Annie Legate-Wolfe

What do you, the United States of America, and Eritrea have in common? If one of your parents was born in either of these countries, more than you may have thought.

Eritrea and the USA are the only two nations in the world that confer citizenship automatically based on the citizenship of one of the child’s parents. For example, if one of your parents was born in the USA, or your grandparent was and your parent spent over 4 years living there as an adult, you may be an American too.

What could this mean for you? With respect to taxation, the United States are Eritrea are also the only two countries that will tax your international income based on your citizenship, even if you’ve never earned a cent there. This means your TFSA and RESP, which some countries see as “trusts” and not tax-free saving accounts, don’t confer the same benefits to you as they do your fellow Canadian-only citizens. Any income derived from these sources would be considered income from a foreign trust, and therefore taxable income in the foreign country.

For the many Canadian-Americans north of the border, the proposed Tax Fairness for Americans Abroad Act of 2018 is looking to update these rules. While you would still be considered an American by birth, if the Bill is passed, you wouldn’t be exposed to the same levels of taxation. So long as you were compliant with filing your taxes in the USA in the 3 years prior, are taxed regularly on your Canadian income, and lived in Canada 330 or more days in a taxable year, you could be excluded from the USA’s international taxation requirements.

Snowbirds should note that this is very different from the residency rules that apply when you live in a country other than Canada for over 182 days. The proposed Bill doesn’t change the residency rules, and would only further limit the amount of time you could stay in the USA without being subject to income tax as an American.

There is more to citizenship than just taxes, however. As a U.S. citizen, you are entitled to live and work in the country, obtain a passport, travel on their foreign visas, seek assistance from their embassies, and use all of the many benefits that come with foreign citizenship.

If you are curious about your heritage or think you may have international tax obligations, consider spending an evening searching an ancestry database. You may find you can add a new title to your name: “dual citizen”.


Annie Legate-Wolfe completed her law degree at Western University. She also an active volunteer in her community and lends her time and talents to support such initiatives as Habitat for Humanity and Goodwill. Connect with Annie on LinkedIn.

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