Why Is the US Passport the Worst in the World, and Why Am I Renouncing US Citizenship?

TL;DR

The speaker calls the US passport the worst because US citizens remain subject to taxation and extensive financial reporting even when their families, jobs, businesses, and investments are abroad. Preparing the speaker’s 2021 tax return cost about $4,000 to $5,000, while every worldwide bank account required reporting. Read on for the claimed tax consequences, renunciation challenges, and second-passport strategy.

Transcript

this a travel document that people have spent hundreds of thousands and millions of dollars to get people fly all over the world just to have their kids in this country in order to get this passport and so many people would trade absolutely everything to have this little thing the united states of america passport i'm gonna tell you why being a us ... Read More

Key Insights

• 🚕 The US is the only country that taxes its citizens based on citizenship, regardless of residency.
• 😀 US citizens living abroad face significant compliance burdens, including extensive annual reporting and documentation requirements.
• 🚕 Renouncing US citizenship can be a complex and costly process, requiring careful tax planning and potentially paying an exit tax.
• 🛂 Obtaining a second passport or residence permit can provide individuals with options to minimize taxes and maintain freedom of movement.
• 🚕 Puerto Rico's allure as a tax haven for Americans may change as US tax laws evolve.
• 💚 Green card holders face similar tax obligations as US citizens, but renouncing a green card is relatively straightforward.
• 🚕 Tax planning and professional assistance are crucial for individuals seeking to renounce US citizenship or obtain a second passport.

Questions & Answers

Q: Why does the speaker call the US passport the worst in the world?

The speaker says the United States taxes citizens even when they live, work, invest, and conduct business outside the country. The burden also includes annual documentation and reporting for worldwide bank accounts.

Q: Why is the speaker renouncing US citizenship?

The speaker wants to escape the taxes, regulations, and recurring documentation attached to US citizenship while living abroad. The speaker obtained a second passport through investment specifically to support renunciation.

Q: What must the speaker report about foreign bank accounts?

The speaker files a form for every bank account held around the world. Each filing includes the amount in the account and its highest balance during the year.

Q: How much did the speaker’s 2021 US tax return cost to prepare?

The speaker says processing the 2021 tax return cost about $4,000 to $5,000. This expense applied despite living outside the United States and having no US investment income source.

Q: How does the guilty tax affect foreign companies controlled by US citizens?

The speaker says a foreign company controlled more than 50% by US citizens is subject to the guilty tax. The stated rate was 10.5%, and the speaker says it would become 12.5% if the US corporate tax reached 25%.

Q: Do US citizens owe capital gains tax when trading through a foreign company?

According to the speaker, capital gains remain taxable regardless of where the citizen lives or trades. The speaker says cryptocurrency profits made through a Dubai company would be treated as personal capital gains rather than corporate income.

Q: How could moving to Puerto Rico affect capital gains taxes?

The speaker describes Puerto Rico as an option that could potentially reduce capital gains taxes to zero after living there for a couple of years. The speaker also says some people do not genuinely satisfy requirements such as spending 183 days there or buying property.

Q: Why is obtaining a renunciation appointment difficult?

The speaker says getting an appointment was difficult because thousands of people with second passports wanted to renounce US citizenship. The speaker also says dual citizens were surrendering passports at embassies around the world.

Summary & Key Takeaways

• Definition: Citizenship-based taxation means the speaker remains subject to US taxes while living, working, investing, and operating businesses abroad.

• Compare: Norway may impose 60% tax for the next 3 years after departure, while the speaker says US taxation continues regardless of residence.

• When: Preparing the tax return for the year 2021 exposed the speaker to extensive reporting requirements and preparation costs.

• Number: The speaker says the 2021 tax return cost about $4,000 to $5,000 to process.

• Tool: A form is filed for every worldwide bank account, including its balance and highest balance during the year.

• Number: The speaker says business income could be reduced to 10.5% through the guilty tax.

• Number: A foreign company controlled more than 50% by US citizens is described as subject to the guilty tax.

• Number: If US corporate tax reached 25%, the speaker says the guilty tax would become 12.5%.

• Number: A Dubai cryptocurrency company can provide a 3-year residence permit and bank account, but the speaker says trading profits remain personal capital gains.

• Number: Puerto Rico may offer potentially zero capital gains tax, but the speaker cites a 183-day presence requirement.

• Step 1: Obtain a second passport, which the speaker did through investment before seeking to renounce US citizenship.

• Step 2: Secure a renunciation appointment, which the speaker says is difficult because thousands of people want to renounce.