Second Passport Programs, Economic Citizenship and Passports by Investment
Let’s face it; American passports are not what they once were. In fact, Americans are giving up their citizenship 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:
1. If you have distant relatives in countries like Ireland, Poland & Italy, you might qualify for citizenship by ancestry.
2. 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.
3. If you are a long term resident of a country like Belize, Paraguay, or Panama, you can qualify for citizenship. 3 to 10 years.
4. 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 bearcats 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.