CHAPTER IX — SECOND PASSPORT, FOREIGN RESIDENCY, OFFSHORE BANKING
Second Passport, Foreign Residency, Offshore Banking
I titled this chapter so that you can do a keyword search on the Internet using the exact title or variations of it. You will find websites such as the Dollar Vigilante, and I recommended this one in particular.
Did you know that a list of countries do not tax international business companies provided that the profits they earn are outside the country in which they are organized?
Unless you already have a second passport in hand, it is often not necessary or desirable to establish legal residency in a country that you would like to spend time in.
This is because becoming a legal resident entails getting sucked into a country’s tax system, something that is obviously better to avoid if possible.
The smarter option is usually to just leave every 90 days and renew a tourist visa while not spending more than six months per year in any particular country. (Most countries will consider you a tax resident if you spend more than six months per year there.)
It’s much better to be treated as a valued guest to be courted (a tourist) than a cow to be milked (a legal resident).
Sometimes though, it is advantageous to become a legal resident of a country, particularly if you intend to become naturalized and obtain a second passport.
(Note: it is critically important to obtain the political diversification benefits that come from a second passport. See more here and how to avoid common scams here)
Most countries will naturalize legal residents after a certain number of years. However the conditions to initially obtain, and then retain, permanent residency status vary widely across countries.
As Doug Casey mentioned in a recent edition of The Casey Report, one of the easiest countries in the world to obtain permanent residency status is Panama.
A law was passed in 2012 (Executive Order 343) to encourage certain foreign citizens to come to Panama.
It makes obtaining permanent residency in Panama easy for citizens of 48 specific countries that “maintain friendly, professional, economic, and investment relationships with the Republic of Panama.”
This program is often referred to as the “Specific Countries” or “Friendly Countries” program.
Eligible countries include the USA, Canada, and many European countries. For a complete list, click here.
It requires one simple application and a deposit of at least $5,000 USD in a local bank account, plus an additional sum of $2,000 USD for each dependent. Of course if you are an American citizen it will be a headache to actually open a bank account. But it is certainly possible.
Applicants will also have to show proof of some meaningful economic activity in Panama, such as ownership of a Panamanian corporation (new or existing), a purchase of income-producing real estate, or an employment contract from a business in Panama.
Incorporating a new LLC in Panama in order to qualify is not particularly difficult or expensive, though the paperwork must be completed before the residency application can begin. This is an especially attractive option if you have an Internet-based business or a mobile source of income.
There is, of course, discretion by the Panamanian authorities in determining if your situation qualities for “meaningful economic activity.” But from what I have heard it is not difficult to get approved.
Once you have obtained permanent residency status, you become eligible to eventually obtain full citizenship and a Panamanian passport after five years.
The Panamanian government also has discretion on the naturalization process. If you don’t spend any significant time in the country during the five years they may decide not to grant you citizenship. That said, they do not currently appear to be strictly counting the number of days you are in-country.
I’d recommend that you consult with a local attorney to better determine how much time in the country is required to maintain permanent residency status with an eye towards naturalization after five years.
The attorneys I spoke with said that a visit once every two years is the minimum needed to maintain residency.
In any case, it would be a good idea to establish demonstrable personal and business ties to Panama. Tomorrow’s government may decide to interpret things more stringently.
The “Friendly Countries” program in Panama offers one of the easiest ways to obtain permanent residency—with a path to a second passport—available in any country today.
Panama has an enjoyable climate and a dynamic economy. Panama City is the largest offshore and regional banking center in Latin America. The country really has a lot to offer.
Whether you are looking to obtain a second passport, form an offshore company, purchase foreign real estate, open an offshore bank account, retire abroad, store physical precious metals, or internationalize your medical care choices, Panama has relatively attractive options.
Things can change quickly. New options emerge, while others disappear. This is why it’s so important to have the most up-to-date and accurate information possible. That’s where International Man comes in. Keep up with the latest on obtaining residency and citizenship in Panama, as well as other attractive options that arise, by signing up here for our free email newsletter. You’ll also get access to other stuff like Doug Casey’s very popular special report Getting Out of Dodge.
For those interested in pursuing Panama as a choice for a second passport there is an important clarification. It is true that on paper Panama does not recognize dual citizenship and requires you to renounce your previous citizenship in order to be naturalized. However, this does not mean you have to really give up your existing citizenship.
