizenship. Banks and everyone else accept it as proof as well.

A concluding thought:

A CLN application based on naturalisation is often cut-and-dried, but a renunciation always is always cut-and-dried as the consular officer witnesses and attests to the relinquishing act. 

So in general I’d say if a person feels their relinquishment based on naturalisation is a cut-and-dried case and the date of relinquishment is important to them, I’d choose to go for a CLN based on the naturalisation (this is what I did). If, however, one feels their case is not so clear-cut and the date is not important to them, I’d choose renunciation.


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## Nononymous

If the relinquishing act (i.e. naturalization) took place before 2004 then there are no tax compliance obligations, so it's worth jumping through hoops to prove it and obtain the CLN for US$2350. Otherwise it's easier to just renounce, also at a cost of US$2350 to obtain the CLN.


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## Jorgeb

So looking at my paperwork, I renounced my US nationality before a Spanish judge on Sept 20, 2005, when I became a Spanish citizen. 

Given that this is post-2004, is it not worth using naturalization as the reason for my renouncing? Is there any advantage at all for setting my official relinquishing date at 2005 rather than 2018?


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## Nononymous

Jorgeb said:


> So looking at my paperwork, I renounced my US nationality before a Spanish judge on Sept 20, 2005, when I became a Spanish citizen.
> 
> Given that this is post-2004, is it not worth using naturalization as the reason for my renouncing? Is there any advantage at all for setting my official relinquishing date at 2005 rather than 2018?


I don't believe there's any advantage to documenting relinquishment if it occurred after 2004. It's the same price and administratively easier to simply renounce. 

Your requirements to exit the US tax system would be the same either way. But of course you do not need to be compliant before you renounce, nor do you need to bother afterwards. It may be to your advantage to make a clean exit, or it may not matter one bit, or it may save you lots of grief and money to ignore those obligations.

PS on edit. I went back to the start of the thread and all of my earlier advice still applies, so I won't repeat myself more than I already have.


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## Zendo

Bevdeforges;14680862 said:


> ...
> ... Practically speaking, if you haven't been filing tax returns all this time, and have no income coming from the US nor any financial assets in the US ...
> Bev


I have a question. As a so-called dual national (birthplace USA), with no direct financial connection or, for that matter, any connection to the US, either ever by employment, retirement, bank, residence or whatever; if I have a collective investment scheme containing a small percentage of US stocks, is that considered to be financial assets *in* the US?


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## Bevdeforges

Zendo said:


> I have a question. As a so-called dual national (birthplace USA), with no direct financial connection or, for that matter, any connection to the US, either ever by employment, retirement, bank, residence or whatever; if I have a collective investment scheme containing a small percentage of US stocks, is that considered to be financial assets *in* the US?


It depends what you mean by "collective investment scheme" - it it's something like a mutual fund or assurance vie, it's the nature of the scheme itself that matters, not the individual stocks that make it up.

But chances are, if the fund or financial institution that manages the fund notices your US birthplace, they'll be in touch regarding a W-9. I wouldn't worry about it until and unless you get a request for one. (And even then, I wouldn't worry all that much.)


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## Zendo

Bevdeforges said:


> It depends what you mean by "collective investment scheme" - it it's something like a mutual fund or assurance vie, it's the nature of the scheme itself that matters, not the individual stocks that make it up.
> 
> But chances are, if the fund or financial institution that manages the fund notices your US birthplace, they'll be in touch regarding a W-9. I wouldn't worry about it until and unless you get a request for one. (And even then, I wouldn't worry all that much.)


Thank you for the quick reply. I was referring to a mutual fund, a scheme made up of local and world bonds and local and world stocks.

I gather from your reply that, in any case, these items are not considered US assets. That's what I assume but was not sure. In the last analysis, the "assets" are local to my bank.

I had to fill out and sign a W-9. There was apparently no choice. That was a bit strange, as I've been a customer at the bank for many years and no-one had required this of me before. I'm not terribly worried about it, as far as the bank goes. I'm slightly worried about what can really happen with the information that is sent. 

The real question is. Considering the fact that I am a US citizen by birth, done some schooling in the US, but have never worked there, do not own property or have any assets there at all. Would they be at all interested in pursuing me and can they in any tangible way? 

I'm retired now and have neither the mind set nor the energy to be compliant just out of fear. Do I really have to fear for my comparatively meagre life savings?


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## Bevdeforges

Zendo said:


> Thank you for the quick reply. I was referring to a mutual fund, a scheme made up of local and world bonds and local and world stocks.
> 
> I gather from your reply that, in any case, these items are not considered US assets. That's what I assume but was not sure. In the last analysis, the "assets" are local to my bank.


Correct, from your point of view, it's the "nationality" of the mutual fund rather than the individual assets that make it up that counts. For the bank, however, any US assets (stocks, bonds, etc.) they hold in that mutual fund or any other investment fund would be subject to 30% withholding if the IRS were convinced they hadn't done their "due diligence" in discovering "US persons" amongst their customers.



> I had to fill out and sign a W-9. There was apparently no choice. That was a bit strange, as I've been a customer at the bank for many years and no-one had required this of me before. I'm not terribly worried about it, as far as the bank goes. I'm slightly worried about what can really happen with the information that is sent.


The W-9 is a CYA thing for the bank. It never leaves the bank in any event. The FATCA reporting for foreign financial institutions only really went into effect starting in 2014, so some banks are only just getting around to checking their customer lists for customers with US birthplaces (which they are required to do). 


> The real question is. Considering the fact that I am a US citizen by birth, done some schooling in the US, but have never worked there, do not own property or have any assets there at all. Would they be at all interested in pursuing me and can they in any tangible way?


Basically, you have nothing to worry about unless, like Boris Johnson, you get lots of publicity when you sell your 4 million GBP home for a big profit, or if you somehow pop up on the radar screen of the IRS for being a potential source of lots and lots of back taxes. 

The IRS shut down all of their overseas tax offices (there were only 4 of them anyhow) a few years ago, so with no US based assets or accounts, you're of very little interest to them.



> I'm retired now and have neither the mind set nor the energy to be compliant just out of fear. Do I really have to fear for my comparatively meagre life savings?


As long as it's not sitting in the US, you have nothing to fear.


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## Nononymous

@Zendo

You are a perfectly typical "Accidental American" by the sounds of it. What you should not do, under any circumstance, is think about attempting to come into compliance with the tax obligations of a US citizen. It sounds like you've reached this conclusion already.

Your bank may begin sending information about your accounts to the IRS. The only way for you to stop this is to spend $2350 and renounce US citizenship. (Note that tax compliance is not required before or after you renounce.) The IRS likely will do nothing with this information - they haven't yet - but if they did, they have no ability to collect a penny from a Swiss citizen living in Switzerland. 

I'm a bit surprised that you've had no trouble from your bank. Switzerland has apparently been very hard for anyone with US citizenship, a consequence of the UBS mess ten years' ago. That you are allowed to keep a mutual fund is possibly unusual. Some Swiss banks have even required customers to show proof of US tax compliance. Again, the only cure for this problem is to renounce.

I don't know much about this but I would assume that US stocks held by a mutual fund would not be subject to any sort of withholding on dividends or gains?


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## Bevdeforges

Just to clarify a few points:



> Your bank may begin sending information about your accounts to the IRS. The only way for you to stop this is to spend $2350 and renounce US citizenship.


You can save yourself the $2350 and just forget about it. Chances are, the bank will continue to report your bank balances (or whatever) to the IRS no matter what, due to your US birthplace. But unless something on a tax return triggers big questions (difficult if you're not filing tax returns) or some indication of an enormous evasion of taxes comes to their attention, any and all information will be filed away wherever and forgotten.



> That you are allowed to keep a mutual fund is possibly unusual. Some Swiss banks have even required customers to show proof of US tax compliance. Again, the only cure for this problem is to renounce.


Again, it has taken banks a couple of years to get around to doing their "due diligence" on long time customers. In 2014 when the regs for the banks came into effect, they only applied at first to new accounts being opened after the date of the applicable bilateral agreement. Here in France, old customers only got asked for W-9's last year, so it's not surprising that the OP has only recently been asked to provide a W-9. 



> I don't know much about this but I would assume that US stocks held by a mutual fund would not be subject to any sort of withholding on dividends or gains?


