Media Misconceptions About Expatriation

Tina Turner Joins the Ranks of Famous Expats

Pop icon Tina Turner has recently joined a multitude of famous and not-so-famous expats. After acquiring Swiss citizenship, Turner, a long-time resident of the canton of Zurich, voluntarily relinquished her US citizenship and passport.

In contrast to the media frenzy surrounding Facebook co-founder Eduardo Saverin’s expatriation in 2012, the reaction to Turner’s move has been relatively subdued. We’ve not seen much condemnation, questions about her motives, or calls for retribution against her.

Perhaps this is because Saverin is much younger than Turner, lives a more public existence, and is frequently seen in the company of young, beautiful, and wealthy women. (Jealous, anyone?)

But Turner and Saverin share one thing in common: the mainstream media got it all wrong when reporting on their expatriations.

Media Misconceptions About Expatriation

We have already discussed how the media missed the mark in Eduardo Saverin’s case. With Tina Turner, they made additional mistakes.

Within hours of The Washington Post breaking the story, dozens of websites worldwide were repeating two fundamental misconceptions expressed in that article:

1. Relinquishment vs. Renunciation. Renunciation of US citizenship is a much more complex process than relinquishment.
2. Tax Consequences. There are no tax or other penalties associated with “relinquishment” of US citizenship. (The Washington Post subsequently corrected this error, but not the first.)

Let’s deal with each of these errors, one at a time.

The Difference Between Relinquishment and Renunciation of US Citizenship

The official procedures for giving up US citizenship are covered in Volume 7 of the US Department of State Foreign Affairs Manual.

Federal law prohibits the government from taking away your citizenship without proof that you intend to lose it. So if you want to relinquish, rather than renounce, your US citizenship, you must prove your intent in some other way.

Relinquishing US Citizenship

To relinquish your US citizenship, you must voluntarily perform an “expatriating act,” such as becoming a citizen of or pledging allegiance to another country.

Additionally, you must participate in a personal interview at a US consulate outside the USA. At some consulates, you may be asked to submit a written statement verifying your intent to give up your citizenship. You’ll also need to complete Form DS-4079, a very invasive questionnaire designed to judge your intentions.

Once you’ve filed the paperwork, you must wait several weeks to several months for the State Department to approve your expatriation.

Renouncing US Citizenship

Renunciation is much easier. You must still make a personal appearance before a US consular officer. But, crucially, instead of completing Form DS-4079, you just need to sign the oath of renunciation. This act removes any question of your intent to give up US citizenship. That’s why it’s so much easier.

One of our clients – who did not use our services for expatriation – wanted to relinquish. He received a “rejection letter” several weeks after he thought he had expatriated. His relinquishment had not been accepted, and his only option was to choose renunciation. This delayed the effective date of expatriation by several months. This could easily have wrecked his expatriation tax plan.

The Tax Consequences of Expatriation

The tax consequences of relinquishing and renouncing US citizenship are identical.

If you are considered a “covered expatriate,” you may have to pay an “exit tax” on your unrealized capital gains when you give up your US citizenship or long-term US residence.

There are also other unpleasant tax consequences that can arise, such as for your IRAs, pension plans, and some trusts. Additionally, future gifts or bequests to your beneficiaries may be penalized.

The Complexity of Expatriation

Expatriation is a complex topic that the average journalist is often not equipped to write about accurately. But because it is a politically controversial issue, the media is drawn to reporting on it, like “moths drawn to a flame.”

To avoid getting “burned” by bad advice, it is crucial to seek guidance from experts when considering expatriation. Do not simply trust everything you read in the mainstream press. They have demonstrated a tendency to make mistakes when covering this topic.

Need Help?

We can assist in every phase of giving up your US citizenship or long-term residence. This includes helping you get a second passport before giving up US citizenship.

And if you’re not ready to expatriate, we can help you take advantage of tax breaks in the Tax Code that apply to U.S. citizens and permanent residents living overseas.

Schedule a consultation with a Nestmann Associate to see if expatriation is right for you.