Tag Archive for: Second Passport

Christian Reeves

10 Best Second Passports and Citizenship by Investment Programs For 2016

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Here are the 10 best second passports for 2016. The citizenship by investment industry has undergone a lot of changes in the last year, including a major change to the St. Kitts passport offering. It’s has been kept quiet by those hyping this passport, but I’ll give you the full story here.

Here’s everything you need to know to buy the best second passport in 2016.

How to Value a Second Passport

First, let’s talk about how to value a second passport. The best second passport is a) the one you can afford b) that gives you visa-free travel to the most countries. The smaller the number and the less desirable the countries, the less you should pay.

For example, a second passport from Austria is the 4th most valuable travel document in the world and the most valuable second passport you can buy. This is because it gives you visa-free access to 171 countries.

That is to say, a second passport from Austria is a group 4 travel document. A group 1 passport gives you visa-free travel to 174 countries. Group 1 passports are those issued by the US, UK and Germany. Group 2 offers travel to 173 nations including Canada. Group 3 gets you access to 172 countries and is a passport from Belgium and Netherlands.

Because an Austrian passport gives you visa-free access to 171 countries, it’s a 4th tier passport and the best second passport you can buy… if money is no object. By comparison, Dominica gives you visa-free travel to 91 countries and is thus in the 41st tier.

A second passport from an EU country (Bulgaria, Hungary, Malta, Cyprus or Austria) also gives you the right to live and work anywhere in the European Union.

Finally, the number of visa-free travel countries gives you an indication of how your new passport will be received by world banks. An EU passport will allow you to open an account anywhere in the world. A passport from St. Kitts will have fewer options, but generally accepted. I expect it to be nearly impossible to open an account abroad with a passport from Comoros (last on my list of 10 best second passports).

Don’t Fall for a Second Passport Scam

There are a lot of online charlatans promising cheap passports, diplomatic passports, or banking passports. All of these are scams…. plain and simple, nothing to debate, they are scams.  

There is no easy or cheap way to get an authentic second passport.

Think of it this way: governments around the world need to raise hundreds of millions of dollars to fill up their coffers. And second passports are are a multi billion dollar business. There is is not lack of customers… in fact, demand often outstrips supply.

In such a market, countries are not interested in diminishing their brand by selling you a passport for $50,000. If anyone tells you different, or they claim to have a guy who can “hook you up,” run the other way. 

A Word of Advice to US Citizens on Second Passports

If you’re a US citizen, note that owning a second passport doesn’t change your US tax filing or paying obligations. So long as you’re an American citizen, you must pay tax on your worldwide income. Also, offshore banks will continue to report to the IRS under FATCA.

A second passport  will allow you to travel and invest with more privacy. It is also the first step in renouncing your US citizenship. You must have a new passport in hand before you dump your blue travel document.

You might be thinking to yourself, how will the bank know I’m an American? What if I have all of my documents from, for example, St. Kitts? What will tie me back to the US of A? What if I change my name to further frustrate the records search?

Uncle Sam and the IRS are way ahead of you. All second passports now list your country of birth. If you were born in the US, the bank will see this on your second passport and list you as an American until you provide them proof you’ve renounced your citizenship.

This was a big issue back in 2014. Countries began blocking St. Kitts citizens from entry on grounds that the passport could be used to facilitate terrorism. Of course, this was at the behest of the United States who was looking to enforce it’s FATCA system.

As a result, St. Kitts was forced to recall all passports issued from January 2012 to July of 2014… possibly as many as 16,000 documents. It reissued them with the holder’s place of birth and any other names by which he or she had been known.

A second passport has many benefits, but it doesn’t allow you to cut out Uncle Sam.

Best Second Passports for Sale

Here’s my list of the 10 best second passports for sale. I’ve compared the price to the number of visa-free countries, as well as access to the EU and United States. For this reason, my top 3 passports are all from the EU.

Russia, in 4th position, is a unique opportunity. Citizenship requires you to set up or invest in to an active business in the country. Because of the weakness of the ruble vs the dollar, Russia is currently a value proposition.

Bulgaria

I rate Bulgaria #1 as the best second passport available because it’s one of the two programs where the investor is likely to see her investment again. This offering allows you to invest €512,000 in government bonds in exchange for residency. Then, after a year, invest another €512,000 to gain citizenship. There are also business investment options.  That’s about $1.2 million.

