As of September 12th, 2014, the U.S. State Department has raised the fee for citizenship renunciation to $2,350 (U.S.) a person; an incredible increase from the previous $450.
The reason for the exorbitant fee increase is stated as an attempt to capture the “full cost” of delivery of this service by U.S. consular officials, and that it represents the “real, unsubsidized cost of providing this service.”
A noteworthy difference in taxation structure between Canada and the United States is especially noteworthy at this juncture. The United States taxes individuals based on citizenship. In contrast, Canada, and virtually all other countries, base taxation on residency. What this means for Americans living abroad is that they must file U.S. taxes regardless of where they live.
The recent signing of the Foreign Account Tax Compliance Act may also make renouncing U.S. citizenship more of a pressing issue for some.
The new law, which will come into effect in stages, makes it mandatory for financial institutions to share information about their U.S. customers. What does this mean for Canadians? For those holding accounts worth $50,000 or more, your financial information can now be passed over to the IRS if you are an American citizen. CRA will commence with collecting information on all financial accounts worth more than $50,000, starting at the end of 2015, and remit relevant information to the IRS.
This tax tip is a publication of DSK on developments in the area of taxation. The material is general in nature, is current as of published date, and should not be relied upon to replace the requirement for specific professional guidance. These posts should not be considered advice to be acted upon without further professional consultation, as each reader’s personal financial situation is unique.