The Panamanian nationality law requires an oath of renunciation of former citizenship as a condition of naturalization. However, currently the US court system interprets this oath as “non-meaningful” and therefore it will not result in the loss of US citizenship, unless the US citizen renounces their citizenship directly to the US State Department, which will then result in loss of US nationality. Likewise, it is not necessary to renounce US citizenship to the US State Department to become naturalized in Panama.
There are quite a number of people that are interested in hearing more about offshore banking, tax free bank accounts, and related matters. The problem really is a lack of information on the Subject. Here are some of the facts and also some answers to the mostly commonly asked questions. . . .
A good number people are under the impression that such an idea is only for the very wealthy, CIA super spy types, or even criminals. The fact is that most people who do establish a bank account offshore are not any of these things. They are average people just like you, that either want to take advantage of investment opportunities not available in their home country, or want to safeguard their savings by having it safely tucked away someplace else. Regardless of what the motivations are, it is not illegal for you to have a banking or investment account abroad. This is a key and very important point, which we will discuss a bit further later on. Also, while some governments do not like to see their own citizens with funds, shall we say, out of reach – the only thing of concern is of course that such citizens pay any applicable taxes on the earnings (more of this later on as well).
First and foremost, what is an offshore bank or offshore account? Most people affiliate the term offshore banking with a bank located in some idyllic palm tree lined tropical tax haven. The truth of the matter is, the term offshore really means anywhere outside of where you are living or residing right now. If you are an American living in the United States, and happen to have a bank account in Canada – then it could be said that the Canadian Bank Account is offshore for you. Similarly the same case is true with a German citizen, living in Germany, but banking in the United States as well. This brings us to a very interesting point. Many countries have policies, laws or regulations in place that allow for bank account interest to be tax-free either for its own citizens, foreigners only or maybe both. In fact, there are many, many countries where this is true and it makes perfect sense. The United States, as just one example, allows for foreigners (non US citizens) to enjoy no or zero local taxation on any capital gains resulting from stock investments via a US brokerage account. The idea is to encourage foreigners to invest in the US stock market. However, if you are an American Citizen, then you might feel this is very unfair since you have to pay taxes for the same thing – and the foreigner pays nothing. On the other hand, you can be the foreigner someplace else and get the same benefits.
Exploring this idea a bit further, the first group of places you might consider are some of the so-called traditional English speaking tax havens in Europe or the Caribbean, such as the Isle of Man, Channel Islands, Bahamas, Cayman Islands, and so on. However, the fact of the matter is you should probably NOT focus on some of these places. Some of these jurisdictions, such as the Bahamas, have already buckled under pressure from the OECD and are not advantageous jurisdictions any longer. Banks, Investment Firms or Life Insurance companies located elsewhere, while perhaps making no changes to current legislation, such as the Isle of Man using just one example, may simply refuse to accept you as a client simply because you are a US or EU country resident (or citizen). Stated another way, a reporter once asked the famous bank robber, named Willy Sutton, why he robbed banks. Willy Sutton promptly replied: Because that is where the money is. Similarly, the OECD has gone after all the traditional tax haven locations because they think anyone with an offshore account must have one there, in one of these places. US tax authorities have of course focused attacks on places such as the Bahamas, Bermuda and other English speaking jurisdictions located fairly close to the US mainland, because they assume – that is where the money is.
THE WHOLE WORLD IS A TAX HAVEN – FOR YOU
As we already have mentioned, there are a large number of countries that allow foreigners to bank or invest in their country – on a tax-free basis. Every country is really in competition with each other to find foreign investment capital, and making this attractive certainly makes sense. The OECD (Organization for Economic Development) and the WTO (World Trade Organization) claim they are trying to root out what they claim is unfair tax competition and harmful trade practices. The bottom line or simple translation is, they want to kill the competition. It is very ironic though, that one of the main supporters of these organizations, the United States, has not taken away their OWN tax incentives for foreigners to invest in the US, but of course they want every else to do away with such things. They even went so far to mix it up with the European Union, in essence asking the Europeans to act as tax collectors and reporting agents in terms of US citizens banking or investing with financial institutions in Europe. The Europeans said sure, and now you can do the same for us in terms of Europeans that have all those tax-free brokerage accounts inside the US. The US politicians said: Well, Umm, we do not know, Umm, Ah, Umm, we have to get back to you. And so it was left. Then they started chasing a few Arabs hiding out in the mountains of Afghanistan. Then they brought up the subject again, although now the reason is catching bad guys with bank accounts and not taxes. So, the reason for these pressures have changed, but the goal is still the same – make it as difficult and cumbersome as possible for citizens to have accounts elsewhere (outside the home country).
