Second Passports and Citizenship

  The articles below originally appeared in our montly newsletter, The Sovereign Individual and will give you some of the basics, but you may need professional help to guide you along the way. You can learn more about second passports and citizenship, tax havens and offshore banking in The Sovereign Individual each month by becoming a member of The Sovereign Society. Click here for details on membership.

• Best Second Citizenship & Residency Programs - by Robert E. Bauman, JD
• Expatriation: Ultimate Solution to Cut Your Taxes, Make Money & Protect Your Wealth  - by Robert E. Bauman, JD
• Your New Country in a Matter of Months: Economic Citizenship for Sale - by Robert E. Bauman, JD

Best Second Citizenship & Residency Programs
by Robert E. Bauman, JD

 If you’re in a hurry and want a second citizenship in a matter of months, there are only two nations that offer this quick service, but for a price. They call it “economic citizenship” but it’s really citizenship for sale. The two nations are the Commonwealth of Dominica and St. Christopher & Nevis, both in the Caribbean area.

Several other nations, including the U.S. and Canada, offer immediate residence in return for substantial investments in a job-producing business, but not immediate citizenship. That usually requires several years of actual presence.

Single Investment Delivers Potential Profits, Dual Citizenship, and Visa-Free Travel

The Commonwealth of Dominica is located at the northern end of the Windward Chain of the Lesser Antilles in the Caribbean Sea.

Dominica’s economic citizenship program is first rate. Since its inception in 1991, it has operated successfully. A single investor may acquire Dominican citizenship via a direct cash contribution of US$100,000 to government and private projects; the sum is raised to US$150,000 for a family of up to four persons. A new citizen of

Dominica has the right to live and work there at any time, but living there is not required. Holders of a Dominica passport can travel without a visa to more than 100 countries and territories, including the U.K., Switzerland, Sweden, and Hong Kong.

Economic Citizenship in a Paradise with Splendid Beaches and Balmy Weather

St. Christopher & Nevis is the older of the two economic citizenship programs and it, too, has an established history of successful operation.

Applicants must invest US$350,000 in an “approved investment project.” Government registration fees are now US$35,000 for a main applicant and US$15,000 for each spouse and dependent child under 18. Young adult family members over 18 must pay US$35,000 each. In addition, professional fees are US$15,000 for the main applicant and US$5,000 for each additional family member.  Or you can contribute to the Sugar Industry Diversification Foundation, in the amount of US$200,000 (for a single applicant). Using the charitable contribution is an easier route for most applicants, because it allows a set cost and avoids further expenses associated with owning real estate in a foreign country. Plus you don't have to live in St. Kitts or Nevis to secure your second citizenship, so buying real estate could just be an additional burden if you're not interested in spending time there.

St. Kitts (as it is called) and Nevis (say “knee-vis”) is in the Leeward Islands in the eastern Caribbean, 225 miles east of Puerto Rico, 1,200 miles south of Miami. Each tropical island is a volcanic mountain rising about 1,000 meters above the sea, with about 75% of the total population living on St. Kitts. The islands’ balmy, virtually unchanging weather and splendid beaches and accommodations have made them popular vacation spots, offering a wide range of recreational amenities.

Nevis, which has its own Island Assembly, is a recognized tax and asset haven. It has a no-nonsense banking and business privacy law that even the U.S. government can’t crack unless crime is involved. Its pro-offshore laws have existed for over two decades—so there is plenty of experience and precedent in the local courts—and the legislative assembly keeps the applicable laws current. There are well-established service companies that can manage an offshore business, establish a foreign trust, etc., and some have convenient U.S. offices.

Visa Programs Make This the Leading Destination for Foreign Retirees

Everyone knows about The Republic of Panama and its famous Canal, but Panama is also one of the world’s leading destinations for foreign retirees. That’s because it has numerous resident visa programs that welcome you with immediate residency status.

Perhaps the best known of these resident visas is the turista pensionado visa. Anyone entering the country as a qualified pensionado is guaranteed to retain that legal status so long as they choose to stay in Panama. (The word pensionado does NOT mean you must be retired to qualify.)

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Under the pensionado program, the applicant must show proof of personal entitlement to a monthly income from an official foreign program (Social Security, disability, military retirement, government pension) or a private corporate pension plan, in the amount of at least US$500, plus an additional US$100 each for a spouse and other dependants.

Panama truly does offer probably the best residence deal in the world today. For this comparatively small price, the benefits are incomparable, including exemption from taxes, tax-free importation of your automobile and household goods, and discounts on a host of goods and services.