The Bulgaria program ties up your cash for 5 years interest free. That’s right, the government bonds do not pay interest. It will take two years to get your passport and requires you to visit Bulgaria twice. Residence is granted with acceptance and processing of your clean background check.

Most of the programs listed in this best second passport post charge you a fee for the passport. Bulgaria and Cyprus (below) are the only ones where you can expect your principal returned.

  • St. Kitts and other offer real estate investment options, but those come at significant additional cost and your prospects for selling for the purchase price are limited.

A passport from Bulgaria is rated 18th in the world and gives the holder visa-free travel to 153 countries, including Switzerland the United Kingdom. It doesn’t get you visa free in to the US… only Malta and Austria do that. It also allows you to live and work anywhere in the EU.

A passport from Bulgaria may allow you to work in the UK. There has been some political maneuvering on this point and the results are not yet known.

As a partial member of the Schengen region, Bulgaria gets you access to all of Western Europe. Things are changing quickly in this regard as Bulgaria works to become a full member. For more information, see: The Cost for a Second Passport from Bulgaria will Double Next Year

St. Lucia – Best value in 2016

The St. Lucia second passport program is new for 2016 and modeled after the Bulgaria citizenship program. With St. Lucia, you have the option of buying the passport for $200,000 to $250,000 or investing $500,000 to $550,000 in government bonds for five years.

Because this is a new program, very few second passports have been granted. In my opinion, this makes citizenship from St. Lucia a more private and “below the radar” purchase or investment. I prefer these smaller programs to the big names like St. Kitts which has received a lot of attention in the last few years.

St. Lucia provides visa free travel to 121 countries as well as visa free travel to Switzerland or 180-days in the Schengen area of the European Union. Click here are all the visa free countries. At half the cost of Bulgaria, St. Lucia is the best value in 2016.

You could say that the St. Lucia second passport program allows you to double your money in 5 years. Rather than paying $250,000, you invest $550,000, get a passport immediately, and your capital is returned in 5 years.

When you compare St. Lucia to its Caribbean neighbors, it costs a fraction because you get your investment capital back. Total cost would be fees plus interest lost / opportunity cost of the capital invested into government bonds.

Malta

Like Bulgaria, Maltese citizenship gives you the right to live and work anywhere in the European Union. It also allows you to travel visa-free to the United States. Malta and the US have a Visa Waiver program, which operates a bit differently from other systems. 

A Malta passport also gives you access to Switzerland and visa-free travel to 166 countries. A passport from Malta is the 8th most valuable travel document.

The cost of a Maltese passport is $1.57 million dollars plus fees. Expect it to cost around $1.85 million “all in.”

This program is capped at 1,800 passports and there’s a requirement to “reside” in Malta. The number of days you are to be present on the island are not stated and it’s understood you won’t be a full time resident (someone who spends more than 6 months in country). But you should plan to spend “a reasonable amount of time” in Malta, whatever that means.

Cyprus

Cyprus is the third smallest nation in the European Union and made it on to the world stage by seizing wealthy foreigners cash to bail out their banks during their 2013 recession. Surprisingly, from this mess came their current citizenship offer.

In order to bring back international deposits, and ensure these investors wouldn’t face a similar fate, Cyprus began offering passports and citizenship with investments of €2.5 million. As a second passport holder you will receive the same rights and protections of any Cyprus citizen.

Another use of the citizenship program was to compensate the mostly Russian foreign depositors whose cash they’d “borrowed” and converted into equity. Many of these high net worth Russian investors were given special deals in appreciation for their mandatory contribution.

Austria

Austria is the gold standard of the second passport and citizenship by investment programs. If money is no object, this is the passport to buy.

It’s the most valuable passport available for purchase, the best EA passport, and offers visa-free travel to 171 countries. A second passport from Austria is the 4th most valuable passport in the world.

And it’s the most expensive second passport. You can qualify by making a donation of €2 to €4 million or by investing about €10 million in an approved business. Such a business is expected to employ a significant number of people and generate taxable income. The amount of investment and business type are negotiable.

Expect fees and other charges to exceed $500,000 in this program.

Russia

Like the Austrian business program, this citizenship by investment option was approved and signed in to law in late 2014. It’s just getting started and no second passports have been issued as of this writing.