Anyway, there are many, many countries you would never even think of as being a great place to bank or invest – yet they are out there just the same. Plus, these places are not on the radar screen, which is probably why they have not come under attack. So, the idea is to forget about the so-called tax haven countries or the nations on the OECD black list (of very naughty countries that have no taxes, or very low taxes). For obvious reasons, I will not mention them all, but for example, have you ever thought about banking in Hong Kong? How about the Czech Republic or Taiwan? How about Bahrain or Brazil? Even one of the EU countries can be a great place providing you are not a resident from one of the EU member nations. In fact, some of the countries with the highest income tax rates in the world for their own citizens often enough provide tax-free banking policies for foreign owned accounts.
WHY AN OFFSHORE BANK ACCOUNT?
You do not need to be a millionaire, in order to be treated like one. Many banks will allow you to establish a savings account in US Dollars for anywhere from US$300 up to $2,500 or more (it all depends upon the bank). In addition, you will gain access to three things I am sure you do not have at the moment: Privacy, the ability to enjoy bank account interest free from local taxation, and personal attention plus banking services beyond what you have at the moment. Today’s banking industry is highly regulated yet private, physically far away yet very accessible via e-mail – fax or telephone, attentive yet discreet about your affairs. In addition, access to your money is always possible with a bank or Visa debit card that is accepted worldwide. However, the ability to have accounts in different currencies, or the ability to access investments not available at home is not the only reason some people make seek out an offshore, or non-local account.
Asset protection is of course the other motivation. With this said, there as those that claim the offshore banking industry caters to criminals, be they political or otherwise. For sure, there certainly may be these types of people setting up such accounts or investments. However, it is not the vast majority and of course no financial institution wants to willingly get mixed up with a client that can cause problems down the road. So, this argument attacking issues such as zero taxation or zero reporting (banking privacy) is sort of like attacking everyone that has a cell phone simply because some criminals have them also. In other words, the logic of the argument is, all criminals use cell phones to conduct business therefore anyone with a cell phone must be a criminal – no? This logic is of course ridiculous, but just the same it is the theory put forth to the general public in order to sell the idea of a crack down.
In any event, the truth of the matter is, many people might establish accounts abroad to safeguard against potential local threats in their own home country – war, civil uprising, government confiscation, lawsuits and so on. What many governments do not like it when citizens have the ability to move funds to another country, as it can make it even that much more difficult to confiscate it or track it. In terms of tax collection it is much of the same thing. Which is to say, how many governments are willing to report accounts or assets owned by foreigners inside their own country to another government? How many governments are willing to act as a tax collection agent or reporting agent for another government? There is no incentive for this. Plus, in some cases, bank account interest may be tax-free in a particular country, which translates into the fact that such accounts are not even reported to the local government where the account is located, never mind anyone or anywhere else. In other cases, banking privacy might be codified into law, making the reporting illegal. However, once again using the United State as one example of a country leading the charge against banking privacy issues and offshore banking in other nations, it is very ironic that many foreigners keep assets inside the US for the very reasons we just mentioned. In addition, in many cases, the US government has refused to turn over assets or even allow the reporting of such assets to other governments, so the hypocrisy is quite blatant (and ironic).
Establishing an Offshore Bank Account
Banks if many offshore jurisdictions do offer a number of services that you are currently accustomed to, plus some additional services as well. For those investors seeking time deposits in foreign currencies, foreign exchange, and the personal attention of a bank officer that may be in a position to help with more than just banking ~ then an offshore banking relationship is ideal. Contrary to popular belief, such services are not always expensive either. Competition has meant that more services than ever are available to banking clients, with fees that are highly competitive.
Most offshore banks will look for references from your existing bank in order to establish a relationship. In addition, since your relationship will most likely be a very personal one, many require that you visit the bank to sign signature cards and other account forms. Some banks may permit an account to be established by mail, but the majority have taken the cautious route after being forced to due so under pressures from the US regarding money laundering. The truth of the matter is, this pressure seems to be more of a tactic to make it more difficult for the average person to move their funds offshore (with regards to taxes) than to combat illegal activity. Regardless, this is the current situation for many banks in both tax haven and non tax haven countries. Since the majority of individuals are honest and hard working people, it is hard to imagine that the goal of any client is geared in this direction. This is why we say, its about taxes, not money laundering.
Even though it has become more cumbersome to establish an offshore bank account, than it was in the past, it is not really as difficult as you may think. Also, in conjunction with an offshore foundation ~ trust or IBC structure, it is a must if you want true asset protection and tax advantages. The truth is, like any other banking relationship, an application form (and copies of your incorporation documents) is really all it takes.
