Moving Out of the Country: Renouncing Citizenship - Caleb Jones

https://www.youtube.com/watch?v=UYjooV1eadw

Here is a video from Andrew Henderson of Nomad Capitalist, one of the resources I recommend for five flags and international living / business issues. He’s just renounced his US citizenship, something I’ve mentioned a few times before.

The video is 45 minutes long and I strongly recommend it if you’re an American looking at creating some sort of five flags lifestyle, now or in the future. (If you’re not an American, it’s purely optional, since non-Americans usually have less reasons to renounce, because of America’s uniquely horrendous tax laws and paperwork requirements.)

You can do what I always do with YouTube videos and play it at 1.5X speed which makes the video just 33 minutes or so.

While he touches on the technical specifics, Andrew covers mostly the emotional aspects of renouncing citizenship. Renouncing citizenship is a pretty big deal. It’s only something you should do when you know with 100% certainty you want to do it and it’s worth doing. In most cases, it probably isn’t.

Andrew only spends five or six days a year in the USA, so for him, renouncing makes sense. Why pay all those damn taxes and get involved in all the banking paperwork if you’re not using any of the resources of the USA in your day-to-day life? Makes sense to me.

He said the entire process of renouncing took about $2300 and two and a half months. I was surprised it moved that quickly. Pretty nice.

He talks about not renouncing just because you’re pissed off or making an emotional decision. He’s right about that. Renouncing your citizenship just because you’re mad at the US or disagree with its politics is one of the stupidest things I can think of. Clearly I have a problem with just about everything the government of my country does, but that doesn’t factor into whether or not I will renounce my citizenship down the road.

I don’t want to renounce my citizenship. I really don’t. I hate my government, but I love my country, and I feel a much stronger connection to America than Andrew does. Most of my life philosophies of individualism and freedom are based right out of American values, which are largely unique in the world. I also have children and a wife (Andrew has neither of these) and will have grandchildren in the next ten years. This keeps keeps me tied to the USA, at least to some degree, for at least the mid-term future.

However! Both of my kids strongly want to move out of the USA as well. My daughter is always talking about moving to Thailand or New Zealand, and my son is spending an entire month in Mexico as I type this. If my kids actually move out of the USA some time in the next 10-20 years, the only strong family ties I will have here will be my parents, who are elderly and likely won’t be alive by then. Granted, Pink Firefly has family here she’s close to (mostly her parents, who are younger than my parents) and that needs to be factored in as well.

Will I eventually renounce? Probably, but it will likely be in a very long time. If I do, it will be the last step in my five flags plan, which is currently a 10-15 year project. My goal is to get to the point where I can renounce if I choose to. This means these items must be in place first:

1. I must have not one, but at least two other passports in addition my USA one.

2. I must be moved out of the USA.

3. I must be fully settled in my new location(s), which very well may take several years after I move out, since it may take time to get my footing and find out exactly which international living configuration makes me the happiest.

4. Certain financial aspects must be in place.

Then, at that point, I would renounce only if my current tax cost and paperwork hassle was worth the travel hassle of renouncing. If I renounce my American citizenship, I would still be able to visit the United States, but I would have to do so as a foreigner, meaning I’d likely have to get travel visas every time I visited, and there would be time limits on the amount of time I could stay. Therefore, this hassle would have to be “worth” me renouncing, and thus saving me money on the tax burdens and banking paperwork unique to American citizens living abroad.

Will things get to that point? Based on where I see the USA going, probably. But I don’t know for sure. The point is I’ll have the option at that point if I need to. I would be doing it for purely financial and logistical reasons, nothing else. I’m not “mad” at the United States (I was when I was much younger, but not now).

Andrew mentions that he feels much more relaxed now that he’s no longer a citizen of the US. Every time he sees a news report about the latest stupid thing our government or voters are doing, he just doesn’t care; it’s no longer his cross to bear. He feels like it’s a weight off his shoulders.

That sounds very compelling to me. However, I sort of feel like that already. Every new problem the USA encounters, I view it more like watching a movie (specifically, a dark comedy) than something I’m personally a part of. Though I agree this sense of ease would increase if I was no longer a citizen.

Paperwork is the other thing. The amount of legal, banking, and tax paperwork required when you are an American citizen living a five flags lifestyle is gargantuan, to the point of insanity. This all vanishes when you’re no longer a citizen.

I don’t live the five flags lifestyle right now, and I’m reasonably confident that Andrew makes more money than I do (though I could be wrong about that), so while this paperwork aspect doesn’t affect me yet, it certainly will when I start fully offshoring everything. As you know if you’ve read my book, extreme paperwork requirements violate one of the standards of having an Alpha 2.0 business. It can’t be tolerated long-term, at least in my strong opinion.