The relevant fact here is that the US stock is held by the bank's mutual fund and not by the individual customer. The way it's supposed to work (though I wonder about it in practice) is that, if the US feels that the bank is not doing its due diligence in rooting out US persons, then the 30% withholding will be taken against the interest and/or dividends remitted to the bank and it's the foreign bank's problem to explain to their mutual fund customers what's going on or make up the difference out of the bank's funds.

But in any event, it's not necessary to shell out $2350 to just ignore this. Possibly if one has significant financial assets in the US, but otherwise I wouldn't bother.


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## JustLurking

Nononymous said:


> I don't know much about this but I would assume that US stocks held by a [non-US domiciled] mutual fund would not be subject to any sort of withholding on dividends or gains?


The US will withhold tax on stock dividends paid out by US stocks to non-US domiciled mutual funds. The standard rate is 30%, but a treaty can reduce this. Ireland is probably the most commonly used non-US jurisdiction for ETFs, and here the US treaty rate is 15%. This 15% is an unavoidable US tax drag for holding US stocks, even within a non-US domiciled collective vehicle.

For investors in countries without a US tax treaty in particular, this is a very useful aspect of non-US domiciled ETFs, since it enables these investors to effectively use the Ireland treaty to halve their US tax loss on dividends from US stock holdings, relative to using a US domiciled ETF or holding US stocks directly. It also completely sidesteps the insane and usurious US estate tax for NRAs, which can otherwise kick in at a miserly $60k of total US holdings.

Only dividends have this issue. Interest and capital gains are paid out from the US without any US tax withholding or liability.


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## Nononymous

Bevdeforges said:


> The way it's supposed to work (though I wonder about it in practice) is that, if the US feels that the bank is not doing its due diligence in rooting out US persons, then the 30% withholding will be taken against the interest and/or dividends remitted to the bank and it's the foreign bank's problem to explain to their mutual fund customers what's going on or make up the difference out of the bank's funds.


I was asking about the routine withholding of dividend income on US stocks (a question answered in the previous post by Just Lurking). What you describe is penalty withholding against a bank's US transactions if they are deemed not to be FATCA-compliant. It's a big threat that has never to our knowledge been exercised yet. Banks in countries with Model 1 IGA countries, which report US-person account data via their national tax authority, don't face this threat. Banks in Model 2 IGA countries report directly to the IRS, and are at risk of this penalty. I believe that Switzerland is a Model 2 country but moving to Model 1, but I'm working from memory here.



> But in any event, it's not necessary to shell out $2350 to just ignore this. Possibly if one has significant financial assets in the US, but otherwise I wouldn't bother.


True, but if Zendo either objects on principle to having personal financial information transmitted to the IRS, or the bank begins restricting services available, then the only cure is to pay $2350 and renounce.


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## Zendo

Nononymous said:


> You are a perfectly typical "Accidental American" by the sounds of it. What you should not do, under any circumstance, is think about attempting to come into compliance with the tax obligations of a US citizen. It sounds like you've reached this conclusion already.


Yes, indeed, I reached this conclusion after contemplating the various options and observing the discussions in this forum.



Nononymous said:


> Your bank may begin sending information about your accounts to the IRS.


I have an account at another bank, where they have been sending FATCA info since 2013, after I signed a Waiver and W-9. Fact is, the IRS is certainly not interested in me. I don't have much. 



Nononymous said:


> The only way for you to stop this is to spend $2350 and renounce US citizenship. (Note that tax compliance is not required before or after you renounce.)


I may or may not do this. I'm still thinking about this option. But, I hear that renouncing does not obliterate the tax obligation. So, why renounce, given that this is the reason why most individuals choose to renounce?



Nononymous said:


> The IRS likely will do nothing with this information - they haven't yet - but if they did, they have no ability to collect a penny from a Swiss citizen living in Switzerland.


Thank Goodness! :amen:



Nononymous said:


> I'm a bit surprised that you've had no trouble from your bank. Switzerland has apparently been very hard for anyone with US citizenship, a consequence of the UBS mess ten years' ago. That you are allowed to keep a mutual fund is possibly unusual. Some Swiss banks have even required customers to show proof of US tax compliance. Again, the only cure for this problem is to renounce.


I can only speak for myself. The situation is uncomfortable, but not impossible. The banks here have paid their dues in the form of large penalty sums to the US government. They are still under scrutiny, but no longer under attack.