How Do I Know that My Money is Safe?
This is probably the number one question that we hear, and quite frankly an understandable one. For US citizens especially, this concept of FDIC insurance is one that makes them fearful of banking in another country or jurisdiction. In reality, most modern banking jurisdictions have very strict and stringent regulations in place to ensure liquidity, and the safety of depositors. These regulations or systems may be different than what exists where you are doing your banking now, but that does not mean that the protection is less. As a case in point with both the Dominican Republic and Panama (two banking markets we know the best), a central banking system exists to regulate local banking and to ensure stringent accounting practices. In both cases, a banking license is not so easy to obtain. Banks must prove certain reserve or capital requirements before they can even open their doors to the public. In addition, special reserve deposits are maintained with the central bank at all times.
This is often in contrast to some other jurisdictions, where Brass Plate banks may be permitted. The meaning of a Brass Plate bank is, a bank that perhaps is legitimate, but is operating from an obscure location with just a few employees and a bare minimum of operating capital. This is the type of bank most people are fearful of, and is also the type of bank that has caused problems for investors in the past. It is ironic, but the majority of the problems of this kind have all seemed to have surfaced in English speaking – Common Law jurisdictions. It is quite interesting that some countries whereby people are most afraid to invest (I am thinking about Latin America) often have stricter banking regulations and requirements than the English speaking countries in the same region. Go figure.
How do you know the difference?
For starters, we suggest you look for a local bank that is operating as a regular full service bank. In other words, choose a bank that has local depositors and not just foreign clients. Since in some jurisdictions, bankers actually go to jail if they mismanage customer or the bank’s funds, you can be well assured that a bank, which is serving the locals, is one that will be well scrutinized. This is especially true if local businessmen, and government officials, have their money on deposit. Local depositors and businessmen are no less concerned about the safety of their money than you are. So, just because the front door to a bank located offshore does not say FDIC on the window, it does not mean it is unsound or unregulated. Often enough, it is more secure if it is located in a country that takes regulatory responsibilities seriously.
I contrast this to the US savings & loan scandal from a few years back, which had taken place. Many of the bankers ended up playing golf, with the US tax payer footing the bill for the bail out. Depositors were paid, some after two years of waiting and plenty of paper work (and after the government raised additional account insurance money from the sale of bonds to cover the huge short fall in the old FSLIC – The Federal Savings & Loan Insurance Corp., the sister insurance company to the FDIC). A safety net for depositors is only as good as the material it is made from – or the people managing it.
We look for, and suggest, local full service or commercial banks to our clients that meet certain standards. In truth, size is not as important as is the quality of management, accounting practices and services. There are a number of very large banks, or banks with that seem to be good because they have many branch offices, that we in fact stay away from for this very reason (lack of quality or competence in one or more of these areas). Bigger is not always better.
Is it Legal for a US citizen to have an Offshore Bank Account?
We often get this question, and the answer is Yes ~ it is perfectly legal for a US citizen to own an offshore bank account, offshore annuity policy or offshore mutual fund. The only stipulation is the folks at the IRS want to make sure they know about it, so you can pay taxes on the interest or earnings. For Canadian citizens, it is interesting to note that while offshore accounts are still exempt from Canadian tax liabilities, Revenue Canada now wants you to start reporting what you have offshore. This is a trend in countries that are abusing their use of debt and public money and trust.
Since many banks or investment firms in other countries do not report customer account information to foreign tax authorities (or their own government for that matter), it is the responsibility of the account holder to do so. However, if you are a US citizen, then the exception to this rule might be the US Bank located in a foreign country, that you think it is an oh-so-safe bank simply because it is a bank owned by a US banking entity (a bank in another country with same name as a US bank, is really a locally licensed bank that is a wholly owned subsidiary). Many US banks with divisions abroad (we will use the word division rather than branch, because it really is not a branch of the US bank at all) have started to voluntarily reporting accounts owned by US citizens to US tax authorities. This is quite interesting when you consider that they may not be required to report to the local government where they are located and probably do not do so, yet they are reporting account information to what is technically a foreign government (the US is our example). Not only that, many people will feel warm and fuzzy thinking they have an account with XYZ bank, because they think it is the very same bank they know of back in another country. Not so.