The last factor, and the biggest one, is taxes. Living the Alpha 2.0 lifestyle, I already pay a very low percentage of my overall income in taxes, legally. While the typical American pays 51-73% in total taxes, I pay around 17%, and do so 100% legally, and while still living in the USA most of the year. By moving out of the country and legally setting up my five flags, my goal is to get this down to 4% or less, ideally 0% but I’ll take 4% if I have to. (Andrew was able to get his tax rate down to 1%.)

My point is that 17% really sucks, but it isn’t such a pain point that it really bothers me…  yet. The problem is that as my income goes up, that tax rate tends to go up as well. For most of the last many years, my tax rate was 7-8%, so it’s more than doubled since then as my income has increased.

So this topic is a complicated one, all the more reason why, if I do it, I’m putting it way off into the future to give me plenty of time to know if it’s the right decision for me at the time. That’s how you need to look at this stuff.

And again, if you’re not an American citizen, your country doesn’t tax you regardless of where you live, and international banks don’t mind dealing with you because of FATCA laws, so you likely never need to worry about this. Congratulations!

21 Comments on “Moving Out of the Country: Renouncing Citizenship

  1. In regards to having the hassle of visas for re-entry to the USA once no longer a citizen, for this reason I’m looking at a citizenship in a country who is in the Visa-Waiver-program (VWP). I’ve chosen Chile for this after reading a lot of Simon Black’s work.

    For me, the two passports I’m looking to achieve:

    #1- Peru or Argentina- approx 3-5 Years to acquire (so, a better time commitment than most)

    then #2- Chile- approx 6 Years to acquire (a VWP country, so passport only needed to visit US, not a visa as well)

    then #3, renounce, but still able to visit US for months at a time if needed due to being Chilean citizen.

  2. Good plan. What are the residency requirements for getting that Chilean passport though? Do you have to live there for those 6 years? Or 6 months a year?

  3. Off topic, but what are your thoughts about Trump’s tarrifs?

    My opinion is complicated, but it doesn’t matter, since the tariff thing is an example of “things have gotten so fucked up, regardless of if you do it or don’t do it, both options are bad at this point.”  That issue is something that could have been fixed 20-25 years ago, but not now.

  4. Who cares what some guy’s *emotional* reasons are. The technical aspects are the only thing of interest.

    Lots of anonymous sources talking about this. Anything interesting behind a paywall, of course. No proof that any of them really live the life they say they do. No proof that any of the information is true. Just trust me and give me your credit card. LOL.

    So the blogger here is so upset at politics and taxes, yet he’s waiting 15 years to pull the trigger. Sounds pretty fishy. Let’s all charge the enemy lines… but you first — and don’t forget to leave that credit card behind.

  5. Who cares what some guy’s *emotional* reasons are. The technical aspects are the only thing of interest.

    The emotional reasons are valid, as are the technical ones.

    Lots of anonymous sources talking about this.

    Who’s anonymous here? I’m not, and neither is Andrew.

    So the blogger here is so upset at politics and taxes, yet he’s waiting 15 years to pull the trigger. Sounds pretty fishy.

    If that’s your opinion of me you shouldn’t be reading my blogs. My friend, I’ve been very patient with you and given you several warnings about your repeated trolling with zero facts, as well as your time-wasting comments on both of my blogs. Goodbye.

  6. i didnt know the international taxes and paperwork were so US specific.

    Google FATCA.

  7. American woman, stay away from me
    American woman, mama, let me be
    Don’t come a-hangin’ around my door
    I don’t wanna see your face no more
    I got more important things to do
    Than spend my time growin’ old with you
    Now woman, I said stay away
    American woman, listen what I say

  8. It still amazes me how the US cititzens are expected to pay tax to the US government when living and earning outside of US. Ive known about this for years and it still doesn’t stop to amaze me. It is so outrageous its almost funny. Its kinda like the government saying that you are the government’s property.

    It is a shame though that the banks and firms in other countries do disclose information to the US government, that is unfortunate that they agree to do that.

    Cant you just have one other passport, keep the US passport and then when opening bank account you only show the bank your other passport and do not tell them about being US citizen? I know there are forms where you have to sign that you do not have a US passport, but I don’t think they could find out. Or is the potential risk of that so high that its not worth going this route?

  9. He looks like every nerdy digital nomad I see spending thousands at brothels abroad.  He’s right about ” go where youre treated best ” though.  I cant argue. Nows the time to seize the global opportunity if we’re not happy

  10. In regards to Chile requirements- according to Simon’s info, it’s about 9 months on the ground in Chile for Year One, then it’s minmum one day each year for Years 2-5. (That’s the law-required minimum, but of course they’d prefer to see you spent more, and made integration/investments in Chile etc).