The visa application process for Panama’s basic pensionado program is simple; a onetime application and no renewals or additional fees. Getting your permit takes as little as 30 to 60 days. It’s fast, affordable and easy. But you need an attorney to do all this.

Significant Tax Incentives for Retirees

Although Belize’s economic citizenship program ended in 1991, the country still offers significant tax incentives to retirees and other foreigners. You can become a permanent resident if you have a US$2,000 minimum monthly income from non-Belize sources.

Belize is the only English-speaking country in Central America. Its mixed population of 280,000 includes descendants of native Mayans, Chinese, East Indians, and Caucasians. Independent since 1981, its language came from its colonial days when it was called British Honduras. Situated south of Mexico and to the east of Guatemala, Belize is on the Caribbean seaboard.

In 1998, the Retired Persons Incentives Act was enacted to attract foreign citizens and foreign currency. The law established a residency program for Qualified Retired Persons (QRPs), offering them significant tax incentives to become permanent residents (but not citizens) of Belize.

A QRP is exempted from all taxes on income from sources outside Belize. QRPs can own and operate their own international business based in Belize exempt from local taxes. There is no minimum time that must be spent in Belize and QRPs can maintain that status so long as they maintain a permanent local residence.

To qualify for the QRP program, the applicant must be 45 years of age or older and prove personal financial ability to support oneself and any dependants. A spouse and dependants (18 years and younger) qualify along with the head of household. Initial fees for the program are US$700 for the qualified retiree and US$350 for each dependant, plus US$100 for an ID card upon application approval.

Expatriation: Ultimate Solution to Cut Your Taxes, Make Money & Protect Your Wealth
By Robert E. Bauman, JD

Q: “How can I avoid paying U.S. income taxes?”

A: You can’t, as long as you are a U.S. person.

In my travels, I often get this question from folks the U.S. Internal Revenue Service calls “U.S. persons.” That’s IRS shorthand for those multi-millions (citizens and resident aliens) that must pay American income taxes.

Since the U.S., alone among major countries, imposes taxes on its citizens, no matter where a U.S. citizen lives, where their assets are located, or where their income source is based, American income taxes apply.

A U.S. person can be born in, but spend their entire life outside the U.S., and the law says they still owe U.S. taxes. That’s because U.S. citizenship is so easy to acquire. Virtually everyone born in the U.S., or a U.S. dependency, automatically acquires it. In addition, certain individuals born outside of the U.S. are U.S. citizens because one or both parents are U.S. persons or otherwise have close connections with the U.S.

In contrast, most other countries impose taxes only on the income of actual residents. A U.K. citizen who permanently relocates to low-tax Switzerland is no longer subject to U.K. income tax and (after five years) U.K. capital gains tax. Similar rules apply in the remainder of the EU and in Canada, although Canada imposes an onerous exit tax on expatriates. Thus, moving to a tax haven is a legal way to avoid income taxes for nearly everyone, except those hapless “U.S. persons.”

Fortunately, there are several options that a wealthy U.S. person can take to legally avoid the long arm of the taxman:

• Life Insurance & Annuities: It’s still possible to achieve major deferral of current taxes using offshore life insurance and annuities as an investment vehicle. But this is a technical area that demands expert help.
• Foreign Earned Income Exclusion: If you earn a salary while living offshore, you may be permitted to exclude up to US$80,000 (US$160,000 for married couples) from your taxable income.
• Asset Protection Trust: Although it’s complex and requires expert tax and legal help to create, an offshore APT can produce significant estate tax savings for your heirs. However, there are generally no income tax savings.

The Billionaire’s Tax Loophole—or the Ultimate Estate Plan?

The only way a U.S. person can escape U.S. taxes for good is to end U.S. citizenship after relocating to a foreign country in a dramatic action called “expatriation.” It’s legal and the U.S. Supreme Court has upheld the right to expatriate repeatedly.

Every year, about 250,000 U.S. citizens and resident aliens leave America to make a new home in some other nation. Only a tiny fraction of these persons give up their U.S. citizenship, and of those, most do so for non-tax reasons. But while only a handful of very rich Americans have legally expatriated, these individuals include some prominent names. And Congress doesn’t like that one bit. As Forbes magazine observed: “For more than a decade Congress has obsessed over the fact that a handful of rich folks, including Kenneth Dart of Dart Container, and Campbell soup heir John Dorrance III, were able to escape U.S. income and estate taxes by renouncing their citizenship.”

