Expatriation is the New Black

  • US citizenship renunciation is expected to hit a record this year.
  • That’s partly because of the pandemic backlog when no one could renounce.
  • Taxes are just one reason people are leaving.

Happy Tuesday!

I haven’t written about expatriation for a while, as the markets and the bureaucrats distorting them have provided too much fodder to ignore.

But we’re coming up to the second quarter renunciation numbers, and they promise to be a doozy… if the State Department bureaucrats could be bothered to process the applications.

It’s incredible to me that over the past decade, it’s not just tax and expatriation experts like our friends at Nomad Capitalist or Sovereign Man writing about the subject.

Now, there are young adults all over the internet writing about how they don’t want to be Americans anymore.

Thanks to the millennial virtue signaling, they rarely mention the word “tax.”

Nevertheless, their other reasons are compelling.

Whether or not they get what they’re looking for in their new countries is another question.

As a Rude reader, you know we’ve got Four Pillars of Financial Freedom:

    1. Getting a second passport.
    2. Starting an online business.
    3. Owning a bit of crypto.
    4. Getting in great shape.

In this edition of the Rude, we’ll look at my expatriation process, how I felt at the time, and how making the time to renounce was the best investment I could’ve made.

Singapore 2011

Pam and I had just been married on that fateful July 3rd.

The following Tuesday, after already communicating with the US Embassy in Singapore, I said to Pam, “Ok, I’m going through with it.”

We had discussed my expatriation, and I assured her that everything was fine.

After all, I still had my British passport, and we had planned to move to England, not America, in the future.

I also explained to Pam that if we were to have children, they all would be “Accidental Americans” and subject to US taxes even if they never set foot in the country.

As a Filipina, Pam isn’t so keen on taxation anyway.  (In the Philippines, you get a bird’s eye view of what your taxes really buy you.)

The US gives the renouncer a four-month “cooling off period” to make sure renunciation is really what the renouncer wants.

I vividly remember the one night I regretted starting the process.

I was watching a Henry Fonda cowboy movie on the hotel television.

The melancholy I felt then I can feel now – but luckily, logic took the field, and I went ahead with the process.

I no longer had to fill out US tax forms and FBAR forms for FATCA, and I didn’t have to worry about banks turning me away because of my passport.

That happened more than once in Singapore.

It’s worth noting that paying the taxes themselves may not be too much of a problem, but the paperwork is an absolute nightmare.

But those days were over.

Philippines 2018

Skipping over my stint in Hong Kong, I convinced Pam to move back to the Philippines for a short period.

Pam quickly accused me of being the “only white man who ever brought his wife back to the Philippines!”

But it was a smart move financially for two very compelling reasons:

  1. As a country with a territorial taxation system, taxes are only applied to income earned within the Philippines.
  2. Since I wasn’t a US citizen anymore, I didn’t have to pay US taxes in lieu of Philippines taxes.

Basically, not only could I live cheaply in Southeast Asia, but tax-free as well.

As Nomad Capitalist recently tweeted:

That second sentence is simple math.  I was saving boatloads completely legally just by not paying income tax.

That savings will finance our house in Italy.

Italy 2022

Our transition to Italy has been pretty easy thanks to not being weighed down by the millstone of a US passport.

Banks can’t turn me down, as they have no reason to.

And opening my new business entity is taking much less time than I thought it would.

Italian bureaucracy is legendary, but not as bad as I thought.

So my investment of time, emotion, energy, and money in renouncing my citizenship paid off in spades.

I don’t pretend that it’s as fruitful for everyone, but I’m one example of how expatriation can work.

And by having both British and Italian passports, I’m not denied entry back into the US.

In fact, I’ve been there on my British passport at least a half-dozen times since 2011.

All in all, renunciation was a bold move that paid off for me.

What the Kids Are Saying

Good friend and Rude reader Jimmy sent over an article from medium.com titled, “Americans Are Sick & Tired Of America! Meet The Americans Who Moved Abroad and Don’t Regret It.

I found the piece incredibly interesting because I never worried about guns, healthcare, and (earning) money.

Philosopher-Truck Driver John Ring was an immense provider, so I never had to.  (I guess that’s called “privilege” nowadays.  I call it, “Dad worked his ass off.”)

What I did worry about, perhaps too constantly, was government intrusion.

And nowhere did I feel government intrusion more than when I lived outside the US.

Nuts, isn’t it?

And that’s why I knew government intrusion was a problem.

If I could feel the USG and IRS in London and Singapore, I could only imagine how bad they were inside the US.

Though I felt alone in 2011 when I was renouncing, I certainly don’t feel alone now.

Check out these numbers from Aetna (bolds mine):

The U.S. government doesn’t formally track how many Americans leave the U.S. but the most recent estimate puts the figure at nearly nine million.

This figure represents a doubling of the 1999 figure, placed at 4.1 million.

The number of ex-pats has more than doubled in the last fifteen years — a number growing faster than the rate of the U.S. population itself.

After the 2016 U.S. Presidential election, many Americans said that they would leave the country, though no figures exist to show whether a significant up-tick has occurred.

So where are these American ex-pats going?

According to the Association of American Residents Overseas (AARO), US ex-pats can be found in more than 160 countries:

      • 40% opt for the Western hemisphere — Canada, Central, and South America.
      • 26% move to Europe.
      • 14% head to East Asia and the Pacific — think Australia and New Zealand as well as China and Japan.
      • 14% head to the Middle East.
      • 3% travel to Central or South Asia.
      • 3% choose Africa.

It’s not all “me, me, me,” it seems!

Wrap Up

If you were hesitating about getting a second passport or renouncing your US citizenship, know that you’re no longer alone or on the fringe.

Both have become mainstream options in curating your perfect life.

As I’ve written before, if you haven’t started doing your homework, then start today.

The State Department is in no rush to process your application, as that means less tax revenue for the IRS.

So get going, have a peek, and see what you can do.

I wish you the best of luck!

Until tomorrow.

All the best,

Sean

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