    Then once year 5 is up, can apply for citizenship, and then have to wait 6-12 months for approval/passport, making it approx 6 Years total from start to finish.

  11. Hey, BD, hi. 🙂 I rarely comment on any website, but seeing your curiosity about a Chilean VISA made me make an exception to the rule. 😀

    Based on what I read about you, your lifestyles and your business, I think that Chile is a MUST for you, at least right after you obtain any major Asian passport.

    I think you’ll also love the country itself and its fat-trim bureaucracy. I say from experience: I’m a Brazilian entrepreneur who’s right now in the process of obtaining Chilean citizenship.

    Hit me up on email if you wanna an in-depth analysis of the procedures to obtain a citizenship (and, with it, a passport) and hwo life is in Chile overall (quick note: it’s awesome. Mostly Singaporean quality of life with Latin American prices, at least in the capital Santiago).

  12. Caleb, have you read Neil Strauss book on the same topic (and more)?

    Im always curious on your views on Strauss books, because he tackles the same problems You do on your blogs (freedom, money, women, game, sex, nonmonogamy and relationships), and goes through the same ideas You do but comes with a different outcome.

  13. Cant you just have one other passport, keep the US passport and then when opening bank account you only show the bank your other passport and do not tell them about being US citizen?

    Yes, but you’d be breaking the law, and I don’t do that.

    I know there are forms where you have to sign that you do not have a US passport, but I don’t think they could find out. Or is the potential risk of that so high that its not worth going this route?

    It all depends on whether or not you ever want to go back to the USA. If you have no desire to ever return to the USA ever, for the rest of your life, then sure, you could break all kinds of American laws and you’d probably be fine as long as you kept a reasonably low profile and didn’t make too much money (if you were making hundreds of millions or billions, you’d have a problem).

    In regards to Chile requirements- according to Simon’s info, it’s about 9 months on the ground in Chile for Year One, then it’s minmum one day each year for Years 2-5. (That’s the law-required minimum, but of course they’d prefer to see you spent more, and made integration/investments in Chile etc).

    Then once year 5 is up, can apply for citizenship, and then have to wait 6-12 months for approval/passport, making it approx 6 Years total from start to finish.

    Hm. Yeah, that more or less matches what I’ve heard. Not bad.
    Based on what I read about you, your lifestyles and your business, I think that Chile is a MUST for you, at least right after you obtain any major Asian passport.
    I don’t know about “MUST” since I can just get a Comorosian passport for just $40k within a few months instead of waiting 6 years and living in Chile for a year, but I agree it’s a good option, yes.

    Caleb, have you read Neil Strauss book on the same topic (and more)?

    Im always curious on your views on Strauss books, because he tackles the same problems You do on your blogs (freedom, money, women, game, sex, nonmonogamy and relationships), and goes through the same ideas You do but comes with a different outcome.

    Yes, his book on five flags is called Emergency and I highly recommend it. Very good stuff in there.

    I’ve read of most of Neil’s books, though I tried to get through The Truth and wanted to review it, but it was so painful to read (he is such a beta and so needy and so wedded to monogamy) that I just couldn’t do it.

  14. Hi Caleb,

    US citizens trying to live abroad have 2 big issues:

    1) Alone among “developed” nations, the US is the only country that taxes all citizens on worldwide income, irregardless of whether they reside in the country at all: you are liable for US income taxes even if you are physically present in the US for 0 days per year. (FWIW, the only other countries I’m aware of that tax worldwide income of non-residents are Afghanistan and the Philippines, looks like America is keeping some low-rent company, LOL.)

    2) Whether rightly or wrongfully, the United States feels it has a right to apply its laws extraterritorially. In terms of banking, one effect is that the US enforces foreign banks to apply all sorts of screening to US citizens who open accounts, and even to perform FINCEN style reporting and handing over information about their clients to the IRS. They enforce this basically by holding the foreign banks’ assets in the US hostage, and by arresting and jailing employees of foreign banks (employees who have never even worked at US branches of foreign banks have even been arrested when they foolishly traveled to the US.)

    The upshot is that some banks have made corporate decisions to refuse the business of US citizens or Green Card holders (BTW, anyone who is foolish enough to take out a US Green Card, is just as liable for worldwide taxes as a US citizen. Keep that in mind if you or someone you love has been thinking of getting a Green Card.)