Every expatriating American can reap immediate benefits in terms of lower income taxes (assuming they relocate to a low-tax jurisdiction), but the real payoff comes later, when your wealth is distributed to the beneficiaries of your estate. Since the estates of wealthy Americans are subject to taxes as high as 46%, the tax savings can be dramatic. In 1962, John Templeton, respected international investor, businessman and philanthropist, surrendered his U.S. citizenship to become a citizen of the Bahamas. This move saved him more than US$100 million when he sold the well-known international investment fund that still bears his name. Extremely wealthy individuals such as Dart and Dorrance have saved billions of dollars in estate taxes with this strategy.

Expatriation, Step-by-Step

Expatriation is “the ultimate estate plan.” It’s a legal, step-by-step process that can lead to the legal right for you to stop paying U.S., or other national income taxes forever.

For U.S. persons, expatriation works best for those who have substantial assets that can easily be moved to a low tax country. This process requires professional assistance to coordinate the movement of assets offshore and help choose and acquire a second nationality. When all that’s done (and done right), you must relocate to your selected new home in a low-tax or no-tax country. There you will take the final step to tax freedom: the formal ending of U.S. citizenship.

A drastic plan? You bet. But for the U.S. person who wants a permanent and legal way to stop paying U.S. taxes, expatriation is the only option.

One caveat: U.S. tax law seeks to impose taxes on former U.S. persons who expatriate for a period of ten years after they end citizenship. This current tax scheme, in theory, tries to collect taxes on all income or gains after expatriation. But if you have no income from U.S. sources and no assets there, there’s nothing for the IRS to collect.

Can a former U.S. citizen return to America? Yes, but you may need to obtain a visa, and the Immigration and Nationality Act says that if your expatriation was “tax-motivated,” you may be excluded. This law has never been enforced, and many legal experts say that it’s unconstitutional. But it demonstrates the vehemence of the ongoing Congressional pursuit of tax refugees. The law also says that expats who return to the U.S. for more than 30 days will be treated as U.S. citizens for tax purposes and be taxed on their worldwide income (if they can find them).

How To Surrender Your U.S. Citizenship

The basic rule: U.S. government policy, as defined by the courts, presumes that an American citizen does not wish to surrender citizenship. Clear proof of that intention is required before expatriation will be recognized officially.

Expatriation comes about because of a deliberate act. You must officially give up citizenship. This means visiting a U.S. embassy or consulate abroad, answering a standard questionnaire, then signing a formal document requesting an end to U.S. citizenship. Subsequent U.S. State Dept. approval usually is granted as a routine matter. In every case, the applicant must already have acquired a new citizenship, lest they become “a person without a country.”

Some U.S. congressmen want to impose a radical “exit tax” similar to that in effect in Canada on “taxpatriates.” It would impose on tax-motivated expatriates a one-time capital gains tax on the unrealized gains from any investment they hold, anywhere in the world. Many expatriates would have to liquidate much of their assets simply to pay the tax. But there is already a net worth test that presumes anyone with a net worth exceeding US$2 million who expatriates does so with the intent to avoid taxes. Forbes magazine noted, “while this …will cause pain for some moderately well off expatriates, the truly rich, and tax averse, will still be able to plan around it.” (It’s worth noting that among the few nations that have imposed punitive exits taxes were Nazi Germany to tax departing Jews, and apartheid South Africa trying to keep disaffected whites at home.)

Of course, instead of expatriate tax punishments and exit taxes, the U.S. Congress should adopt real tax reform and stop playing for headlines at the expenses of those who pay most of the taxes—because they’ll leave and pay no more.

To learn more about expatriation and find out if it's right for you, click here.

Your New Country in a Matter of Months: Economic Citizenship for Sale
By Robert E. Bauman, JD

I often get questions concerning how to acquire dual citizenship and the second passport that comes with it. Folks want to know how it can be done, and why they should consider it.

I start by assuring them that dual citizenship is legal under American law, as it is in many nations, and that the U.S. Supreme Court upheld this right in several cases decades ago. And of course, if the person is interested in “expatriation,” the formal act of surrendering U.S. citizenship (also a legal right), I explain that they certainly need a second citizenship to avoid becoming a man (or woman) without a country, a modern day version of Edward Everett Hale’s disturbing novel from 1917.