The bank in a foreign country with the XYZ name is a local bank, separate and apart legally from the parent company in another country. This is very important to understand, because the parent bank in another country is not legally responsible to step in and save the day. You may think that they are morally responsible to do so, but what you may think and what a board of directors from the parent bank in another country might think, might be two very different things. You want a real life example? Look no farther than Argentina. The nice people in Argentina thought the foreign owned banks would be safer for the same moral reasons you might think, but they were sorely mistaken. Many of the foreign owned banks folded up and the parent bank in another country simply wrote them off. The local banks in Argentina however, stayed the course and are still open today (2005). They had no choice but to weather the storm. The other foreign owned banks? They yanked their money out and ran, leaving depositors high and dry (regardless if the account holders were foreigners or locals).
I would say I good idea is to use what I like to call the visa approach, and no I am not referring to a credit card. When anyone applies for a tourist or travel visa to visit another country, the consulate usually looks for or ask for certain things such as proof of home ownership, proof of a job, bank account, etc., etc. What they are really looking for are ties to the country. In other words, they want to see of the person has some reason to come back and not an incentive to stay in the other country illegally. The same thing can be applied to banking. Which is to say, make sure there is some reason the bank will not cut and run. Of course, there is much more to it than that when choosing a bank, but certainly the argument (and proof) is there when it comes to a local bank versus a foreign owned one.
Banking is another country does not necessarily mean risk and it not an idea for criminals either (see our article about Rhett Butler on the main directory page). Also, with the communication mediums we have today (telephone, fax, internet) it is very possible to live in one country and bank in two, three or more countries abroad for different reasons. In fact, many money managers often seek out higher returns for bank deposits globally and move assets around accordingly to take advantage. While this idea was very difficult for the average investor many years ago, today it is very possible and maybe even necessary (if you are living off the income from your investments or deposits). So, do not be dissuaded from those that would have you believe that banking or investing in another country is a foolish idea. In reality, the reverse is true. However, just like anything else is life – do your homework, investigate, read and look around. What you find out may very pleasantly surprise you.
New Life and New Passport
Second Passport Programs, Economic Citizenship and Passports by Investment
Second Passport. Let’s face it; American passports are not what they once were. In fact, Americans are giving up their citizenship and seeking second passports in record numbers. For example, the U.S. embassy in Switzerland reports that hat it had processed 411 renunciations in the first nine months of 2012. This compares to 180 Americans giving up their passports in 2011.
While the number of Americans that turn in their passports is a small fraction of the estimated 35,000 to 40,000 U.S. citizens living in Switzerland, the rise in such renunciations is causing concern. “At the moment this phenomenon is bigger in Switzerland than anywhere else in the world,” the U.S. ambassador told the Handelszeitung newspaper. “U.S. passports are becoming less attractive due to the implementation of stricter U.S. laws.”
One of the major motivators pushing Expats and others to give up their U.S. passports is the Foreign Account Tax Compliance Act (FATCA) that requires banks worldwide to report the financial assets and transactions of their U.S. clients. The burdens this law places on international banks is enormous and most have decided compliance is impossible. The bottom line is that it’s not financially feasible for an international bank to maintain a team of experts to ensure compliance with this convoluted law…which means those with U.S. passports will be unceremoniously dumped by their banks.
If you are considering taking the drastic step of renouncing your U.S. citizenship, keep in mind that you must first have a second passport in hand. When you give up citizenship in one country, you must already have citizenship in another…otherwise, you will be without a country and without travel documents.
NOTE: Residency is not the same as citizenship. Many clients contact us with the plan of obtaining residency in countries like Belize or Panama, then giving up their citizenship. This will leave you without a passport and may have other draconian consequences.
There are four methods for obtaining a second citizenship and a passport:
If you have distant relatives in countries like Ireland, Poland & Italy, you might qualify for citizenship by ancestry.
If you marry someone and become a resident of just about any country, even the U.S., you can obtain citizenship after a few years.
If you are a long term resident of a country like Belize, Paraguay, or Panama, you can qualify for citizenship. 3 to 10 years.
You can purchase economic citizenship and a second passport from St. Kitts, Dominica and Austria.
If you are looking to opt out of the U.S. system any time soon, the only option is to purchase economic citizenship. A second passport by ancestry is open to very few and has become much more difficult in recent years. Citizenship by marriage may upset your current spouse and citizenship by residency will take years to complete. For example, the constitution in Uruguay requires 3 years minimum, and Panama is about 10 years. Even if you qualify for citizenship through residency, a second passport is not guaranteed. Passports are granted by order of the President and often require a “contribution” to his election fund.
I recommend St. Kitts over Austria is because of the high cost of Austria, because Austria imposes a residency requirement and because St. Kitts is just so much more efficient to deal with compared to the bureaucrats in Austria. An Austrian passport can cost upwards of $1 million plus legal fees, while a St. Kitts passport will cost $250,000 plus legal fees.