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## Bevdeforges

Nononymous said:


> True, but if Zendo either objects on principle to having personal financial information transmitted to the IRS, or the bank begins restricting services available, then the only cure is to pay $2350 and renounce.


Maybe, and maybe not. It is entirely possible that a bank could report the information on a customer with a US birthplace simply as a CYA measure. (Or because it's simply easier to strip off the relevant information from the bank computer files without having to edit for ex-Americans who can produce a CLN certificate.)


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## Bevdeforges

> I may or may not do this. I'm still thinking about this option. But, I hear that renouncing does not obliterate the tax obligation. So, why renounce, given that this is the reason why most individuals choose to renounce?


Renouncing doesn't necessarily eliminate the tax obligation. If, for example, you still had US source income that was not subject to the 30% NR rate, it might be necessary to file NR returns after renunciation.

And there are considerations about renouncing for those who, for example, did live in the US for long enough to qualify for a US pension (i.e. US Social Security) depending on what the tax treaty looks like in their country of residence. 

I have a friend in Germany who renounced - basically to take German nationality after 50 years of living there. But the tax treaty there taxes US SS pensions in Germany only, so it's not an issue for her. In my case, renouncing would mean that I'd have 30% of my US SS taken for taxes. (Well, 30% of 85% of my SS benefits, if you want to get technical.) Filing a US return each year, I pay far less than 30%, so the $2350 would get me nowhere.


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## Nononymous

Zendo said:


> I'm still thinking about this option. But, I hear that renouncing does not obliterate the tax obligation. So, why renounce, given that this is the reason why most individuals choose to renounce?


In many cases it is because they need the CLN to restore full access to banking and investment services, denied to US citizens identified by place of birth. 

Also renouncing does not eliminate past tax obligations, but it does stop future obligations. So a timely renunciation can make all kinds of sense if a person were about to inherit a large sum or sell a house at a huge gain, regardless of whether they had been in the US tax system.

For you, keep on doing what you're doing - nothing. You'd only need to renounce if you were threatened with denial of financial services. 

And yes, the IRS can't touch your money, in principle. It only has collection-assistance agreements with five countries (Canada, France, Denmark, Sweden, Netherlands) but home-country citizens are specifically excluded. However, you said you signed a "waiver" in 2013. I might check and see what that says, since we've heard of some Swiss banks being so terrified that they make US-person customers sign agreements allowing the bank to cooperate with the IRS if a penalty were imposed. These are presumably the same Swiss banks that have sometimes demanded that US-person customers provide proof of their US tax compliance. (Your being a Swiss citizen, as opposed to merely a US expat, may have saved you from the worst.)


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## Zendo

Nononymous said:


> In many cases it is because they need the CLN to restore full access to banking and investment services, denied to US citizens identified by place of birth.
> 
> Also renouncing does not eliminate past tax obligations, but it does stop future obligations. So a timely renunciation can make all kinds of sense if a person were about to inherit a large sum or sell a house at a huge gain, regardless of whether they had been in the US tax system.
> 
> For you, keep on doing what you're doing - nothing. You'd only need to renounce if you were threatened with denial of financial services.
> 
> And yes, the IRS can't touch your money, in principle. It only has collection-assistance agreements with five countries (Canada, France, Denmark, Sweden, Netherlands) but home-country citizens are specifically excluded. However, you said you signed a "waiver" in 2013. I might check and see what that says, since we've heard of some Swiss banks being so terrified that they make US-person customers sign agreements allowing the bank to cooperate with the IRS if a penalty were imposed. These are presumably the same Swiss banks that have sometimes demanded that US-person customers provide proof of their US tax compliance. (Your being a Swiss citizen, as opposed to merely a US expat, may have saved you from the worst.)


The so-called "waiver", and I quote, "...hereby expressly waives any protection rights under Swiss bank-client confidentiality and data protection laws to the extent necessary for the reporting of any Data hereunder ..." It is, essentially, a formulation which allows the bank to be compliant with FATCA requirements. It probably means that, if the IRS requested any "data", the bank would not be able to refer to any form of customer confidentiality. It is purely a precautionary matter. However, it further goes on to say that "This Consent shall be governed by and construed in accordance with Swiss law...", implying that, in most cases, it wouldn't be worth it for the IRS to chase a Swiss national on his/her own turf.