A second nationality is a hedge against unforeseen events. It provides the option to legally reside and work in another country that may offer tax advantages, although this is of limited benefit to U.S. citizens. (If you are a U.S. citizen or green card holder, you are still accountable to Uncle Sam when it comes to reporting your taxes, no matter where you live.)

Most countries require a foreigner to become a resident and live there for an average of five years or more before they are granted citizenship. But there is a quick route to a second passport in just a matter of months—but it will cost you dearly.

It’s known as “economic citizenship” and only two sovereign nations sell it, both tropical island tax havens in the Caribbean—the Commonwealth of Dominica and St. Kitts/Nevis.

Escape from America

Using the excuse of drug wars and anti-terrorism, plus imposing excessive taxation, government controls on private capital and travel restrictions are becoming more prevalent around the world. Smart people of wealth naturally are seeking alternatives that allow them to protect their assets and income and to travel freely throughout the world. And, in the case of the United States, the only way to escape from taxes is to end your citizenship.

Two Caribbean jurisdictions offer economic citizenship under government-sponsored investment laws. These nations want to create jobs, accelerate resort development and grow their tourist industries by bringing in more money. The laws provide a foreigner with instant citizenship, a new passport, and permanent residence, if desired. And both countries are offshore tax havens.

Become a Saint Kittian or Nevisian

St. Kitts & Nevis is an independent English-speaking island state situated in the northern part of the Leeward Islands in the eastern Caribbean. The federation is made up of two islands, St. Kitts and the smaller Nevis, separated by a channel two miles wide. It is a former British colony, a member of the British Commonwealth of Nations and the United Nations. It has a pleasant climate, particularly during the cool months from December to March. Humidity is relatively low, and constant northeast trade winds keep the islands cool.

St. Kitts & Nevis offers good opportunities for investors and manufacturers. The workforce is well-educated, English-speaking and friendly. Other advantages include tax breaks of up to 15 years, repatriation of profits and the possibility of tax-free entry of produced goods into the U.S. market. Substantial European import benefits also apply. There are no income taxes and no net wealth taxes in St. Kitts & Nevis.

St. Kitts & Nevis labels their instant citizenship plan, “Citizenship-by-Investment Program.” To qualify for citizenship, the government requires a real estate investment of at least US$250,000. The islands are an attractive place to own real estate, and there are some excellent real estate developments approved under the program. The new citizen is not required to spend any set period of time on the islands each year.

Alternatively, there is an option available to purchase government bonds. Instead of real estate, one can purchase US$250,000 equivalent in EC$ (Eastern Caribbean currency) Literacy Month 10-year Treasury bonds. Details of this program are not yet final and no date has been set for the next bond issue.

Additional costs include official government fees of US$35,000 for a single applicant, plus US$15,000 for each dependant. There are also application/professional fees of US$15,000 (same as with Dominica) per application and a US$2,500 due diligence fee per adult applicant. They require a reasonable amount of documentation for the application, and the application procedure itself is fairly simple.

The St. Kitts & Nevis passport is relatively well regarded since only a relatively limited number of passports have been issued under this citizenship-by-investment program during its nearly 20 years of existence. As a result, St. Kitts & Nevis citizens enjoy a passport with a good reputation and good visa-free travel. For example, passport holders still have visa-free access to Canada. Visa-free travel throughout continental Europe is also available by combining St. Kitts & Nevis citizenship with a residence permit in European Union countries.

A Passport of the Commonwealth of Dominica

Dominica is often called “The Nature Island of the Caribbean.” It’s a small, beautiful island located in the eastern Caribbean between the French islands of Martinique and Guadeloupe. Independent since 1978, Dominica is English-speaking and a member of the British Commonwealth. It has a Westminster-style parliamentary government, free elections and peaceful transfer of power. There is a strong currency and almost no crime. Unlike some other states offering economic citizenship, Dominica has a good reputation.

The economic citizenship program has operated successfully since 1991, and it is based on a solid legal foundation in the Constitution of Dominica. A limited quota of applications has been set by the government.

There are now two options for obtaining citizenship: a Family Option and a Single Option. Under the Family Option, the applicant pays US$100,000, which qualifies the applicant, his or her spouse and two children under 18 years old for citizenship. An additional US$25,000 per child is required for each child under 25 years old. Under the Single Option, a single applicant pays US$75,000. In addition to the above additional application, agent and registration fees amount to approximately US$2,200. There is also a US$5,000 due diligence fee per person.

The Passport Book covers second passports in detail. More about the book at
LINK : www.isecureonline.com/reports/190SGOPS/W190G580/