To All Saudi Spouses Of Americans And Half-Saudis With American Nationality…This Is A Must Read!

future HUSBANDS and WIVES of SAUDIS

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September 15th, 2014 at 11:28 comment at the end of the below article by Virginia La Torre Jeker J.D., says: “…We will all see in time just how much trouble FATCA causes. One of my Arabic-speaking clients told me yesterday that the Arabic word for “Destroy” or “Destruction” sounds very much like “FATCA” in pronunciation. Interesting….. and perhaps, foretelling?”

Thank You, FATCA, You’ve Just Left Me Stateless
By Virginia La Torre Jeker J.D
AngloInfo: The Global Expat Network (Dubai)
Let’s Talk About: US Tax
15 September 2014

Multiple Nationalities – Caught in the Big FAT(CA) Trap

There is no international law or convention that determines an individual’s nationality or citizenship. One’s nationality is strictly a matter of the laws of a particular country. For example, a country can grant citizenship by descent (usually from a parent or a grandparent). The nationality laws of the United States are found in various…

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6 thoughts on “To All Saudi Spouses Of Americans And Half-Saudis With American Nationality…This Is A Must Read!

  1. TG

    Thanks for the reblog. My husband was interested in American citizenship but now with FATCA…no way. I have been reading through your blog and the information you have compiled is frightening. Keep up the good work.

    Reply
    1. renounceuscitizenship Post author

      Thanks for the comment – FATCA is not even the biggest issue. The problem is life restrictions that one must accept to be a “U.S. law” abiding citizen living outside the United States. For the sake of your family and for your sanity:

      Under no circumstances should your husband seek U.S. citizenship! (Unless you want to live there.)

      Reply
      1. Tara

        Can you please elaborate on accepting life restrictions to be a law abiding US citizen? Or please give me links where I can read about them?

  2. renounceuscitizenship Post author

    Sure after starting with the tweet above – here goes.

    1. Your port of interest is (I assume from your blog) marriage between a U.S. citizen and an “Alien”. Given that the “U.S. citizen probably has to file FBAR, I call this “The FBAR Marriage”.

    Here is a list of posts on this blog that discuss “The FBAR Marriage”.

    https://renounceuscitizenship.wordpress.com/?s=FBAR+Marriage

    The problems include:

    – either having separate financial accounts, not having the account in the American’s name or reporting the non-American spouse’s bank accounts to the IRS (this is a very serious issue for American women married to “aliens” (which is what the the U.S. calls the non-American spouse)

    – different rules on gifting and succession: if both spouses are U.S. citizens then transfers or property between the spouses is not reportable and tax free. Not so if the American spouse wants to make gifts to the non-American spouse. The American spouse is limited in what he/she can transfer to the alien by the Gift tax rules

    – ditto for divorce: the same rules on property transfers apply making divorce much more expensive

    2. Retirement Planning and investing:

    Because U.S. citizens are bound by the rules in the U.S. Internal Revenue Code, (assuming they live outside the U.S.) their local retirement plans will NOT (unless there is a treaty carve out be recognized as legitimate retirement plans under U.S. tax law. In other words Americans abroad lose the benefits of “tax deferral” if they attempt to use most retirement planning vehicles in their country of residence. Now, these examples are Canadian examples. But the same principles apply to Australian Superannuation, U.K. ISA, etc. Here are some posts that deal with this problem (admittedly they are Canadian examples):

    https://renounceuscitizenship.wordpress.com/?s=Retirement+planning

    https://renounceuscitizenship.wordpress.com/?s=principal+residence

    https://renounceuscitizenship.wordpress.com/?s=RRSP

    In Canada many people use the principal residence as a vehicle for retirement planning. Under U.S. law this is taxable when it is not in Canada. This is yet one more retirement planning vehicle that is not available to Americans.

    https://renounceuscitizenship.wordpress.com/2013/07/11/tax-compliant-americansbroad-with-mutual-funds-should-renounce-before-becoming-a-covered-expats/

    Some Americans abroad, who have most of their money in their homes actually must renounce U.S. citizenship in order to avoid the taxation of the capital gain on the sale fo the house.