    In my travels I have been encountering US expats who have found they have to spend weeks trying to find a bank that will let them open an account, while people from “normal” countries can walk right in and open an account with the usual KYC paperwork. Meanwhile, they are spending a fortune on foreign account ATM withdrawals & credit card advances, with attendant currency exchange fees tacked on. Some countries are worse for this than others. YMMV. Sometimes they won’t even grandfather in people with pre-existing accounts. One acquaintance of mine in Switzerland was senior who had held accounts with 2 banks for decades, and (this was over 10 years ago now) she got a letter from both banks telling her they were closing her accounts. She had to shop for a new banks for ages, then physically take bank drafts (the Euro equivalent of certified checks) with her funds over to the new bank (they wouldn’t even wire the funds to the new bank. She has no idea why.) She hadn’t actually been to the US for many years, and she renounced her US citizenship as quickly as possible after this.

    And if you are a US citizen, or tax-liable resident, don’t even think about withholding the information that you have US tax liabilities from a foreign bank. If you do that you expose them to US sanctions that could cost their company a fortune. They will be enraged if and when they find that out, they will immediately close all your accounts, and are within their rights to charge fees to cover their potential costs in such a fiasco.

    Ahhh . . . the joys of being a citizen of the “exceptional” nation . . .

  15. US citizens trying to live abroad have 2 big issues:

    Yes, I’ve discussed both of those here on this blog already.

    In my travels I have been encountering US expats who have found they have to spend weeks trying to find a bank that will let them open an account, while people from “normal” countries can walk right in and open an account with the usual KYC paperwork.

    Exactly. That’s why I’ll likely need to renounce.

  16. Betcha didn’t know that Tina Turner is Swiss now

    Wow! Very cool. I’ve always had a lot of respect for Tina Turner. Good for her.

  17. Caleb, you wrote:

    I’ve read of most of Neil’s books, though I tried to get through The Truth and wanted to review it, but it was so painful to read (he is such a beta and so needy and so wedded to monogamy) that I just couldn’t do it.

    Honestly, you should give it another try, and so should everyone who reads this blog. I almost bled from my eyes reading it, from sheer frustration and empathic pain, but it was so, so worth it as a cautionary tale.

    (Spoilers) basically, by 3/4 of the book, Neil achieves what You and other Alpha 2.0 men dream to achieve, but then crashes it all in a giant Beta/Spiritual crapstorm and turns worse Beta than he was.

    Its a great tale on how one can shake off the Social Programming, and technically achieve his dreams, but if your inner emotional system had not updated, it means nothing and you end up with nothing.

    All the Alpha 2.0 transformation means jack shit if you do not truly embrace your desire for happiness, and “Truth” is a catastrophic drama of why this is true.

  18. A final note.

    There are a couple of strategic considerations people thinking of renouncing US citizenship need to take into account.

    1) US politicians who have addressed the issue consider renouncers to be ingrates, some have even used language like “parasites” and “traitors.” Some politicians have also stated a belief that the only reason people renounce citizenship is to escape paying “their fair share of taxes” (in these politicians’ minds, there is no other reason anyone would leave “the greatest country on earth,” one that millions of foreigners are trying to get into.)

    What this attitude means is that the US government keeps making it harder and more costly to renounce US citizenship.

    Did you know that before renunciation started to grow exponentially, there was no fee to renounce, and it was done routinely in a few weeks. Then in 2010 a $450 fee was introduced, then in 2014 the fee was raised to $2,350. US consulates have also been following obstructive “work to rule” (foot dragging) practices that slow down processing. Is this intentional? Nobody will say. The minimum time to renounce in Canada is now 1 year. Making a mistake and getting a rejection form back months later can turn renunciation into a multi-year ordeal.

    https://www.theglobeandmail.com/news/politics/delays-costs-mount-for-canadians-renouncing-us-citizenship/article28688026/

    2) Before 2007 there was no Exit Tax for US citizens.The HEART act of 2008 changed all that.

    The upshot- the higher you build up your income and the more assets you accumulate, the closer you come to triggering the US Exit Tax .

    http://easyexpat.blogexpat.com/blog/2011/02/09/heart-act-what-it-costs-to-stop-being-an-american

    Waiting until you have achieved enough success to trigger the US government grabbing a large chunk of it when you renounce your citizenship can cost you big time.

    Think long and hard about this: the trend of the US government to make it harder, slower, and more costly to renounce citizenship will continue to get worse. If you continue to sit around procrastinating while the spider builds its web around you, it is possible to find yourself trapped.

    BTW: Think about whether the US might just stop recognizing any right of renunciation at all.  Are there precedents for this in other countries? Yes. Argentina is one example. You can’t renounce Argentine citizenship.
    Will the jaws of the trap snap shut on US citizens?
    Do you want to wait long enough to find out?
    Here’s Andrew talking about planning strategically around the exit tax: https://www.youtube.com/watch?v=B-SWTT_EJq4

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