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US Extends Hike In Fees For Relinquishing US Citizenship

by Mike Godfrey, Tax-News.com, Washington

09 September 2015


The US State Department has issued an interim final rule that would extend the increase in its processing fees payable for renouncing US citizenship to those who relinquish their US nationality through other methods.

While the majority of individuals giving up their US citizenship do so by "making a formal renunciation of nationality before a diplomatic or consular officer of the United States in a foreign state," an increasing number also resort to losing their nationality by perform certain specified acts "voluntarily and with the intention to relinquish US nationality."

Those acts include obtaining naturalization in a foreign state in an application after the age of 18; the taking of an oath, affirmation, or other formal declaration of allegiance to a foreign state after the age of 18; entering or serving in the armed forces of a foreign state; or accepting employment with a foreign government after the age of 18.

The State Department put the application processing fee for renunciation of US citizenship up from USD450 to USD2,350 with effect from September 12 last year, explained by "the findings of a recent Cost of Service study to ensure that the fees for consular services better align with the costs of providing those services."

It has now sought to justify the extension of that fee rise to those relinquishing US nationality "on the grounds that the services performed in both situations are similar, requiring close and detailed case-by-case review of the factors involved in a request for a Certificate of Loss of Nationality (CLN), and both result in similar costs to the Department."

Although they are not a requirement under US laws, CLNs are increasingly being sought by both those who are renouncing and those relinquishing US citizenship. Foreign financial institutions require ex-US individuals to show them a CLN (or provide a "reasonable explanation" of why they do not have one) to comply with the exchange of information provisions of the Foreign Account Tax Compliance Act (FATCA) and the various intergovernmental agreements the US has signed with foreign jurisdictions.

In fact, the fee hike has come during a period when a record number of US citizens living abroad have been giving up their citizenship, possibly due to the greater measures being taken by the US Treasury and the Internal Revenue Service (IRS) to trace American undeclared assets and income held abroad.

Those measures include not only the operation of the FATCA, which is intended to ensure that the IRS obtains information on accounts held abroad at foreign financial institutions by US taxpayers, but also existing US tax reporting obligations, such as the requirement for US expats to file a Report of Foreign Bank and Financial Accounts.

TAGS: individuals | expatriates | compliance | Citizenship | Foreign Account Tax Compliance Act (FATCA) | tax | tax information exchange agreement (TIEA) | tax compliance | FATCA | law | fees | Internal Revenue Service (IRS) | tax authority | agreements | legislation | United States | Compliance | Expats | Tax

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