    Mutual Funds:

    Non-U.S. mutual funds are taxed almost to the point of confiscation. They are thought to be PFICs (which is a dangerous thing):

    https://renounceuscitizenship.wordpress.com/?s=PFIC

    Special taxation and reporting requirements for those who own or wish to carry on business through non-U.S. based companies:

    3. Business Partners and Employment

    The U.S. has very very strict laws requiring Americans abroad to report on their activities. These inclucde FBAR, Foreign corporations, Foreign Partnerships, etc. in general this is not acceptable to non-U.S. business partners and shareholders. Would you want your information reported to a foreign government?

    FBAR (Foreign Bank Account Report) is a particular problem because (among other things) it makes it impossible to employ a U.S. citizen in any job that involves “signing authority” over bank accounts or financial accounts. See for example:

    https://renounceuscitizenship.wordpress.com/2012/01/01/u-s-citizen-employees-and-fbar-requirements/

    FBAR has also been the reason for a Canadian adoption agency warning against the adoption of babies born in the U.S.

    https://renounceuscitizenship.wordpress.com/2011/12/31/fatca-and-fbar-make-u-s-born-children-virtually-unadoptable-for-non-u-s-parents/

    If you want to learn more about FBAR see:

    https://renounceuscitizenship.wordpress.com/2012/01/26/looking-for-mr-fbar-in-search-of-fbar-fullfillment-and-consciousness/

    – children: if the child is not a U.S. citizen the U.S. parent can’t take a tax credit for an “alien” child

    4. Constant threats of penalties and special reporting requirements for not living in the United States. Since 2009 the IRS has been attacking Americans abroad on the issue of taxes. The U.S. is the only country in the world that claims the right to tax residents of other countries on income earned in those other countries. The problem is that U.S. tax laws expect Americans abroad to abide by the same rules as U.S. residents. But, everything about the lives of Americans abroad is “foreign” which makes it subject to special penalties and reporting.

    For a list of posts on U.S. citizenship-based taxation see:

    https://renounceuscitizenship.wordpress.com/?s=Cook+v.+Tait

    For a list of posts on how the IRS has attacked Americans abroad since 2009 see:

    https://renounceuscitizenship.wordpress.com/?s=OVD

    5. FATCA – Americans are being kicked out of banks. Getting harder to get normal banking arrangements if you live outside the USA. Why would a bank want the problems of having an American as a client. Here are some example from Switzerland

    https://renounceuscitizenship.wordpress.com/?s=ovdp+banks

    6. For those Americans who try to renounce U.S. citizenship they may be subject to the “Exit Tax”. See:

    https://renounceuscitizenship.wordpress.com/?s=Exit+Tax

    It is possible to live as an American abroad if you are NOT in compliance with U.S. laws. But, as you can see it is impossible to live as an American abroad if you ARE tax compliant. Tax compliant Americans are disabled from pretty much everything.

    Jacqueline Bugnion of American Citizens Abroad summarized this all very well as follows:

    https://renounceuscitizenship.wordpress.com/2013/07/10/cook-v-tait-12-the-implications-of-afroyim-and-the-14th-amendment/

    n 1776, the United States declared independence because the mother country on the other side of the ocean was imposing taxes on the colonies for the benefit of England. Resentment started when Britain tried to enforce the Navigation Act after 1763. Resentment increased with the Stamp Act in 1765, a way for Britain to tax the colonies. The British Tea Act of 1773 led to the Tea Party and we all know the outcome – the American Revolution and independence crying out “no taxation without representation”.

    Today, the estimated 7 million Americans resident abroad, of whom the majority are long-term overseas residents in high tax OECD countries, face a comparable situation. Their representation in Congress is non-existent in reality. Americans abroad amount to only 1 to 2% of the votes in any particular state; Congressmen and Senators have ignored their tax issues. The unjustified myth that Americans abroad are wealthy and disloyal restricts a rational approach to the problems because of political image issues.

    Citizenship-based taxation (CBT) has existed ever since the federal income tax was adopted. Despite CBT being an anomaly involving double taxation, taxation of phantom gains and explicit tax code discrimination, it was grudgingly tolerated by Americans abroad because it was essentially voluntary, most often involved little tax or no U.S. tax liability and basically was not enforced. In particular, the FBAR filing requirement was so obscure that even the big four accounting firms were not aware of the filing obligation dating from 1970 and failed to inform Americans abroad of the need to file the FBAR.

