Introduction:
There is much discussion of the U.S. rules which operate to impose taxation on the residents of other countries and income earned in those other countries. You will hear references to “citizenship taxation”, “FATCA Canada“, PFIC, etc. It is becoming more common for people to wish to relinquish their U.S. citizenship. The most common form of “relinquishment is renunciation”. The U.S. tax rules, found in the Internal Revenue Code, impose taxes on everything. There is even a tax on “renouncing U.S. citizenship”. I don’t mean the $2350 USD administrative fee which everybody has to pay. (Isn’t that really a tax?). I mean a tax on your assets. To be clear:
You must pay a price to NOT be a U.S. citizen.
This tax is found in S. 877A of the U.S. Internal Revenue Code.
It’s defined as the:
“Tax responsibilities of expatriation”
Few people are aware of this tax. Fewer still understand how it works. As FATCA operates to enforce U.S. taxation on many Canadian citizens, and increasing numbers wish to NOT be U.S. citizens, the importance of understanding the U.S. “Exit Tax” increases.
It is particularly important to understand what triggers the “Exit Tax”. You will be subject to the “Exit Tax” if you are a “covered expatriate”. You must know what that means and why, sooner or later, everybody will become a “covered expatriate”.
The “Exit Tax” is not a simple “token tax”. For Canadians, the tax can be a significant percentage of their net worth. Furthermore, the tax is payable NOT on actual gains, but on “pretend gains”. (Where would the money come from to pay the tax?)
Hang on to your seats. You will shocked, amazed and horrified by this.
Since the advent of FATCA in Canada, this issue is increasingly important.*
To be forewarned is to be forearmed!
This is a 15-part series which is designed to provide you with some basic education on:
How the U.S. S. 877A Exit Tax rules work; and
How they particularly affect Canadians with a U.S. birthplace, who lived most of their lives in Canada.
This will be covered over a 15 day period in a “15-part” series.
Although this series began on “April Fools Day”, I assure that this is NOT a joke.
“The unfairness of the exit tax under 877A and its dependence on accidents of birth, over which a person has..”http://t.co/saSFv17C9Y 1/2
— U.S. Expat Canada (@USExpatCanada) April 7, 2015
“…no control is breathtaking.The article makes a convincing case 4 calling the exit tax “evil.” http://t.co/saSFv17C9Y 2/2
— U.S. Expat Canada (@USExpatCanada) April 7, 2015