Want to Avoid Tax? Denounce your Citizenship!

An increasing number of US citizens and green card holders want to give up their green cards or US citizenship after the country’s heavy budgetary deficit and a drive to trace unreported income through tighter tax laws and disclosure norms.

Tax laws in the US empower the Internal Revenue Service (IRS), to tax global incomes of those holding US citizenships or the green card. According to reports published internationally, over 500 US citizens had given up citizenship in the last quarter of 2009, to settle in convenient destinations. This figure was almost double the number of people who severed ties with the US in 2008.

“It’s is true that several clients are giving up US citizenships,” said Sudhir Kapadia, a partner with consulting major Ernst & Young. “A major reason is the stringent tax laws. With rising budgetary deficits, their tax laws are increasingly becoming stringent. And more such laws are in the offing. From 2011, Inheritance Tax, at the rate of 20%, would be levied on heirs of US citizens.” Mr. Kapadia said.

There is another side to this development. Even if a person is not residing in the US, he is liable to pay tax if he holds a green card or has citizenship. In other countries, for example India, a person is bound to pay tax in the country if he resides there for more than 182 days in a year. However, the number of days a taxpayer resides in the country is irrelevant for the purpose of taxation in the US. What matters is whether he holds US citizenship or a green card.

Beside USA only North Korea has similar laws about Tax in the World.

Although these laws have been in force for some time, it was only two years back that the US government decided to strictly enforce them after the government detected unreported accounts of US citizens with the Swiss bank, UBS. Ever since, the US administration has initiated the project to collect as much data as possible about the global income of US citizens not reported to the Internal Revenue Service.

Quit Citizenship

US citizens and green card holders must report to IRS and file their annual 1040 income tax return, even they have not lived in US for several years. Also, they have to report to IRS each foreign bank account with a balance of $10,000 or more. Failure to comply will have the possibility of prison time in US.

We are one of Vancouver’s premier IRS authorized US income tax service provider. Contact us, if you need to report to IRS.