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How to renounce American citizenship in France – and why you might want to

The plight of the 'accidental Americans' in France has lead to an increasing number of people renouncing their US citizenship, but the process is far from straightforward and could land you with a hefty tax bill. International tax law specialist Alexander Marino explains.

How to renounce American citizenship in France - and why you might want to
Dual nationality can lead to a tax nightmare for Americans in France. Photo: AFP

Because the United States imposes taxes based on both residence and citizenship (and automatically makes almost all children born within its borders or to an American parent US citizens from birth) many people who live in France and hold French citizenship are still required to annually file US tax and information returns that carry heavy monetary penalties if not timely submitted.

This can be true even if the individual owes little or no actual US tax because of credits granted for French taxes paid and regardless of whether the person ever held a US passport or registered with the US government.

And hiding is increasingly difficult: since France and the United States signed an intergovernmental agreement implementing the US Foreign Account Tax Compliance Act (FATCA) in 2014, the French Ministry of Finance shares with the US Department of the Treasury and Internal Revenue Service (IRS) information on US individuals who own French financial accounts and who may not be compliant with their US taxes.

Faced with these realities, many dual citizens look to renounce US citizenship.

This is particularly true for ‘accidental Americans’ – people who were born in the US and therefore hold citizenship, but who may have lived in there for only a few months and had no further connection with the country.

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Renunciation is nothing new and has long been a right under US law – American-born entertainer Josephine Baker did it in the 1930s, for example – but the “how” of renouncing has become quite complex.

My advice is always that an individual considering renunciation needs professional counsel competent in both US nationality and tax law to make a good decision.

Fixing previous failures to file is generally possible through IRS voluntary disclosure programs, but renunciation carries serious immigration and tax consequences that can seldom be undone.

READ ALSO Does France allow dual citizenship?

An individual deemed to have renounced US citizenship “for the purpose of avoiding US taxation,” for example, may be permanently barred from entering the United States even if he or she would otherwise qualify for visa-free US travel with a French passport.

Likewise, a renouncer with a net worth of more than $2 million (€1.78 million) who was not at birth a dual citizen of both the United States and his or her current country of residence can be subjected to a US “exit tax” on capital gains similar to the French exit tax passed under Nicolas Sarkozy in 2011.

Any renouncer who fails to certify on his or her final US tax return that he or she filed all required US tax forms for the five years preceding the year of renunciation is also subject to the US exit tax.

And all renouncers subject to the US exit tax also become subject to a special inheritance tax on gifts made to US citizens or residents.

In short, renouncing US citizenship is not as simple as scheduling an appointment at a US embassy or consulate, paying the applicable fee, and declaring that one does not want to be American.

Indeed, even swearing an oath of allegiance to another country is usually not in itself enough to end US citizenship. There are many details to consider, and careful planning is essential. 

The pandemic has added an extra wrinkle, as closures during lockdowns mean that many consulates now have long waiting lists for paperwork requests, so the administrative process may take longer than usual.

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LIVING IN FRANCE

France to roll out ID cards app

Technology is being rolled out to allow people to carry their French ID cards in an app form - and could be rolled out to other cards, including driving licences and cartes de séjour residency cards.

France to roll out ID cards app

Holders of French carte d’identité (ID cards) will soon be able to carry certified digital versions of them on their smartphone or other electronic devices, a decree published in the Journal Officiel has confirmed.

An official app is being developed for holders of the newer credit card-format ID cards that have information stored on a chip. A provisional test version of the app is expected at the end of May.

Users will be able to use the ID card app, when it becomes available, for a range of services “from checking in at the airport to renting a car”, according to Thierry Breton, EU Commissioner for the Internal Market.

All French citizens have an ID card, which can be used for proving identity in a range of circumstances and for travel within the EU and Schengen zone – the new app will be in addition to the plastic card that holders already have.

Under the plans, after downloading the app, card holders will need merely to hold the card close to their phone to transfer the required information. According to officials, the holder then can decide what information is passed on – such as proof of age, or home address – according to the situation.

The government has not given any examples of situations in which the app would need to be used, but has set out the main principles and the ambition of the plan: to allow everyone to identify themselves and connect to certain public and private organisations, in particular those linked to the France Connect portal.

READ ALSO What is France Connect and how could it make your life simpler?

Cards will continue to be issued for the foreseeable future – this is merely an extension of the existing system.

Only French citizens have ID cards, but if successful the app is expected to be rolled out to include other cards, such as driving licences, cartes de séjour residency cards or even visas. A digital wallet is being developed at the European level – Member States have until September to agree what it could contain.

READ ALSO Eight smartphone apps that make life in France a bit easier

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