St. Kitts Second Passport Programs
St. Kitts and Nevis are two islands in the Eastern Caribbean that became independent from England in 1983 and have a history of providing privacy, asset protect, and the best second passport available. This country of 51,000 is a member of the United Nations, its primary language is English, and its currency, the Eastern Caribbean Dollar, is pegged to the United States dollar at 2.7 to 1. Click here for additional information on the Eastern Caribbean Community.
Your St. Kitts passport will provide you with visa free travel to over 100 countries, including Canada, Great Britain, Hong Kong, Liechtenstein, Ireland, Sweden, Switzerland and Schengen States of the European Union. For a list of these countries, click here.
Your St. Kitts passport will also provide an easier path to residency in a number of countries, such as Monaco, Switzerland, Andorra, United Kingdom, and Bermuda, Cayman Islands, Bahamas and other Caribbean countries.
Most importantly, there is no residency requirement to obtain a second passport from St. Kitts. You are not required to live in St. Kitts and there is no travel, regular meetings with immigration representatives, or other annoying requirements.
Processing Time: In most cases, you will receive your St. Kitts passport in 2 to 4 months after submitting your application.
There are two programs that will lead to a second passport in St. Kitts:
Citizenship through real estate investment in St. Kitts, and Citizenship by making a donation to the St. Kitts Sugar Industry Diversification Fund.
St. Kitts Passport by Real Estate Investment
The minimum investment in St. Kitts real estate is $400,000 per applicant. If there are two related applicants, such as a husband and wife, you can invest $800,000 in a single property.
Government fees for the St. Kitts real estate investment program are as follows (updated for 2012):
US$7,500.00 for due diligence background checks and processing fees for the main applicant;
US$4,000.00 for due diligence background checks and processing fees for each dependent of main applicant who is over the age of sixteen years;
On approval in principle of an application through a real estate investment
i. US$50,000.00 for the main applicant
ii. US$25,000.00 for the spouse of main applicant;
iii. US$25,000.00 for each child of the main applicant under eighteen years of age;
iv. US$50,000.00 for each qualified dependent of the main applicant above the age of eighteen years, other than his or her spouse.
4. Application processing fee is $250 per applicant
Legal fees are in addition to the costs above and vary significantly by applicant. Typical real estate and related expenses are as follows:
Purchase and Sale Agreement – 1% of the Purchase Price
Memorandum of Transfer – Approximately 1% of Purchase Price
Surveyor’s Fees – Approximately US$327.00 per acre
Government Fees – Registration fee of US$2.70
Assurance Fund – Purchase price divided by 500
Alien Landholding License Application – US$1,500.00 per applicant
Stamp Duty (on select properties): 2.5% – 6% of purchase price
In addition to the high transaction costs, there are a number of issues with the St. Kitts passport by investment program. For example, you must purchase a “program approved” property, which means the cost will be higher than for a non-approved comparable property.
Second, if you give up your citizenship and sell the property, it will lose its approved status and your sale price will be lower. In other words, you can’t sell the property to someone seeking economic citizenship, so the number of potential buyers and the sale price will be significantly reduced.
Third, real estate taxes and upkeep on a property you do not occupy may be prohibitive. The Comptroller of Inland Revenue assesses a property tax of 0.2% per year on market value.
Fourth, St. Kitts does not charge a capital gains tax when the property is sold. Instead, they have a 12% transfer tax due on the full sales price. So, even if you are selling the property at a loss, a 12% tax is charged on the transfer.
Fifth, I said that $400,000 is the minimum investment per application. However, this assumes you can find an approved property you wish to purchase in this price range. Many single family homes are significantly more expensive than this minimum investment and large homes can be in the millions on St. Kitts or Nevis.
In my experience, clients who will spend significant time in St. Kitts opt for the investment option and purchase a single family home. Those who will visit the island from time to time opt for the condos provided by Marriott (for additional information, click here) and the rest will prefer to acquire a passport by donation.
St. Kitts Passport by Donation
Second Passport If the preceding page on the St. Kitts passport by investment option left you dazed and confused, as it does many clients, there is an easy solution. You can purchase your St. Kitts passport by making a “donation” to the Sugar Industry Diversification Fund (SIDF).
Under the SIDF Citizenship-by-donation option there are four cost structures based on family size:
$250,000 for a Single applicant,
$300,000 for an applicant with no more than 3 dependents (two children under 18 and a spouse),
$350,000 for an applicant with no more than 5 dependents (four children under 18 and a spouse), or
$450, 000 for an applicant with no more than 6 dependents (five children under 18 and a spouse).
