Taxation after renunciation of US citizenship

Posted by eauyang (114 days ago)

I have a friend asking for some advice that is quite sensitive. He just renounced his US citizenship with the US Ambassy in HK. Passport's been retained, etc, but the Consulate told him that the State Dept must officially approve this, which would take 3-4 months. Is he still an American then? The question is what happens with tax liabilities as he continues to earn income over the next 3 months? Can he stop paying social security/medicare/medicaid, and withholding taxes now, or wait 3-4 months?

(I am based in Hong Kong)

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Tags citizenship, taxes

Posted by hkkm (113 days ago)

Your friend should get some expert advice from a tax lawyer. From doing a quick Google search, it looks like the US can tax someone for up to 10 years after they renounce citizenship if they think the reason was to avoid taxes (they look at someone's net worth and average annual income to determine this). Don't know about the other stuff.

(I am based in Hong Kong)

Posted by evildeeds (113 days ago)

Yes, normally they will still be liable for tax for 10 years after renouncing citizenship.

(I am based in Hong Kong)

Posted by associates (113 days ago)

We would require much more detailed information to provide a reasoned view; we would be pleased to attend to your needs on your matter.

We would suggest you contact our office to arrange an initial meeting with our Mr. Weir and our fee charge for an initial meeting is HK$2,500. Please call 2526-1767 to arrange a meeting or send in your email to WeirLaw@HongKongLaw.com.

Weir & Associates
Solicitors & Notaries
16th Floor Tak Shing House
Theatre Lane
20 Des Voeux Road Central
Central
Hong Kong
Tel : 2526-1767
Fax : 2868-3568
email : weirlaw@hongkonglaw.com
www.HongKongLaw.com/weirlaw

(I am based in Hong Kong)

Posted by eauyang (113 days ago)

I was told that there is no 10 year reporting requirement UNLESS a) person incurred tax liabilities of >US$100,000 each of the past 5 years, OR b) person has net worth >US$2,000,000. I am not sure what my friend's case is, but I am guessing that neither case is true. In this case, my tax accountant just told me the tax withholding and social security can stop immediately. Does anyone disagree with this?

(I am based in Hong Kong)

Posted by mpasteven (109 days ago)

You have to do a few tests under IRC Section 877 and its regulations. Most part of your analysis sounds right. Following link will take you to IRC Section 877 .

http://www.law.cornell.edu/uscode/26/usc_sec_26_00000877----000-.html

(I am based in Shanghai)