Why many don't want to get the US Citizenship even if they could? + Citizenship-based taxation
It is important to note that whether or not to pursue citizenship is a personal decision that depends on individual circumstances and priorities. That being said, there are several reasons why one might choose not to pursue U.S. citizenship, even if they have the opportunity to do so.
One reason is the cost. The application fee for U.S. citizenship can be quite high, and the process can also involve significant legal expenses. Additionally, if an applicant is not fluent in English, they may need to pay for language classes to meet the English proficiency requirement for citizenship.
Another reason to avoid pursuing U.S. citizenship is the time involved. The process can take several years, during which time the applicant may be required to attend interviews, submit additional documentation, and pass a test on U.S. history and government.
Obtaining U.S. citizenship also has the potential to affect an applicant's relationship with their country of origin. Once an individual becomes a U.S. citizen, they may be required to renounce their original citizenship and face potential issues such as loss of property and voting rights in their country of origin.
Furthermore, with U.S citizenship also comes the obligation of Jury Duty, taxes, military service and being called upon to serve as a witness in court and other civic responsibilities. This can be a hindrance for some who wish to maintain their current lifestyle and are not prepared to take on such responsibilities.
Lastly, it's important to note that becoming a U.S citizen may not be a guarantee of security or stability in the long term. The U.S government can revoke citizenship if it is found to have been obtained fraudulently, and there is always a chance of deportation if a person commits a crime or otherwise becomes subject to removal proceedings.
Ultimately, the decision of whether or not to pursue U.S. citizenship is a complex one that should be carefully considered. Factors such as cost, time, and impact on one's relationship with their country of origin, as well as civic responsibilities and potential loss of security should all be taken into account.
It is important to consult with a lawyer, discussing all pros and cons of applying for US citizenship, and seeking guidance accordingly.
Citizenship-based taxation
Citizenship-based taxation refers to the way in which the U.S government taxes its citizens, regardless of where they reside in the world. This means that U.S citizens are required to pay taxes on their worldwide income, even if they live and work outside of the United States.
The U.S is one of the few countries in the world that imposes citizenship-based taxation. This means that even if you are a U.S citizen living and working abroad, you are still required to file a U.S tax return each year and pay taxes on your global income. This includes income from foreign sources such as employment, business, and investments.
One important aspect of citizenship taxation is the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC). The FEIE allows U.S citizens living abroad to exclude a certain amount of foreign earned income from their U.S taxable income each year. The FTC, on the other hand, allows U.S citizens to credit foreign taxes paid against their U.S tax liability. This is useful for people who are already paying taxes in their host country, so they don't end up paying double taxes on the same income.
It's also important to note that U.S citizens are required to file annual reports on certain foreign financial assets, such as bank accounts and investments, if the value of these assets exceeds certain threshold amounts. This is done through the Foreign Bank Account Report (FBAR) and the Report of Foreign Bank and Financial Accounts (FBAR) that are filed separately from the tax return.
Failure to file required U.S tax returns and foreign asset reports can result in significant penalties, including fines and even criminal prosecution. The IRS has increased their focus on offshore tax compliance in recent years and they have stepped up enforcement actions against U.S citizens who are not compliant.
The U.S tax laws are complex and constantly changing. It's important for U.S citizens living abroad to stay informed about their tax obligations and to seek professional tax advice to ensure compliance.
In summary, U.S citizenship comes with the responsibility to file and pay taxes on worldwide income, even if you live and work outside the U.S. Special exclusions and credits are available to U.S citizens living abroad to mitigate the burden of double taxation. Consult with a tax professional to make sure you understand and fulfill your tax obligation.
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