Some Germans enjoy a privilege. They either have a green card for the USA, i.e. a permanent residence and work permit. Or they even have American citizenship in addition to German citizenship, which makes this possible as well as uncomplicated entry. However, both are associated with certain tax obligations.
Global income taxation: Tax obligations for US citizens and green card holders
This is because the USA taxes its citizens on the basis of their global income, regardless of where they live - even if they have no income or assets in the USA. This means that Germans with a green card or additional US citizenship who do not live in the USA must expect to pay substantial taxes in some cases, despite the double taxation agreement. But even without a tax burden, the effort involved in preparing US tax returns should not be underestimated. Extensive declaration and disclosure obligations relating to worldwide assets and income mean that privileged Germans are considering giving up their US citizenship or green card. But there is a lot to consider here. Anyone wishing to renounce their US citizenship or green card must first have fulfilled their tax obligations for the past five years. This also applies to people who live and work abroad. Anyone who has neglected this tax obligation must expect to pay high penalties.
Andreas Peter
Senior Manager, Tax
KPMG AG Wirtschaftsprüfungsgesellschaft
Expatriation tax: exit tax when giving up US citizenship
The expatriation tax becomes due when citizenship is surrendered. This expatriation tax is levied on the entire assets of the person concerned. However, there are exceptions, such as holding another citizenship from birth or renouncing US citizenship before the 18th birthday. The calculation of the expatriation tax is based on net assets in dollars and applies to all assets. Green card holders may also be affected. The final renunciation of US citizenship also includes the submission of a final US tax return. US citizenship or a green card therefore have both positive and negative effects. Their renunciation must be carefully considered.