- 1 Dual Citizenship Advantages and Disadvantages
- 2 Pros
- 3 Easy Travel to the US
- 4 No ‘Big’ risk of Removal/Deportation
- 5 No Need to Renew
- 6 Cons
- 7 U.S. Tax on Worldwide Income
- 8 Limited Treaty Elections Available
- 9 Expatriation/Exit Tax
- 10 Global Bias Towards the United States
- 11 Alternatives to U.S. Citizenship
- 12 Become a Lawful Permanent Resident
- 13 U.S. Visa and Substantial Presence Test
- 14 Interested in Expatriation
Dual Citizenship Advantages and Disadvantages
With the globalization of the U.S. economy, U.S. citizenship has become a highly sought-after commodity. Having U.S. citizenship as either a primary or secondary citizenship, can be a great benefit for global citizens across the globe. But, while having US citizenship may benefit Taxpayers with traveling to the United States as well as conducting business and operations in the US — and beyond — it does come with certain tax responsibilities and implications that may reduce if not eliminate the tax benefit the benefit of having US citizenship. For some taxpayers, it may be better to become a permanent resident or visa holder in order to be able to travel to the United States while minimizing tax issues. Let’s look at some of the benefits of dual citizenship, as long with some of the cons and alternatives
Let’s take a look at the pros first:
Easy Travel to the US
Taxpayers who enjoy traveling to the United States but do not want to deal with the headache of having to renew a visa or maintain permanent residency status can become a citizen of both the United States and the foreign country which can make travel easier.
No ‘Big’ risk of Removal/Deportation
When a person is not a U.S. citizen but has established their lives in the U.S., sometimes there is an overriding concern for themselves and their children that potential deportation or removal is a risk if a mistake results in a possible criminal or quasi-criminal scenario. While naturalization can be stripped, it is much rarer than it would be to be removed as a permanent resident.
No Need to Renew
It is just overall easier to not have to worry about whether you are going to be stopped at the border if you remained outside of the United States too long, or if you were concerned about having to obtain a re-entry permit because you wanted to take a break from traveling to the United States, or your visa is about to expire — it just makes your life easier overall.
Next, let’s take a look at the cons:
U.S. Tax on Worldwide Income
Unfortunately, unlike most other countries across the globe, the United States taxes individuals on their worldwide income. So, if you maintain U.S. Citizenship and even if you live outside of the United States and earn all of your income from outside the United States, the U.S. will still come to tax you.
Limited Treaty Elections Available
When a person is a U.S. citizen, they typically do not have the opportunity to make a treaty election to be treated as a foreign person for tax purposes so they only get taxed on their U.S.-sourced income. Typically, this is for residents only and not U.S. citizens.
Once a person wants to give up their US citizenship, they are at risk for becoming a covered expatriate which could result in a significant exit tax. Conversely, when a person is a permanent resident, they must qualify as a long-term lawful permanent resident before they could become subject to the exit tax rules as a covered expatriate.
Global Bias Towards the United States
Some countries have an overall bias toward U.S. citizens. In addition, U.S. citizens (born or naturalized) may have difficulty opening up foreign bank and financial accounts as a result of many countries and hundreds of thousands of foreign financial institutions have adopted FATCA (Foreign Account Tax Compliance Act).
Alternatives to U.S. Citizenship
There are some alternatives to obtaining US citizenship that sometimes may be a better fit for certain taxpayers.
Become a Lawful Permanent Resident
If a person is a lawful permanent resident of the U.S. then they are able to travel freely to and from the United States as long as they maintain their immigration status — which typically requires remaining in the US for at least six months out of the year. Although, in recent years, it has become more difficult for taxpayers who do not meet that residency requirement — but still want to travel in and out of the United States — to avoid having their Green Card revoked. For tax purposes, if they live outside the U.S. in a treaty country, they may elect to be treated as Foreign Persons for U.S. Tax Purposes.
U.S. Visa and Substantial Presence Test
There are many visas available to taxpayers depending on what country they are from and what their purpose of traveling to the United States is. For example, they may obtain a work visa such as an H-1B, Investment Visa (such as an EB-5) or a Tourist visa such as a B1/B2. The main risk with a Visa is that the US is very strict with how long you can stay in the U.S. and if you stay too long, you may become subject to US Tax on worldwide income (unless you can meet the closer connection exception or other exception).
Interested in Expatriation
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