Of course, this aggravated me at first until I realised that I am not someone whose "data" would provoke any red flags.


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## Nononymous

Okay, that's reassuring. I asked you to check because there have been reports of some banks requiring US-citizen customers (possibly not Swiss citizens though) to bring in 1040s to prove US tax compliance, and even to sign waivers allowing the banks to pay directly from their accounts any penalties imposed by the IRS. These were not multi-millionaires either.

Right now, for you, things sound okay. Your data is being reported to the US, but no attempt has been made by the IRS to contact you. The bank is not denying or reducing service. Keep on doing what you're (not) doing - i.e. don't file US taxes - but keep an eye on the situation and be prepared to spend $2350 on renunciation if something changes for the worse. (You don't need to be compliant to renounce.)


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## Zendo

Nononymous said:


> Okay, that's reassuring. I asked you to check because there have been reports of some banks requiring US-citizen customers (possibly not Swiss citizens though) to bring in 1040s to prove US tax compliance, and even to sign waivers allowing the banks to pay directly from their accounts any penalties imposed by the IRS. These were not multi-millionaires either.


Thank you for the interesting observation. But, are you sure you have your facts right? Legally speaking, I don't think it is possible for a foreign entity like the IRS to garnish money from a foreign bank under the conditions discussed in this forum. Swiss banks are subject to Swiss law and, in the case of FATCA, subject to penalties for not complying with international regulations. But, they are not imbued with the power to garnish assets for the IRS. That seems unimaginable. Banks are private institutions. As you have correctly observed, they can deny service with due cause. But, that is about as far as it goes. And, they must have very justifiable due cause. Even with FATCA there must be limits to jurisdiction. I'm not an expert, but a little common sense tells me that some of the stories you heard or read about may be exaggerated. Of course, an expat probably wouldn't easily be able to get a mortgage here or would be limited to certain kinds of financial activity. But, that would be about all.

Anyway, I am not an expat.



Nononymous said:


> Right now, for you, things sound okay. Your data is being reported to the US, but no attempt has been made by the IRS to contact you. The bank is not denying or reducing service. Keep on doing what you're (not) doing - i.e. don't file US taxes - but keep an eye on the situation and be prepared to spend $2350 on renunciation if something changes for the worse. (You don't need to be compliant to renounce.)


I don't think the IRS will ever contact me, because frankly, I'm not worth it. Renunciation may eventually be a viable option, though. It is not likely that I will visit the US anymore. The last time was about 30 years ago. 

I will indeed keep an eye on the situation and may still have questions and observations to make.


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## Nononymous

I too found it hard to believe. The story was something reported on another forum, all one can do is trust the source. If true I'm sure it was an US-only expat, not a dual citizen, and the bank was being paranoid in the extreme. We've definitely heard multiple accounts of banks wanting to see 1040s every year to "prove" US tax compliance, but I don't specifically recall if those folks had Swiss citizenship. 

In any case, sounds like you're fine. Keep your eyes and ears open but continue doing nothing as far as US taxes are concerned.


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## Bevdeforges

Let me just add a bit to what has been said already here.



> I asked you to check because there have been reports of some banks requiring US-citizen customers (possibly not Swiss citizens though) to bring in 1040s to prove US tax compliance, and even to sign waivers allowing the banks to pay directly from their accounts any penalties imposed by the IRS. These were not multi-millionaires either.


There are LOTS of factors involved in these sorts of situations. Many of the most important ones often don't get into the reports. But in the case of the foreign banks, most are simply covering their own butts.

I only mention this because here in France, most banks won't give you any reason if they decide to turn you down for an account - and it's perfectly legal for them to do so. I don't know the case or cases Nononymous is talking about, however for the banks, the key fear is that if they "miss" a US person or two or are found not to be complying with the bilateral agreement that they will be excluded from doing business in the US. FATCA as such doesn't really have any authority outside the US. The banks have to comply with their national banking laws. But it's the threat of being banned from doing business in the US that motivates some of the stranger "requirements" they cite.