    Since 2001, a series of legislative events have radically changed the situation:

     In 2001, the Patriot Act made anything foreign suspect, including Americans residing overseas.

     In 2004, Congress, under the Jobs Act, drastically increased the FBAR civil and criminal penalties to confiscatory levels, creating a disguised form of taxation on assets held overseas.

     In 2006 administration of the FBAR reports was transferred to the IRS for enforcement.

     In 2006 the Tax Increase Prevention and Reconciliation Act (TIPRA) extended the Bush tax cuts and included a compensatory revenue raising provision that reduced the benefit of the foreign earned income exclusion, limited the foreign housing allowance and pushed Americans overseas into higher tax brackets, thereby increasing U.S. tax liabilities for many Americans abroad.

     In 2008 the law relating to renunciation of U.S. citizenship was revised under Section 877A and introduced an Exit Tax on wealthy individuals (defined as “covered”). The law also provided that Americans who inherit from estates of former “covered” U.S. citizens are subject to U.S.
    inheritance tax with no exclusion. This outrageous discriminatory provision aims to discourage renunciation of citizenship, but in fact penalizes children of former U.S. citizens for an act they did not commit. In practice, it encourages the children to also renounce their U.S. citizenship.

     In 2009 the IRS launched its initiative against tax evasion linked to foreign assets through the Overseas Voluntary Disclosure Programs and a threatening public relations campaign. While it justifiably targeted U.S. resident tax evaders, it simultaneously trapped Americans abroad who necessarily have foreign assets. The IRS’s one size fits all policy and bait and switch tactics led to abuses of Americans abroad which inspired sharp criticism from the National Taxpayer Advocate.

     In 2010 FATCA was slipped into the HIRE bill with no debate in Congress and no cost/benefit
    analysis. FATCA aims to provide the door that closes the fiscal trap by requiring foreign financial institutions to report to the IRS on assets held overseas by U.S. persons. It effectively cuts off many Americans from foreign financial institutions which find it too onerous to maintain American clients. FATCA creates a barrier to free movement of capital and people.

     In 2012 S.3457 proposed to grant the IRS the authority to have a U.S. passport cancelled or not issued if the IRS determined that the individual owed $50,000 or more U.S. tax.

     In 2012 the Ex-patriot Act, S.3205, proposed to deny any “covered” expatriate re-entry into the United States, with retroactive effect for ten years prior to enactment of the law. The Reed
    Amendment of the 1996 Illegal Immigration Reform and Immigrant Responsibility Act already
    allows the United States to deny entry of former citizens into the United States.

     In 2013, S.268 was introduced; it compounds difficulties created by FATCA.

     In 2013 the Senate Finance Committee included in its tax reform recommendations a provision which would grant the IRS authority to cancel a U.S. passport for tax collection purposes.

    This stream of legislation and proposals categorizes Americans abroad as suspected criminals seeking to escape U.S. taxes. Congress has outdone George III and has turned the United States into a fiscal prison, including legislation which is deemed anti-constitutional under the Fifth Amendment1 and is contrary to Articles of the Universal Declaration of Human Rights.2
    The foundation of the U.S. fiscal prison is citizenship-based taxation. Americans working and living abroad carry a ball and chain of dual taxation throughout their entire lives up to and including death.

    Americans abroad already pay taxes in the country where they reside and receive governmental services.

    The additional U.S. tax obligation creates inevitable incompatibilities and discrimination and even requires Americans abroad to break foreign exchange control laws to pay U.S. taxes.

    A revolution among long-term overseas residents is now underway. Five years ago, Americans abroad never talked about renunciation of citizenship. Today, it is a common topic in the press and among the community abroad. For more and more individuals, renunciation is the only solution to an intolerable situation created by the U.S. imposing its laws beyond its borders. The United States is literally destroying the community of Americans abroad, which plays an essential role in representing U.S. interests and goodwill overseas. The United States is shooting itself in the foot.

