Access to citizenship in the host country
For some expatriates, losing their nationality becomes necessary to gain citizenship in their host country. The "eternal foreigner" label no longer fits when a temporary stay transforms into permanent residency. These immigrants actively contribute to their new society—working, paying taxes, and integrating into the local community. However, they often face limitations. Regular paperwork renewals are a constant reminder of their "outsider" status. Political participation is restricted to local elections, and they are ineligible to hold office.
The easiest solution? Residing in a country that recognizes dual nationality. This allows individuals to be citizens of both their home and adopted countries. However, not all countries embrace this concept. Countries like Austria, China, and Germany prohibit dual nationality or impose strict limitations. While reform initiatives are underway in some countries to expand dual citizenship, the challenging path of voluntary renunciation remains the only option for others.
Political dissent can be a reason to renounce
Renouncing citizenship can also be a political act. In 2016, the number of Americans renouncing their nationality skyrocketed to 5,411 – a significant increase from 1998's 398 (Statista, based on US Treasury Department data). During this period, many expatriates expressed their disapproval of Donald Trump's candidacy by seeking to sever ties with the US. They felt his values clashed with their own and feared his presidency would harm the country. However, it's important to note that the stricter tax policies introduced by the FATCA law likely played a significant role in this surge of renunciations.
Similarly, Brexit prompted a wave of British immigrants to renounce their UK citizenship in favor of their European host countries. Losing their European citizenship meant losing valuable rights, such as the right to residence. Today, these individuals face limitations in voting and holding office in their European communities. They are considered "third-country nationals" and must regularize their status.
To protest Brexit and retain their European citizenship, some Britons have chosen to renounce their UK nationality. While a challenging and expensive decision, applications haven't dwindled. In France alone, applications for French citizenship from Britons soared by 254% (Le Monde). In response, the UK Home Office increased the cost of renouncing citizenship from €370 to €427 in 2018, seen as a way to discourage applicants and bolster government coffers.
Escaping bureaucracy and tax hurdles
Dual nationality can come with unforeseen complications. In 2012, a significant number of Swiss-American dual citizens renounced their US citizenship. While new US tax regulations were a concern, the overwhelming factor was the administrative burden. This coincided with the implementation of FATCA (Foreign Account Tax Compliance Act), a law aimed at combating tax evasion.
FATCA requires financial institutions to report American clients' accounts to the US tax authorities. This includes accounts held abroad, life insurance, and investments in non-US companies. Failure to comply with tax filing can result in hefty fines. All US citizens, regardless of residency or tax status, are obligated to file tax returns.
The first half of 2020 saw another record-breaking number of Americans renouncing their citizenship (5,816, according to US authorities). Taxation remains a major motivator, especially for those not subject to US taxes. They fear the potential cost of regularizing their status with the IRS.
The plight of "accidental Americans"
Some dual nationals face a particularly harsh burden – the so-called "accidental Americans." These individuals, born on US soil to non-American parents, may have never lived in the United States. Despite this limited connection, they are still considered US citizens for tax purposes under FATCA. This throws many families into a complex and stressful situation.
Advocacy groups have long condemned this system. The pressure from US tax authorities can push "accidental Americans" into financial hardship, even barring them from banking services. For some, the only escape seems to be renouncing their US citizenship. However, this path is fraught with further challenges. They must first settle their tax obligations, incur significant administrative costs, and hire legal counsel, all before paying the hefty fee associated with renunciation. The total cost can reach tens of thousands of euros, an impossible sum for many "accidental Americans." They feel trapped in an "aggressive" system that fails to recognize their unique circumstances.
Conclusion
Renouncing one's nationality is a complex decision with far-reaching consequences. While some situations force expatriates' hands, others make this choice based on a desire for full integration and political dissent. Regardless of the reason, the process is often bureaucratic and expensive. Countries with stricter tax regulations, like the United States, can further complicate matters for dual citizens. Ultimately, the decision to renounce is a deeply personal one and a well-considered one at that.