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## fredgeorge

Jorgeb said:


> Hi,
> 
> I've been living and working in Spain since 1999 and became a naturalized Spanish citizen in 2005. At the time I swore an oath of loyalty to the Spanish crown and renounced my American citizenship before a Spanish judge at the ministry. Being a naive, I thought that was the end of it. I haven't worked or lived in the US since 1999 and have only used my Spanish documentation.
> 
> Recently my bank, ING Direct, has been asking me to fill out a W9 form to be in compliance with FATCA because on my Spanish ID it says I was born in the USA. I thought I wasn't an "US person" and have only been willing to fill out a W8, but they are insisting and threatening to block the account, so I started looking further into the issue.
> 
> So I now realize that, for tax purposes, I needed to officially renounce my US citizenship to the State Department, that there is a hefty fee over $2000 and possible tax implications. Damn.
> 
> Unfortunately, I do not have much to show for my nearly 20 years in Spain. I have now assets of note and little money in savings after a recent divorce.
> 
> I was wondering what steps should I take to deal with this FATCA issue and how important is it for me to formally renounce my US citizenship.
> 
> Any and all advice is welcome!


Hi Jorgeb,

I´m very curious as to how your situation with FATCA has been resolved. 

I am in the exactly the same boat as you, having become a Spanish citizen in 2001, and now my bank is threatening to block my bank account me regarding FATCA if I don't provide a "Certificado de Renuncia". Did you end up paying for a CLN or renounce to your American nationality?

Would love to hear from your case, since this is causing much stress and health issues


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## Nononymous

fredgeorge said:


> Hi Jorgeb,
> 
> I´m very curious as to how your situation with FATCA has been resolved.
> 
> I am in the exactly the same boat as you, having become a Spanish citizen in 2001, and now my bank is threatening to block my bank account me regarding FATCA if I don't provide a "Certificado de Renuncia". Did you end up paying for a CLN or renounce to your American nationality?
> 
> Would love to hear from your case, since this is causing much stress and health issues


Is the bank threatening to block your account simply because you are still a US citizen, or because you refuse to answer their questions or otherwise cooperate with FATCA requirements by giving them an SSN or signing a W9?

Worst case, to keep your account you will need to either sign the W9 and be reported (which likely will have no consequences) or renounce US citizenship and show them your CLN. Note that you do *not* need to be compliant with US taxes to renounce, neither before nor after. It will cost you $2350 but the tax compliance side of it is not necessary (it may in some cases be desirable, but you can also ignore it).

Don't get too stressed, if possible. If you don't have money in the US, there's nothing the IRS can do to you in Spain, even if you are still a US citizen.


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## Zendo

*To renounce or not to renounce*

Given the nature of the discussion in this thread, I do have a few afterthoughts regarding my situation (already discussed in previous entries of this thread).

Although my situation is in no way anything to fret about; in fact, I apparently have nothing to worry about. Still, the thought is still nagging me. What is the point of holding on to my US citizenship, if I will never go there, have no assets, no real family ties, etc.? As there is no immediate "threat" at the moment and probably never will be, I should simply remain "watchful". But, is that a pleasant alternative?

So, I'm beginning to entertain the possibility of renouncing, even if it costs me something. Maybe it is possible that I will feel better afterwards. It certainly appears to me to be better than feeling a bit oddly nervous all the time.

I would like to know if one has to provide a particular reason why one wishes to renounce. I can't imagine one could answer that one doesn't want to pay taxes any longer or be subject to FATCA? Right?

So, first question; does the local embassy ask for specific reasons for renouncing? Second; what reason should/can one provide in oder not to cause anyone to raise their eyebrows? Further, what kind of questions is one subject to? Or, is renouncing a cut and dry procedure?


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## Bevdeforges

A friend of mine recently renounced in Germany, and in her case she was given the opportunity to write a note saying why she was renouncing. But it wasn't obligatory and I think she was almost a bit disappointed that they weren't particularly interested in her thoughts on the subject.

OK, in Germany, you must renounce in order to take German nationality, so maybe that's just a thing in the German consulate. But even if you are asked - you've already mentioned some excellent reasons: you no longer have family ties back there, aren't likely to want to travel back there for other reasons. etc etc.

They have to explain that the decision is irrevocable, serious and all that good stuff. But never once during my friend's process did anyone question her reasons nor try to talk her out of it.


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## fredgeorge

Nononymous said:


> Don't get too stressed, if possible. If you don't have money in the US, there's nothing the IRS can do to you in Spain, even if you are still a US citizen.