    While the absolute number of renunciations, currently around 2,000 a year, is insignificant compared to the average annual U.S. citizenship naturalizations of 680,000, renunciations have multiplied seven times over the last four years. So far we have seen only the tip of the iceberg if CBT remains in force.

    Today’s situation leads to serious hidden prejudice for the United States. U.S. exports are far below where they should to be because citizenship-based discourages U.S. companies from deploying U.S. citizens overseas to sell U.S. products; the law makes them too expensive. U.S. tax law and FATCA create insurmountable barriers for small and medium-sized companies to establish beachheads abroad to develop exports. The loss represents millions of U.S. jobs, hundreds of billions of dollars of exports, billions of dollars of U.S. tax revenue, and an unsustainable trade and budget deficit. Americans married to a foreign spouse, who represent about a third of the Americans resident abroad, now hesitate to register their children born abroad with the U.S. Embassy. The hot thing among young adults in their twenties is to renounce U.S. citizenship; they are aware of the impossible web of U.S. regulations that restrict job opportunities and personal freedom. Pushing away the young generation of Americans abroad is an immense loss to the United States. In prior generations, many highly educated multi-lingual American children returned to the United States, founded companies and created jobs in the U.S.

    Adopting RBT will stop this revolution immediately. RBT law needs to be drafted in the spirit to allow free movement of individuals to leave and return to the United States, to reinforce the competitiveness of Americans and the United States overseas, to provide a simple, non-penalizing transition to RBT for the community of Americans already overseas, to ensure that Americans abroad are not subject to FATCA and FBAR, to adapt existing bilateral tax treaties and enter into new tax treaties so that withholding tax rates on U.S. source income are reasonable and to ensure that Americans abroad who have the majority of their assets in the United States (retirement funds, pension funds, real estate) are not disadvantaged under RBT with regard to either income or estate taxes.

    I thank you for the opportunity to comment and hold high hopes that your bi-partisan efforts will lead to the constructive tax reform so necessary for Americans residing abroad.

    Sincerely yours,
    Jacqueline Bugnion

    __________________________________________________________

    Okay, there are a few examples. Feel free to repost any of these posts with attribution. Hope you find this helpful. The real problem is that Americans abroad really need a lawyer with them all day every day.

    How do you like your freedom now?

    Reply
    1. Tara

      Oh wow! That was a lot to digest. The arm of the American government just keeps getting longer. The hike in renunciation cost makes it seem as if they want to make it harder for Americans to give up their citizenship so that they can always be taxable. In addition to being penalized for living AND working abroad…Americans are also being penalized for marrying non-Americans and living with them outside of the United States. I wonder if their next step would be that Americans aren’t allowed dual citizenship at all. And while we are crying foul…there are foreigners who would give and arm and a leg to have American citizenship. Well the American passport ain’t gold anymore, people!

      Reply
      1. renounceuscitizenship Post author

        With respect to your comment that:

        “Americans are also being penalized for marrying non-Americans and living with them outside of the United States.”

        Absolutely. It appears that U.S. tax policy seems to assume that marriage between a U.S. citizen and a non-citizen is a form of tax evasion.

        There are a number of reasons for this which include:

        1. If the U.S. person chooses the “married filing separately” category (which is pretty much mandatory) various taxes kick in at lower levels. For example the new Obamacare NIIT (Net Investment Income Tax). In addition, the levels for reporting (for example Form 8938) are triggered at lower levels.

        2. The restriction on gifts made to the “alien spouse” obviously discriminate against Americans who marry “aliens”. But, I think that this discrimination is based on the assumption that U.S. citizenship is actually a “property interest” that the U.S. government has in the U.S. citizen individual.

        If we start from the premise that the U.S. government has a property interest in its citizens, the problem with the “alien spouse” is that the U.S. government does NOT have ownership over the alien. The “lack of ownership” over the alien justifies why the U.S. citizen spouse is restricted in property transfers to the alien.

        Bottom line:

        In the “FBAR Marriage” the primary obligation of the U.S. citizen spouse is to the U.S. government and NOT to the other spouse. Once this is better understood U.S. citizenship will be a significant disability in the marriage market. FATCA is accelerating the understanding of this.

        Times have changed.

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