Second Passports & Dual Citizenship

“Kathleen and Lief, an interesting article in Der Spiegel reporting how German banks (and others) are shutting off access to investment accounts for U.S. citizens. Thought your readers would be interested to see. The article is here.”

–David S., Costa Rica

This is one example of when having a second passport can be a very useful and beneficial thing.

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“Lief, good article and right on when it comes to tax ‘experts’ and any question involving issues outside the United States.

“I have one question that I have received every conceivable answer to and can still not determine the facts. I live in the United States on a Green Card and will relocate to Panama next year. Am I considered the same as a U.S. citizen for tax purposes (meaning worldwide income taxed in United States), or is my income tax determined by my place of residence?

“Must I return my Green Card when I leave, and would that relieve me of future tax liability? Must I wait until the Green Card expires and not renew it to be relieved of U.S. income tax liability?

“You cannot believe the conflicting answers I have received to the above questions, and I still don’t know what to do.”

–MikeG., United States

Lief replies:

Yes, you are considered a U.S. person (the relevant term for tax purposes) if you hold a Green Card and live outside of the United States. In other words, you are treated like a U.S. citizen for tax purposes. To be relieved of your tax liability in the United States, you have to give up your Green Card.

I have a British friend who faced the same issue when he moved out of the United States after having worked there for eight years. As he found, you have to formally return your Green Card.

To do that, you go to a U.S. embassy in the country where you’ve relocated once you’ve moved out of the United States. At the embassy, you will be required to complete a form (my friend reports that the embassy had him fill out the wrong form the first time around, so you want to be sure what you’re filling out). Then you must make a formal declaration swearing that you have moved out of the United States and have no need for the Green Card any longer as you won’t be returning to live or work.

Once you’ve given up the Green Card, you can travel back to the United States on your original citizenship, but you’ll have to remember any tourist visa requirements that may apply.

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