Thanks for your information and encouragement. There's nothing the IRS can do to me now, but who knows what the future holds!


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## Nononymous

fredgeorge said:


> Thanks for your information and encouragement. There's nothing the IRS can do to me now, but who knows what the future holds!


In your shoes I'd be more worried about banking problems than the IRS, given how difficult it's been for some in Switzerland. Renouncing and having a CLN to wave about will prevent or solve those problems.

You do not need to give a reason for renouncing, though it's fine to mumble something about "I'm Swiss not American" or "I want to simplify my affairs" (or "Trump"). Generally you are advised not give taxes or tax reporting as the stated reason, even though the consulate knows full well that this is what drives 99 percent of all renunciations. Generally speaking it's a very quick and straightforward procedure, though not painless given the extortionate $2350 fee.

The consulate may remind you of your US tax filing obligations, but you are not required to be in compliance before you renounce, and all future US tax obligations end once you become an ex-citizen. The entirely separate procedure to make a "clean exit" from the US tax system is 5 years' returns, 6 years' FBARs and form 8854. However, if you were never in the system to begin with (apart from a some FATCA reports possibly) then there is no good reason to do any of this. People have increasingly come to realize that if you are not compliant you can just renounce and be done with it, with no ill effects. The IRS will get your name from the State Department but they won't waste resources chasing down someone who they cannot touch and likely owes nothing anyway.


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## Zendo

@Nononymous: I think you thought you were responding to my most recent response. 



Nononymous said:


> In your shoes I'd be more worried about banking problems than the IRS, given how difficult it's been for some in Switzerland. Renouncing and having a CLN to wave about will prevent or solve those problems.


You are quite right on this point. I recently found out that I can only keep a "normal" bank account. As a dual national I may not invest in any Swiss investment packages. But, apart from that there should be no other difficulties. It's a bit ironic, because this was the original reason for my responding to this thread. However, now I will really have to give renouncing some serious thought. 

btw: what does the abbreviation "CLN" mean?



Nononymous said:


> People have increasingly come to realize that if you are not compliant you can just renounce and be done with it, with no ill effects. The IRS will get your name from the State Department but they won't waste resources chasing down someone who they cannot touch and likely owes nothing anyway.


Does this mean that I would have trouble, if for any reason, I wanted to visit the US again (although the last time was 28 years ago)?


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## Bevdeforges

A CLN is a Certificate of Loss of Nationality. It is your key to being recognized as an ex-US citizen - though it's not foolproof. 

After you renounce, it takes "a few" months before the CLN comes through. That's the document you'll need to show the banks to prove that you are no longer a US citizen. Ditto on traveling to the US on your other passport. If a sharp eyed Immigration officer notices your US birthplace, you will need the CLN to avoid a long "conversation" about entering the US on a foreign passport. (And, before you go, remember to enroll in the ESTA program.)

There is still a law on the books that allows the Attorney General of the US to deny any and all forms of visa (including a visa-waiver) to former US citizens who have renounced. It has only been invoked in a couple of very high profile cases, but there is no telling what could happen in the future.

None of this is said to put you off renouncing. Just make sure you are aware of all the terms, conditions and risks.


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## Nononymous

Zendo said:


> I recently found out that I can only keep a "normal" bank account. As a dual national I may not invest in any Swiss investment packages.


That can be a huge problem for some people, if it prevents them from investing to save for retirement; similar problems with business accounts and mortgages. For others it's not such a big concern.

As Bev said, the CLN is proof that you've renounced, which you can show to your bank and make FATCA and any other restrictions go away. Note again that you would receive your CLN no matter what your status vis-a-vis US taxes. No need to start filing returns if you want to renounce.

As for travel to the US after renunciation, you'd have the same rights as any Swiss citizen. Which means, of course, that you don't have an absolute guarantee - if some reason they don't want you in, they don't let you in. But in practice having renounced is never a problem, you do the ESTA thing or whatever and you enter like anyone else with a Swiss passport. It is good practice to carry a copy of your CLN in case the border folks notice a US birthplace and ask if you are a US citizen, since they would then ask why you don't have a US passport.


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## Zendo

Bevdeforges said:


> A CLN is a Certificate of Loss of Nationality. It is your key to being recognized as an ex-US citizen - though it's not foolproof..