In this program you simply pay the fees, gain economic citizenship and are handed second passport…with no strings attached. This is the recommended program for clients who do not plan to spend significant time in St. Kitts or Nevis.
The costs above do not include legal, due diligence, application, agent, and other professional fees. A single applicant should expect to pay out around $350,000 to complete the process.
Dominica Second Passport Program
Dominica is another Caribbean island that has been making a name for itself in the offshore world for the last several years. Its passport is not as travel friendly as St. Kitts, but the costs are much lower.
Officially the Commonwealth of Dominica, this island is in the Lesser Antilles region of the Caribbean Sea, south-southeast of Guadeloupe and northwest of Martinique. Its 290 square miles has a population of about 71,000. Dominica has been nicknamed the “Nature Isle of the Caribbean” and is generally considered one of the most eco-friendly and beautiful islands in the regions.
A second passport from Dominica will cost a family of four (applicant, spouse and two children under 18-years-old) of $200,000, plus $25,000 for each additional child under age 25. With filing, registration and professional fees, applicants can anticipate a total cost of $300,000. In other words, a family of four can obtain economic citizenship and second passports from Dominica for less than the cost of a single passport from St. Kitts.
Dominica offers three options to obtain a second passport:
Package A: Single Applicant A non-refundable investment of US$100,000.00
Package B: Family Application One (Applicant and spouse) A non-refundable investment of US$175,000.00
Package C: Family Application Two (Applicant plus spouse and two children below the age of 18) A non-refundable investment of US$200,000.00
Package D: Family Application Three (Applicant plus spouse and more than two children below the age of 18) A non-refundable investment of US$200,000.00 and US$50,000.00 for every additional person below the age of 18
Dominica’s application and other fees are also significantly lower than St. Kitts.
Application fee – US$1,000 per investor (Non-refundable)
Processing Fee – US$200 per applicant (Non-refundable)
Naturalization Fee – US$550 per applicant
Stamp Fee – US$15 per applicant
Considering legal and other costs, an individual applying for economic citizenship and a second passport from Dominica should expect to part with about $165,000, including the donation of $100,000. This is about half the fee charged by St. Kitts.
The Dominica passport allows visa-free travel to more than 60 countries, including the United Kingdom and CARICOM nations. Click here for list of visa free countries. Dominica imposes no residency requirements to obtain, nor maintain, citizenship and there are no taxes imposed on citizens who do not reside in Dominica; however, those who do reside in
Dominica are subject to substantial taxes on worldwide income.
Warning – Second Passport
The only countries that offer official citizenship and second passports without residency requirements are St. Kitts and Nevis and Dominica. There are a number of websites offering “grey market” passports, but, buyers beware! The vast majority of these are scams.
For example, I am often asked about offers of passports from Paraguay and Dominican Republic costing $25,000 to $50,000. The constitution of Paraguay requires 3 years of residency before citizenship can be granted and the average timeline is about 4 years (3 years of residency and 1 year processing). The Dominican Republic does not offer a passport for purchase or investment program. Anyone promising immediate passports for purchase is either selling forgeries or skirting the system and running a risk of discovery and cancellation. If you give up your U.S. passport and your second passport is invalidated, you are truly up the river without a paddle.
It probably seems like a radical idea to those who were born and lived their lives in only one country, but individuals with financial means and a little determination can, without much trouble, become international citizens. That’s done by acquiring a second citizenship in another country. Along with that dual legal status comes an official second passport.
Acquiring a second passport can expand rights and freedom. For an American, the benefits include freer world travel and fewer problems from officious border guards or nosey customs and immigration officials. A second passport opens doors offshore otherwise closed to Americans. Best of all, dual citizenship and a second passport can be your key to reduced taxes and increased asset protection—and it could even protect your life.
Your Papers Please!
Until World War I, official passports were rarely required by most countries. In those times, document-free international travel was the rule. Times have changed: now a U.S. citizen who leaves the country must have an official U.S. passport or the equivalent in order to both leave and return—and that applies even for day visits to Canada or Mexico.
American travelers face the added problem of coming from a country that is not “politically correct” in the opinion of other countries. In some areas of the world, a U.S. passport provides little or no safety. Using another nation’s passport may give you the safety you need.
An important point: under U.S. law, having dual citizenship and a second passport does not jeopardize American citizenship. However, U.S. citizens, including dual nationals, must, by law, use their U.S. passport when entering or leaving the United States.
