Dual Citizenship / Tax questions

Maggie6872 · Jul 13, 2006

Hello,
I am looking to relocate within this year and will pursue the temp residency then permanent residency according to the guidelines. Eventually, I hope that these will result in a dual citizenship (US/Dom) arrangement.

Question 1: At that point after perm residency is obtained, will I obtain a dominican passport and still retain my US passport, so I can travel interchangably using either passport? I travel significantly for work, and on occasion, it would be beneficial for me to travel on a dominican passport in certain countries where a US citizen can be considered a prize in a terrorist situation (eg Colombia, maybe even Venezuela).

My question #2 involves taxes. As I work for a US firm and will be relocating to the DR (continuing to work for the US firm, but from a home office in the DR), what taxes do I pay during the temp residency, and subsequently the permanent residency for my income? US taxes (with federal and state income taxes, as well as social security taken out) or Dom taxes on foreign income-- (so no US FEd or state income taxes---what about social security? (ok, as a US citizen in her mid 30's I doubt that Soc Sec will be there for me, but it's still an issue at 7.65% taken of my salary!) Is there a grace period (i have seen "free 2 years" somewhere on that issue, but not from any reputable source).

I have tried to work with a tax lawyer/accountant in the smallish (pob.40,000) Indiana town that I live in, but no definitive answers have arisen on the issue, despite the hourly invoice I received.. I will start working with a dominican/US lawyer in chicago to get some answers in August after my house hunting trip to Sosua/cab, but am interested if I can get any straight answers from the board; maybe even find someone on the North coast that can advise me that they are doing a similar thing and let me know some of their experiences (good, bad or otherwise). I would also be interested in some advise on how to best structure the transition from a personal financial situation so that I can keep more of my hard earned money to enjoy pina coladas at my villa by the beach.....and no extra payments get made to either government.

Thanks,
Margaret

rellosk · Jul 13, 2006

Maggie6872 said:
Question 1: At that point after perm residency is obtained, will I obtain a dominican passport and still retain my US passport, so I can travel interchangably using either passport? I travel significantly for work, and on occasion, it would be beneficial for me to travel on a dominican passport in certain countries where a US citizen can be considered a prize in a terrorist situation (eg Colombia, maybe even Venezuela).

When you get your permanent residency you will get a cedula, not a passport. You don't get your passport until you become a citizen. Once you get your passport, you can do use whichever passport is the best for the situation.

Maggie6872 said:
My question #2 involves taxes...I have tried to work with a tax lawyer/accountant in the smallish (pob.40,000) Indiana town that I live in, but no definitive answers have arisen on the issue, despite the hourly invoice I received..

I'm surprised that you haven't been able to get answers from your accountant. The rules (at least for Federal Income tax) are fairly clear. Here are the IRS rules. Keep in mind that the exclusion is for roughly $80,000US of income, and that depending on the type of income, you may be required to pay tax in the DR.

I have so answer for you regarding Social Security or State taxes. Although, since you will not be a resident of any state, my guess is that you will not be required to pay any state income tax.

Maggie6872 said:
I would also be interested in some advise on how to best structure the transition from a personal financial situation so that I can keep more of my hard earned money to enjoy pina coladas at my villa by the beach.....and no extra payments get made to either government.

Be careful with this one, especially if someone says they can get you a high interest rate on investments in the DR.

HOWMAR · Jul 13, 2006

Maggie6872 said:
Question 1: At that point after perm residency is obtained, will I obtain a dominican passport and still retain my US passport, so I can travel interchangably using either passport? I travel significantly for work, and on occasion, it would be beneficial for me to travel on a dominican passport in certain countries where a US citizen can be considered a prize in a terrorist situation (eg Colombia, maybe even Venezuela).

You won't be eligable for a Dominican passport until you become a Dominican citizen.

Maggie6872 said:
My question #2 involves taxes. As I work for a US firm and will be relocating to the DR (continuing to work for the US firm, but from a home office in the DR), what taxes do I pay during the temp residency, and subsequently the permanent residency for my income? US taxes (with federal and state income taxes, as well as social security taken out) or Dom taxes on foreign income-- (so no US FEd or state income taxes---what about social security? (ok, as a US citizen in her mid 30's I doubt that Soc Sec will be there for me, but it's still an issue at 7.65% taken of my salary!) Is there a grace period (i have seen "free 2 years" somewhere on that issue, but not from any reputable source).

Worldwide income is taxable for US citizens, but they are given an exemption of about $80,000 for foreign earned income if they reside in the US for 30 days or less in the year. State taxes would vary state to state.

donluis99 · Jul 18, 2006

80,000 tax exemption

Yes it is US$80,000.00 tax exemtion per tax year, if you are ouside of the USA for 365 days. For each day of the first 30 days the exemption for $80G's is reduced by 1/365th.

So for a seven day vacation in the USA, your exemption is 7/365*80G = $1,537 thus 80G - 1,537.00 = an adjusted exemption of $78,466.00

Stay 31 days in the states, it becomes null and void.

Whats cool about this, they give you an option to specify the beginning of the year absent from US soil, such as July 1, 2005 until June 31, 2006, but I do not fully undertand that part in how it relates to your designated tax year as is for most of us 01/01 thru 31/12.

By the way you are going to need Form 2555 non resident, the long version and now they have the EZ version.

G'luck

SPMGIRL · Jul 19, 2006

I Am Currently In The Process Of Obtaining Dual Citizenship Dr/usa. I Was There Last Week And Had All The Necessary Tests Done. The Lawyer Told Me That In 45-60 Days I Will Receive My Cedula And Temporary Residency...in 2 Years Time I Will Be Able To Obtain My Permanent Citizenship And Passport...check Out The Website Ascot Advisory ...they Explain The Whole Process. Spm Girl

BushBaby · Jul 19, 2006

SPMGIRL said:
I Am Currently In The Process Of Obtaining Dual Citizenship Dr/usa. I Was There Last Week And Had All The Necessary Tests Done. The Lawyer Told Me That In 45-60 Days I Will Receive My Cedula And Temporary Residency...in 2 Years Time I Will Be Able To Obtain My Permanent Citizenship And Passport...check Out The Website Ascot Advisory ...they Explain The Whole Process. Spm Girl

Might I suggest you check with a Lawyer in the DR rather than relying on Ascot Advisory - there is NO SUCH THING as Permanent Citizenship. Residencia Difinitivo (Permanent Residency) YES - it lasts two years at a time & has to be renewed, but Permanent Citizenship ..... NO, it is just Citizenship.

IF Mr. Schroeder is refering to the new "Fast-track" system introduced recently, please be very wary as signing up to this could create problems for you in the future if you prefer to keep a LOW profile here!!

The LAW states (unless I am mistaken) that one must hold Residencia Difinitivo for 3 years before being allowed to apply for Citizenship. SOME lawyers will start the process after they have obtained Residecia Difinitivo for you, but the process normally takes 12 months or so.

I am NOT a legal expert, this is only my interpretation on the law here. PLEASE check thoroughly with someone who KNOWS the whole procedure of imigracion requirements here. ~ Grahame.

mountainfrog · Jul 19, 2006

Dominican Passport

SPMGIRL said:
I Am Currently In The Process Of Obtaining Dual Citizenship Dr/usa...in 2 Years Time I Will Be Able To Obtain My Permanent Citizenship And Passport..

Although I understand that certain people long to become a member of "paradise", I fail to grasp what advantages a Dominican passport would have for an expatriate.
In my view he/she would continue to be treated as a foreigner/gringo.
Well, one could (in fact would have to) vote....
Any other benefits?

m'frog

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