Wealthy people are renouncing American citizenship

Re:Wealthy people are renouncing American citizenship by syops on Thursday August 05, 2021 @08:59AM (#28073071)

If a person has no income or capital gains from the U.S. and doesn’t live in the U.S. shouldn’t they be exempt from paying U.S. taxes? Also, shouldn’t foreign financial institutions be exempt from reporting to the U.S. about financial activities of U.S. citizens when they are outside the U.S.? I think the answer to both questions ought to be yes.

EDIT: I’m aware of the rules regarding income taxes for Americans based on their citizenship and not on where the income was earned. My questions address this and by saying ‘yes’ to them I’m indicating that these rules are dumb in my opinion.

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Re:Wealthy people are renouncing American citizenship by ironchef on Thursday August 05, 2021 @09:06AM (#28073156)

"If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside." - per the IRS (https://www.irs.gov/individuals/international-taxpayers/taxp...)

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Re:Wealthy people are renouncing American citizenship by FabHK on Thursday August 05, 2021 @09:09AM (#28073207)

As the article mentions, the USA and Eritrea tax based on citizenship, not residence.

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Re:Wealthy people are renouncing American citizenship by eatbitseveryday on Thursday August 05, 2021 @09:03AM (#28073115)

Ought to, but US citizens must still report taxes every year on all global income. Some amount is exempt, though one still needs to file.

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Re:Wealthy people are renouncing American citizenship by alephnan on Thursday August 05, 2021 @09:13AM (#28073255)

Foreign banks in nations with treaties with the United States require you to file a special form to the IRS when opening a bank account, furthermore they will report information on your bank account to the US government.

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Re:Wealthy people are renouncing American citizenship by Miner49er on Thursday August 05, 2021 @09:09AM (#28073205)

Wouldn't this create loopholes? A US citizen could leave the US to make foreign investments, then come back to the US and be exempt on taxes on this foreign investments while enjoying the benefits of being in the US and not paying their share of taxes.

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Re:Wealthy people are renouncing American citizenship by AYBABTME on Thursday August 05, 2021 @09:20AM (#28073342)

Most countries tax worldwide income of their _residents_ (not citizens). So in your scenario, you'd end up paying tax on the foreign investments if you profit from it when you resume being a US resident. Unless you don't declare the foreign assets, which would be illegal (gotta file an FBAR each year).

There's no loophole here, a large majority of countries work this way, and OECD countries certainly do (although some have different treatments for short term residents). Usually the logic is: if you don't pay taxes in country A, you'll pay in country B anyways. And you'll pay an exit tax when you go from country A to B in many cases, so country A gets their cut.

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Re:Wealthy people are renouncing American citizenship by jimmydorry on Thursday August 05, 2021 @09:56AM (#28073789)

Most civilized countries determine tax status based on where the person lived for the year. Reporting how much you earn overseas is one thing, but paying taxes twice while living and earning overseas is extraordinarily cruel.

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