Thanks for the explanation. But, what is an ESTA? Sorry, I'm simply not aware of these things.



Bevdeforges said:


> .... Ditto on traveling to the US on your other passport. If a sharp eyed Immigration officer notices your US birthplace ... .


My passport does not state my place of birth. It states only the "place of origin", which happens to be where I live and was nationalised here in Switzerland. But, your point is well taken.



Bevdeforges said:


> None of this is said to put you off renouncing. Just make sure you are aware of all the terms, conditions and risks.


I understand. Indeed, there is a psychological side to all this. Otherwise, I probably wouldn't give it a second thought. I've heard of individuals who have renounced and who have had difficulty with the after-fact effects psychologically. But, I've also heard the opposite, of individuals who were greatly relieved. In my case, I'm not sure yet what I will do. I should be able to continue my life as before without interference form the IRS. The one and only caveat are a few of the focal aggravations from my bank. I can live with that. It's more the back-and-forth of constantly weighing different considerations and trying to imaging how it would feel that is stressful.

The irony of this is the fact that I have no real connections to the US, just some old memories that have more or less faded over the years. I haven't even been there in 28 years! And, despite this, the thought of renouncing somehow makes me unconformable. Maybe its the thought of looking at some grim faces staring at me and telling me how "serious" renouncing is, and that I will end up in Purgatory or somewhere similar...


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## Zendo

Nononymous said:


> That can be a huge problem for some people, if it prevents them from investing to save for retirement; similar problems with business accounts and mortgages. For others it's not such a big concern.


I belong to the "others". I retired 2 years ago, do a little contracting work in my field to slow the retirement impact a bit, but will soon cease completely. In short, there is nothing to save for, no mortgage, no business account, just a very modest pension. If anything, it's more the feeling that I've been unjustly categorised and filed away in some cabinet somewhere with the potential that that some official _could _ at some point start waving the banner at me.



Nononymous said:


> As Bev said, the CLN is proof that you've renounced, which you can show to your bank and make FATCA and any other restrictions go away. Note again that you would receive your CLN no matter what your status vis-a-vis US taxes. No need to start filing returns if you want to renounce.


Thanks, I definitely plan to heed that advice. I'm too old to start now, anyway... 



Nononymous said:


> As for travel to the US after renunciation, you'd have the same rights as any Swiss citizen. Which means, of course, that you don't have an absolute guarantee - if some reason they don't want you in, they don't let you in. But in practice having renounced is never a problem, you do the ESTA thing or whatever and you enter like anyone else with a Swiss passport. It is good practice to carry a copy of your CLN in case the border folks notice a US birthplace and ask if you are a US citizen, since they would then ask why you don't have a US passport.


See previous response to Bev.


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## Bevdeforges

ESTA is the pre-registration you must do these days before travel to the US if you are not a US citizen. It's an online system, and last time I checked, it costs something like $15 for a registration that lasts a couple of years.

It's basically the prelude to being allowed to enter the US on the visa-waiver program (i.e. for a visit without having to secure a tourist visa).


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## Nononymous

Bevdeforges said:


> ESTA is the pre-registration you must do these days before travel to the US if you are not a US citizen. It's an online system, and last time I checked, it costs something like $15 for a registration that lasts a couple of years.
> 
> It's basically the prelude to being allowed to enter the US on the visa-waiver program (i.e. for a visit without having to secure a tourist visa).


For Europeans and others, but not Canadians, for what it's worth.


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## JustLurking

Nononymous said:


> For Europeans and others, but not Canadians, for what it's worth.


Right. Switzerland is one of the ESTA countries.

Here is a quick comparison of the main user-visible features of a US visa and an ESTA:

_Visa_ -- a travel document that you have to apply for in advance of travel, has an application cost, can be refused, and lasts only for a limited time period.
_ESTA_ -- a travel document that you have to apply for in advance of travel, has an application cost, can be refused, and lasts only for a limited time period.
Can you spot the difference?

The US argues that ESTA is not a visa, but this looks mostly like just splitting legal hairs. The EU is certainly concerned that ESTA is actually a _de facto_ visa, and has taken particular issue with the exclusion of some EU countries from the ESTA program (with some sabre-rattling, although true to form little real action beyond 'monitoring' the situation).

At least ESTA is a fair bit cheaper than an actual visa.


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