Five Easy Methods to Secure Peace of Mind
How you can become a citizen depends on a country’s laws, but there are five main methods:
* Birth within the borders of a nation’s territory
* Descent from a parent or grandparent
* Marriage to a foreign citizen
* Religion, as in Israel’s Law of Return
* Formal naturalization by applying and qualifying for citizenship. The naturalization process varies among countries.
Citizenship for Sale
Only two nations, the Commonwealth of Dominica and St. Christopher and Nevis, both Caribbean island countries, grant official citizenship in exchange for cash without any prior residency requirements—but both are expensive. These so-called “economic citizenship” programs offer a nationality quickly and simply for those who qualify.
In Dominica the “family option,” requires a direct cash contribution to the government of $100,000 for a family of up to four people (applicant, spouse and two children under 18-years-old), plus $25,000 for each additional child under 25-years-old. With registration and professional fees of approximately $15,000 added to the basic figure, applicants can anticipate a total cost of $165,000.
The “single option,” under which an individual applicant’s $75,000 investment is to be divided equally between public- and private-sector projects. The total cost for a single applicant is about $100,000.
In St. Kitts and Nevis (the popular name) under the official contribution options, there are four categories:
– Single applicant: $200,000 investment required, inclusive of all fees;
– Applicant with up to three dependants (i.e. one spouse and two children below the age of 18): $250,000
– Applicant with up to five dependants (i.e. one spouse and four children): $300,000;
– Applicant with six or more dependants: $400,000.
Citizenship by Ancestry
A much easier path to second citizenship may lurk up in your family tree. Several countries grant full citizenship based on the law of blood, jus sanguineous, even without a descendant ever having lived in the country. All one needs is a parent or grandparent who is (or was) a citizen of that country.
Ireland: One the best of these ancestral programs is offered by the Republic of Ireland. Persons with one parent or grandparent born in Ireland are eligible for Irish nationality, with a passport valid for 10 years and renewable. As a result, with a population of only 4.1 million, Ireland has over 14 million current official passports in circulation.
Italy: The Republic of Italy offers a similar program. The children and grandchildren of former Italian nationals can qualify for citizenship on the basis of any of the following: 1) a father who was an Italian citizen at the time of a child’s birth; 2) a mother who was an Italian citizen at the time of a child’s birth after January 1, 1948; 3) the father was not born in Italy, but the paternal grandfather was an Italian citizen at the time of birth; or 4) the mother was not born in Italy, but for those born after January 1, 1948, the maternal grandfather was an Italian citizen at the time of the mother’s birth.
In addition, ethnic Italians who cannot qualify under ancestry rules can qualify for naturalization after only three years legal residence in Italy.
Poland: Poland changed its laws a few years ago so that persons whose parents or grandparents were Polish citizens may be eligible to obtain citizenship. Citizenship can be claimed only by descendants of Polish citizens who left Poland after the country became an independent state in 1918. However, there can be no break in Polish citizenship between the emigrant ancestor and the descendant. Application for “Confirmation of Possession or Loss of Polish Citizenship” can be made through Polish embassies or consulates.
Other countries that offer citizenship based on the citizenship of parents or grandparents include Spain, Greece, Lithuania and Luxembourg. Spain also offers a reduced two-year residence before citizenship to citizens of any of several Latin American countries. Portugal and Brazil have a similar arrangement.
The G7 Passport That Could Help You Legally Escape Nearly All Taxes
One of the most respected national passports is that of Canada. However you must become a naturalized Canadian citizen to obtain that document.
But a qualified immigrant accepted for eventual Canadian citizenship is eligible for a complete personal income tax moratorium for the first five calendar years of residence in Canada—zero taxes if the source of income is an offshore, non-Canadian trust or corporation. You can easily create such entities before you move to Canada and become a citizen. (Canada also offers a variation on economic citizenship for investors who produce jobs.)
As a general rule, Canada has a three-year residence requirement after immigrant admission before citizenship is granted, but a five-year residence is required in order to be eligible for this very special tax break. Even better, once you are a Canadian, you can move to a foreign tax haven and escape almost all taxes, since Canada, unlike the U.S., has a territorial tax system that only taxes income earned within Canada.
Several other countries are attractive because they offer immediate official residence under a variety of plans, some leading to citizenship. Both the Republic of Panama and its Central American neighbor, Belize, offer pensionado programs to retirees who have guaranteed annual incomes. Neither leads to citizenship, but Panama does have several investment programs that grant immediate residence and eventual citizenship after five years.