There are many cases of Chinese people giving up their U.S. green card citizenship. The increase in taxes on the rich is costly for abandoning their citizenship.

There are many cases of Chinese people giving up their U.S. green card citizenship. Increased taxes on the rich will cost a lot to abandon citizenship China News Service, January 8th According to the US "World Journal" report, in the "U.S....

Accountant and lawyer Tong Zhimin said that the economy has continued to be sluggish after the financial tsunami. Statistics from the Internal Revenue Service show that the middle income of wealthy Americans has dropped by nearly 40% in the past few years from the peak in 2007. With fewer wealthy people, the number of Americans renounced their citizenship dropped to nearly 800 in 2011. In comparison, between 2008 and 2010, the average number of Americans renounced their citizenship each year was nearly 1,500.

Tong Zhimin pointed out that these figures cannot truly reflect the number of people who have abandoned their citizenship, because many people who choose to return home have not completed the "exit tax" declaration requirements. Unless they do not intend to return to the United States, they are required to declare their global income under U.S. tax law, and this type of person has clearly violated the law. But in practice, the IRS may not have the budget to prosecute such offenders.

Accountant Li Xinzhong said that the professional journal Federal Register and the Internal Revenue Service released information on people who abandoned their citizenship every quarter and found that the proportion of people with Chinese surnames was extremely high. However, it is not cost-effective to abandon your citizenship in order to avoid high tax burdens, because you will not be able to obtain the high American gift and inheritance tax exemptions. According to the recently passed bill, the lifetime tax exemption is 5 million yuan for individuals and 10 million yuan for couples. Therefore, if a person who has abandoned his or her citizenship is a wealthy person and intends to donate U.S. assets to his or her children who have settled in the U.S., not only will they not be able to enjoy the aforementioned high tax exemption, but this year, gifts exceeding 14,000 yuan to one child will be subject to a 40% gift tax.

As for the exit tax, also known as the expatriation tax, taxpayers are required to declare Form 1040C to liquidate their global total assets on the day they abandon their citizenship and pay income tax as "market price sales". If the net market value of global assets exceeds NT$2 million, or the average income tax paid per year in the past five years exceeds NT$151,000, income tax must be paid immediately.

The income tax calculation method is to subtract the asset purchase base from the total net asset value, and then subtract the tax exemption amount of 651,000 yuan, and then calculate the tax burden according to whether it is long-term or short-term. If the gains are held for less than one year, they will be taxed at income tax rates. According to the new tax law passed at the beginning of the year, couples with taxable income exceeding 450,000 yuan and individuals with taxable income exceeding 400,000 yuan will face a maximum income tax rate of 39.6%. If the gains are held for more than one year, they are taxed at a 20% gains rate.

Li Xinzhong said that this immediate liquidation method is not limited to citizens. People who have held green cards for at least eight years in the past 15 years are also considered citizens and must liquidate global assets immediately.

In addition, those who abandon their citizenship must fill out Form 2063 to be eligible to apply to the IRS for permission to abandon their citizenship. If you do not have permission to abandon your citizenship and still have a mailing address in the United States, you will still receive a tax filing notice from the IRS and will be deemed to still have the obligation to comply with tax laws. If your assets are lower than the standard for immediate tax payment, you must fill out Form 8854, stating that you have honestly declared income tax in accordance with U.S. tax laws for the past five years and declared overseas accounts, in order to be eligible to apply for a permit to abandon your citizenship. (Wang Shanyan)