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Which Countries Impose Citizenship-Based Taxation?

The US is the only industrialized nation that taxes its citizens who live in other countries. The only other country that practices citizenship-based taxation is Eritrea. Many US citizens who live in other countries must pay income tax to the United States as well as to the countries where they reside.

More about citizenship-based taxation:

  • US citizens who pay taxes to foreign governments can claim some or all of that money as tax credits or itemized deductions on their US taxes.

  • Some US citizens renounce their citizenship because they want to no longer pay US income taxes.

  • US citizens must report any bank accounts that contain more than $10,000 US Dollars to the federal government.

Discussion Comments

By anon335666 — On May 22, 2013

Due to variations in currency exchange rates, citizenship based taxation results in US citizens having "phantom income". It's not real income. In fact, it can even be a loss, but because the value of the US dollar varies in comparison to the US citizen's working currency, it can look like income exists when there was no income.

In these cases, the IRS wants taxes paid on this phantom income, and there are no foreign taxes to credit against it.

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