The United States is unique in taxing long-term non-resident “US Persons” on their worldwide income under the same rules that apply to resident taxpayers. This tax applies to US citizens AND legal permanent residents (greencard holders) until they formally abandon their US status (turning in a green card by submitting Form I-407 or relinquishing US citizenship). Of course, the non-resident US person almost certainly lives in a country with taxes of its own (not always income taxes), and the tax system of the resident country will not tax exactly the same income items as the US does. So, while the US will allow a credit for income taxes paid to the resident country, there are always some gaps or areas of double taxation. This is especially true when it comes to any tax-deferral allowed by the resident country, such as tax-deferred retirement plans. Furthermore, the US tax system is quite xenophobic, treating any non-US managed investment, corporation, or trust as if its main purpose were to avoid US tax.
Information on how US citizenship-based taxation works
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In 2008, the US legislated (as part of the unrelated Heart Act to increase benefits for veterans and survivors of deceased veterans) that an Exit Tax would be applied to qualifying US citizens, termed Covered Expats, who choose to renunciate their US citizenship.
The Exit Tax is based on as if you had sold all of your assets the day before expatriation.
Whether you are a deemed a Covered Expat depends on three tests: 1) Average income over the past five years, 2) Net Worth, and 3) Tax filing compliance.
More on the Exit Tax here:
US Reform Proposals
Proposals to fix the US system of Citizenship Based Taxation have been advanced by the overseas arms of both of the major US political parties. Information on those proposals can be found here: