How to get German Citizenship and retain (dual) US Citizenship

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I'm aware that my situation sounds bizarre and unbelievable, which is why I will likely be pursuing my case in administrative court. but I am nervous that circumstances will change in the meantime (like the State Department will drop the amount for renouncing down to $500 again) and that this opportunity will go away. I want as many family members with dual citizenship as possible, even if it doesn't include me. I'll take what I can get for the time being.

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1 hour ago, Berlinexpatnine said:

I'm aware that my situation sounds bizarre and unbelievable, which is why I will likely be pursuing my case in administrative court. but I am nervous that circumstances will change in the meantime (like the State Department will drop the amount for renouncing down to $500 again) and that this opportunity will go away. I want as many family members with dual citizenship as possible, even if it doesn't include me. I'll take what I can get for the time being.

Not bizarre- as we have no idea what the whole family status is , and what are your real issues.  

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It's actually about a simple as I've described it – in Baden-Württemberg, they decided that they would split the income of the primary breadwinner across the entire family in order to make a decision as to whether there was actually a hardship involved. This involves calculating exactly how much each dependent would be owed by the primary breadwinner in order to arrive at the amount of income that is available to each dependent for living expenses.

 

In Berlin, they treat every family member separately, even if it is a joint application. So the primary breadwinner is almost always seen as earning too much money and therefore not subject to a hardship, since no family could survive unless the primary breadwinner was earning more than the hardship limit. This logic then gives you multiple dependents who all qualify for dual citizenship and one primary breadwinner who is told that they earn too much to qualify for dual citizenship, even though the actual money available to them is severely reduced by what they theoretically owe to their dependents.

 

I actually believe I would win in administrative court, but I'm only going to go down that route if I know that I won't be holding up my family's applications for years while the issue is sorted out. It is also possible that I would lose in administrative court – since it might just be within the decision-making authority of Berlin politicians to arrive at such an arrangement – but I don't think that this logic would survive if appealed. They would likely have to decide whether Berlin's or Baden-Württemberg's approach was the correct one, and I really think Baden-Württemberg’s approach makes more sense.

 

 

 

 

 

 

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6 hours ago, Berlinexpatnine said:

By the way, I've been getting some private messages that the issue might be the amount in the IRA, that the really bad financial consequences for giving up US citizenship don't kick in until you have in excess of 2,000,000 in assets.

Totally false. I have an IRA, far smaller than $2 Million. The IRA will be harshly taxed as a German-only. It the tax exceeds a few months of your income,  it is a valid hardship

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2 hours ago, Berlinexpatnine said:

 

 

Quote

 

In Berlin, they treat every family member separately, even if it is a joint application. So the primary breadwinner is almost always seen as earning too much money and therefore not subject to a hardship, since no family could survive unless the primary breadwinner was earning more than the hardship limit. This logic then gives you multiple dependents who all qualify for dual citizenship and one primary breadwinner who is told that they earn too much to qualify for dual citizenship, even though the actual money available to them is severely reduced by what they theoretically owe to their dependents.

 

 

Although I cannot say anything about Berlin first hand, this seems improbable. Warren Buffet or Jeff Bezos could come with their kids, the kids all get dual citizenship as they have no income - and the rich guy "only" remains American? I have been through the process in Hessen but have contacts who have applied all over Germany and no one has had that experience. Theoretically all Bundesländer need to follow the same rules with minor deviations as to what can be considered.

 

2 hours ago, Berlinexpatnine said:

 

 

 

 

 

 

7 hours ago, Berlinexpatnine said:

By the way, I've been getting some private messages that the issue might be the amount in the IRA, that the really bad financial consequences for giving up US citizenship don't kick in until you have in excess of 2,000,000 in assets.

Totally false. I have an IRA, far smaller than $2 Million. The IRA will be harshly taxed as a German-only. It the tax exceeds a few months of your income,  it is a valid hardship

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I've been talking to my lawyer on and off for a year now, and it's pretty much decided that dual citizenship will not be offered to me because I earn too much money (while all my dependents will be getting dual citizenship). Like I said, it is a bizarre decision that makes no sense, but I'm not sure that Berlin is known for good governance.

I think I might approach one of these law firms specializing in renouncing your citizenship and get them to write a letter describing the bad things that will happen in regard to my IRA. I can't believe my CPA dropped the ball this badly, but maybe I asked the question in the wrong way. On the other hand, I think I could still get dual citizenship if I just pushed harder against this absurd decision that I earn too much (and what I owe to my dependents is not taken into consideration). But like I said, I'm happy now just to get dual citizenship for my dependents.

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6 hours ago, Berlinexpatnine said:

I'm aware that my situation sounds bizarre and unbelievable

 

I found it all very confusing because you kept talking around your actual issue.

 

4 hours ago, Berlinexpatnine said:

It's actually about a simple as I've described it – in Baden-Württemberg, they decided that they would split the income of the primary breadwinner across the entire family in order to make a decision as to whether there was actually a hardship involved. This involves calculating exactly how much each dependent would be owed by the primary breadwinner in order to arrive at the amount of income that is available to each dependent for living expenses.

 

In Berlin, they treat every family member separately, even if it is a joint application. So the primary breadwinner is almost always seen as earning too much money and therefore not subject to a hardship, since no family could survive unless the primary breadwinner was earning more than the hardship limit. This logic then gives you multiple dependents who all qualify for dual citizenship and one primary breadwinner who is told that they earn too much to qualify for dual citizenship, even though the actual money available to them is severely reduced by what they theoretically owe to their dependents.

 

Now I have finally understood your problem. 

 

I would highly recommend posting your question on how the income of the primary earner should be divided among various family members when applying for citizenship with HvM on info4alien. IIRC it is not covered directly in the StAG, but rather many EBH apply the formula set for another purpose analogously to citizenship. 

 

BTW, HvM = Hinnahme von Mehrstaatigkeit (what you refer to as dual citizenship) 

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Thanks. The lawyer has put all possible arguments on behalf, and I think the problem for now is that Berlin has a bad policy. It will only be resolved if and when I take my case to administrative court, since the Bezirksamt already told my lawyer that they are denying my request.

I'm not sure exactly when I will bring up the IRA issue, but that gives me hope for a chance to make dual citizenship work at some point in the future. It doesn't sound like that problem with IRAs will ever go away, so even if the State Department makes it cheap to renounce citizenship or if I never manage to convince them that my income is of just the right level to allow for dual citizenship, it will still have a terrible effect on my IRA accounts to give up US citizenship -- that seems to be the best way to argue hardship.

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I can only second engelchen's advice to clearly state your issue (I also didn't really get it until your post comparing BW to Berlin by the way) on info4alien. There are several insiders contributing to that forum. 

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Like I said, it was already clear to me where my problem was with the income issue; my lawyer argued that I qualified for dual citizenship under the previously applied standard of Baden-Württemberg, and Berlin’s answer was “This isn't Baden-Württemberg" (not surprisingly). I will soon get written confirmation of that decision.

I was actually only posting to get more info about the IRA issue, and I can only say that I wish I had posted here about it two years ago rather than asking my CPA. He may have just misunderstood my question, but the result is that I seem to have squandered my chance to get dual citizenship right away.

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I actually just dug up the correspondence with my CPA. I had mentioned that I had a variety of IRA accounts (401k, 403b, Roth), and his response was:

 

"Expatriating would not have an adverse effect on your pension account- such as triggering a taxable event."

 

I'm not sure why he would have said that if it wasn't true, but believe me, I want to believe the people posting the opposing point of view on this board are the ones who are right.

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And let me make sure I am understanding correctly. If I renounce citizenship (and leave the accounts open, because I am not forced to close them), I immediately have to pay the deferred taxes on the income contributed to the various IRA accounts AND I have to pay the taxes on any gains in value. And in addition to the immediate loss of this money, I would also lose the benefit of further growing my account based on the amounts withdrawn to immediately pay the tax?

 

The amounts we are talking about or just a few hundred thousand dollars total in all the accounts, with around half of it contributed and half of it through gains in value.

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I've been looking around on the Internet and found this page: https://www.greenbacktaxservices.com/blog/article-renouncing-and-retiring-with-ease/

 

Looking through that, I seem to meet all the requirements for having no tax liability at all upon renunciation, but it seems like a person might immediately lose their right to have an IRA because the companies can't actually serve a non-citizen alien living outside of the US.

In any case, I'm not exactly sure how I could describe how I would suffer from renunciation financially so that I could describe it in a letter to the Bezirksamt and make the argument properly for being allowed to have dual citizenship. Exactly where do I pay more for having renounced (in regard to a modest IRA)? 

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9 hours ago, Berlinexpatnine said:

 

 

Looking through that, I seem to meet all the requirements for having no tax liability at all upon renunciation, but it seems like a person might immediately lose their right to have an IRA because the companies can't actually serve a non-citizen alien living outside of the US.

In any case, I'm not exactly sure how I could describe how I would suffer from renunciation financially so that I could describe it in a letter to the Bezirksamt and make the argument properly for being allowed to have dual citizenship. Exactly where do I pay more for having renounced (in regard to a modest IRA)? 

 

Two Points -

Without USA citizenship you can keep the IRA - but as you withdraw funds you will be taxed as a foreigner, which used to be a flat 30% (haven't checked lately). As a USA citizen you will pay based on your income which is likely small during retirement. If your IRA is stock based, many companies will not let you purchase additional shares. (that happened to me just by declaring a foreign residence - with retained USA citizenship).

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Ok, the argument is that my IRA will be taxed at 30% rather than 24%. For $250,000 in IRA assets, that would mean I would owe $15,000 more in taxes on my IRA accounts by renouncing my citizenship. I guess they might want to have that all verified and confirmed, with a statement of assumptions, but I guess it seems straightforward enough.

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6 hours ago, Berlinexpatnine said:

Ok, the argument is that my IRA will be taxed at 30% rather than 24%. For $250,000 in IRA assets, that would mean I would owe $15,000 more in taxes on my IRA accounts by renouncing my citizenship. I guess they might want to have that all verified and confirmed, with a statement of assumptions, but I guess it seems straightforward enough.

 

I don't think you get the point. Your IRA isn't taxed at all unless you pull the funds out. Don't pull the funds out. If you leave your IRA to an American in your will - instead of zero tax - it is 30% tax. If you aren't currently withdrawing from your IRA you aren't paying 24% in taxes.
Additionally,  If it is in stocks, the dividends, etc. (as a non-USA citizen) would get taxed, and, you likely cannot reinvest dividends if you have  a DRIP.

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I know nothing happens until withdrawal, but I need to arrive at some quantifiable damage being caused to me through renunciation. I think I could probably approach a CPA or tax lawyer to create such a statement, but I want to know what claim they are going to make. Right now my understanding is that upon final withdrawal of the IRA money (at some point after renunciation), the tax rate would be substantially higher, increasing from the 24% marginal rate to the 30% flat rate, and the total additional tax would be around $15,000 for the stated flat amount. I'm not sure if you were saying that I would pay 0 tax upon withdrawal without renunciation -- it seems like I would have to pay normal income tax on it (at 24% on the margin). Except for ROTH plans, of course.

 

The IRA would also lose some or all of its flexibility upon renunciation, but that is harder to quantify. I would prefer to present a number that could be instantly understood and compared with the hardship standard, but perhaps that approach is wrong.

 

I guess I should probably just go to a renunciation lawyer (even though I am looking to NOT renounce), but I know I would spend a few thousand dollars on that before I even knew if it was necessary or would bring success. 

 

Is there someone on the board who already crafted successful language that explains the hardship in regard to an IRA? This would be language that convinced the immigration authorities that renunciation would cause hardship due to IRA problems.

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By the way, I have since followed up with my CPA, and it seems pretty clear that I cannot make the argument that my IRA problems will cause me a hardship. 

 

I think that people are either facing a different problem than me because they have more than $2,000,000 in assets, which makes them be subjected to a different set of rules, or they are mixing up residency restrictions on their IRAs with citizenship restrictions. I will be taxed on my IRA from Germany, not the US, when I begin drawing from it, so the US tax rate on it will be 0% whether I am a US citizen or not. They may restrict my trading in the IRA in the meantime, but that has far more to do with my residency in Germany than my citizenship. I'm pretty sure that if I could no longer maintain a US address, they would have already contacted me to tell me that I was not permitted to make any further trades.

 

In any case, more power to you if you managed to use IRA hardship as the basis for your dual citizenship claim, but I'm not convinced that a case can really be made on this basis unless you have millions in assets. 

 

Again, I would love to be proven wrong. But I'm not sure it is in any way sufficient to prove this point if you simply say that you were successful with this approach, because I think the German authorities can get pretty confused when trying to understand US tax law. 

 

I agree in spirit that bad things will happen to my ability to use my IRA if I give up citizenship, but only because I will be forced to tell my IRA provider that I live in Germany. I don't think that is really a sufficient argument for showing hardship from citizenship renunciation.

 

Please, tell me I am wrong!

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Unfortunately nothing to add. I’m also at a total loss and waiting on baited breath to hear something I could use as well. It really seems impossible for Joe Normal with a middle income and under 2mil in assets to craft an argument that would allow you to keep your passport. It’s seriously disheartening...

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