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What is an Expatriate?
An expatriate, or Ex-Pat, refers to an individual residing in a country different from his or her country of citizenship, usually temporarily and for the purpose of work. An expatriate can also be someone who relinquished citizenship in their home country to become another country's citizen.
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What is an Expatriation Tax?
Someone who already renounced their home country's citizenship and migrates to another is also termed an expatriate for the purpose of tax. The expatriate is mandated to pay an exit tax, also referred to as expatriation tax.
According to the Internal Revenue Service (IRS), the provisions of expatriation tax apply to U.S. citizens who already renounced their citizenship as well as long-term residents who already terminated their residency mainly because of tax if one of the major reasons of the action is U.S. tax evasion. This emigration tax applies to people who:
- Possessing a net worth of at least $2 million on the expatriation date or date of residency termination
- Have an average annual net income tax liability which is greater than $162,000 (as of 2017) during the 5 years which would end before the date of residency termination or expatriation.
- Don't (or can't) demonstrate five years of U.S. tax compliance for the 5 years before the date of residency termination or expatriation.