So, you have received bank letter asking about your tax residence for CRS or FATCA – A @taxresidency primer – Part 4 -Conclusion

cross-posted from citizenshipsolutions.ca

Part F – A “U.S. citizen” cannot use a “tax treaty tie breaker” to break U.S. “tax residence”. How then does a “U.S. citizen” cease to be a “U.S. tax resident”?

Q. I am a U.S. citizen. I do not live in the United States. I live in Canada. I am a Canadian citizen. How do I stop being subject to the all of the FBAR and other reporting rules, tax rules (including PFIC), life restrictions and inability to effectively invest and plan for retirement imposed by the Internal Revenue Code?

A. You relinquish U.S. citizenship. Please note that a “renunciation” is one form of “relinquishment”. In general, the date of relinquishment of U.S. citizenship is more important than the form of relinquishment of U.S. citizenship. A Certificate of Loss of Nationality (“CLN”) may or may not (depending on the date of relinquishment) be necessary to cease to be subject to U.S. taxation.

Q. In simple terms, where do I get information about the process of renouncing U.S. citizenship?

A. You can start here.

Q. What are the tax consequences of relinquishing or renouncing U.S. citizenship?

A. The Internal Revenue Code describes the tax consequences of relinquishing/renouncing U.S. citizenship. See Internal Revenue Code S. 877A (the “Exit Tax” rules).

Part G – How a “permanent resident” of the U.S. – AKA “Green Card Holder” – ceases to be a U.S. tax resident

Q. I understand that IF I am a U.S. “tax resident” then I may be able to use a “tax treaty tie breaker” to NOT be treated as a U.S. “tax resident”. But, how do I cease being a U.S. tax resident period?

A. The definition of “residence” for tax purposes is NOT the same as the definition of “residence” for immigration purposes. In fact it is possible to have lost the right to live permanently in the United States, but still be treated as a “resident for tax purposes.” “Residence for tax purposes” is defined in Sec. 7701(b) of the Internal Revenue Code and is discussed in the Topsnik case. Most “lawful permanent residents of the United States” cease to be “tax residents” of the United States by either (1) Filing Form I-407 or (2) Filing a “tax treaty election”. You are advised to seek professional advice on the best way to proceed.

ATTENTION!! A permanent resident of the United Sates AKA “Green Card Holder” does NOT cease to be a U.S. “tax resident” by simply moving from the United States to another country. One must take specific steps to sever “tax residency” with the United States.

Part H – Are you, or have you ever been a U.S. citizen or Green card holder? Sometimes it’s not what it seems.

Q. Are you a “U.S. Person” for FATCA purposes?

A. See the articles referenced in the following two tweets.

Conclusion …

The receipt of a FATCA or “CRS” letter is a frightening thing. Take a deep breath. Deal with it rationally and logically. If you are NOT a U.S. citizen you are probably NOT a “tax resident” of more than one country. On the other hand, if you are a “U.S. citizen” …

How would you go about “Solving this problem of U.S. citizenship”?

or maybe this

(For an interesting article on the “Possible Meghan Markle U.S. Tax Chronicles” by Helen Burggraf read here).

I am available on a “consultation basis” to help you sort out your “Tax Residency” in a FATCA and CRS world.

John Richardson

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