Royal wedding = royal tax pain, international tax issues

Your Guide to State, Local, Federal, Estate + International Taxation

royal, royal wedding, Prince Harry, Meghan Markle, international taxMy morning routine typically includes tuning into the Dan Patrick show because it’s a sports talk show and I’m a huge sports fan. I was especially excited to tune in this morning as the Phoenix Suns won the NBA Lottery and will select first in the June draft. In addition to sports, Dan Patrick will discuss pop culture, whether it’s music, movies or other current relevant topics. This morning was no exception – the royal wedding was discussed. This typically is just noise in the background for me, but apparently the wedding between Prince Harry and Meghan Markle takes place on May 19. Dan brought up a topic that piqued my curiosity. As Meghan Markle is from the U.S., will she become a dual citizen? As a tax professional and one that occasionally deals with international tax issues, dual citizenship is a term that presents some complex tax issues.

Meghan Markle intends to become a U.K. citizen and even though she is marrying into royalty, she must go through the same process as everyone else. Each country is different for gaining citizenship, but once that’s achieved, the next issue that comes up are the tax consequences. If Meghan Markle does not give up her U.S. citizenship, she will have to continue to file taxes in the U.S. The U.S. taxes citizens even when they don’t actually live in the U.S. As a dual citizen, Meghan would need a tax professional in the U.K and in the U.S. to properly report items of income, deductions and credits. The U.S. will also require additional international reporting forms, such as an FBAR, which reports foreign bank account information. There is also a Form 8938, which is used to report specific foreign financial assets. These forms all go to the Department of the Treasury. If I were on the receiving end, it would be interesting to get a glimpse of the Royal Family’s wealth.

The more likely scenario is that Meghan Markle will renounce her U.S. citizenship. In that case, she will have to pay an exit tax. If she has any pension accounts, there will be a deemed taxation on those. Also, there would be severe restrictions on future time spent in the U.S. In the end, she may end up paying more tax in the U.K.

So, as you can see, deciding on becoming a dual citizen or to apply/renounce citizenship brings many tax complications. The U.S. may lose Meghan Markle to the U.K., but the U.S. got David Beckham and a Spice Girl a few years back so not a bad trade off.

Kelly Lynch, CPA