Russia requires you to invest in to a business or setup your own venture that will employ a number of people and generate tax revenues to the country.

Because of the value of the ruble to the US dollar, the Russian offer is one of the most cost effective… and the only from a world power. You might qualify with an investment $165,000.

In 2014, Russian citizens had visa-free or visa on arrival access to 100 countries and territories. This will change in 2015. For example, Ukraine will probably be removed from the list. A Russian passport currently ranks 38th in the world.

Please see my post Russian Second Passport Program for more information. Remember that this opportunity is focused on bringing business and jobs into Russia rather than cash from the sale of passports, so it functions differently from the others described here.

Dominica

Dominica is the least expensive of the Caribbean passports. A second passport from Dominica will cost a family of four (applicant, spouse and two children under 18-years-old) about $250,000, plus $25,000 for each additional child under age 25. With filing, registration and professional fees, applicants can anticipate a total cost of $350,000.

To put it another way, 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.

The discount is necessary based on how we value second passports. A travel document from Dominica gets you visa-free travel to only 91 countries, making it the 41st most valuable travel document.

Please see my Second Passports article for fees and other information on Dominica (near the bottom of the page).

Antigua and Barbuda

Like St. Kitts (below), you can buy an Antiguan passport for a $275,000 donation or a $500,000 investment in real estate, plus about $60,000 in fees. Also like St. Kitts, the passport gives you visa-free travel to 132 countries and is ranked 24th.

The St. Kitts and Antigua programs are mirror images of each other. If you’re going to buy the passport by making a donation to the government, you might as well save yourself $50,00 and go with Antigua. If you choose real estate, then St. Kitts might be the better choice.

As of April 14, 2015, a second passport from Antigua gives you visa-free travel to Canada, where a passport from St. Kitts does not.

St. Kitts and Nevis

St. Kitts has become the #1 seller of second passports in the world. You can buy a passport with a $295,000 “donation” to their sugar fund or by investing at least $500,000 in real estate. You never need visit St. Kitts nor take a citizenship test… simply pay the money or buy the property and you’re good to go.

Unless you plan to live in St. Kitts, I recommend the “donation” option. Real estate in St. Kitts is overvalued. When you add in taxes and maintenance costs, you’re better off paying the fee. And you’ll be lucky to find a single family home for around $500,000… more likely $800,000 to $1 million.

If you insist on the real estate tract, consider a condo timeshare. But, be warned, the island is filled with mostly empty timeshares and you’ll have a tough time recouping your “investment.”

The St. Kitts passport will get you visa-free travel to 132 countries, with Brazil being recently added to the list. Unfortunately, in November of 2014, Canada announced it would no longer allow St. Kitts citizens to enter without a visa.

The St. Kitts passport is ranked 24th in the world in 2016. Expect it to drop a few notches in 2015. Please see my Second Passports page for details.

Grenada

Grenada reopened its citizenship by investment in 2014 (having closed it from 2001 through 2013). The current version requires an investment of $250,000 in an approved real estate project.

A second passport from Grenada lets you access 110 countries, including the United Kingdom, Hong Kong, South Korea, Singapore, Panama, and most British Commonwealth nations. It does not give you visa-free travel to Canada or the US.

As far as I can determine, only one real estate development has been approved, the Mount Cinnamon Resort and Beach Club. Had there been more investment options, I may have ranked Grenada above St. Kitts. It’s a second passport which is not on anyone’s radar and a transaction which can be completed in private.

 

Residency / Long Term Options

If you’re willing to wait a few years, and to live in the country to prove your commitment, you can earn citizenship after a period of residency. The best options are:

  • Argentina (2 years),
  • Belgium (5 years),
  • Singapore (3 years),
  • Uruguay (3 years if married 5 if single),
  • Paraguay (3+ years),
  • Australia (4 years),
  • Chile (5 years), and
  • Panama (5 years),

Of these, my favorite is Panama. Panama offers the best tax deal and residency can be obtained for as little as $8,500 (single applicant) through their “favored nations visa” program.  It’s also possible to get residency in Panama for free if you combine it with an investment in teak. For more on  this, see: Best Panama Residency Program by Investment.

I hope you’ve found this post helpful. For more information on second passports and economic citizenship programs, please contact me at christian@premieroffshore.com.

Belize Residency Program
Christian Reeves

Belize Residency Program Primer

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The Belize residency program is the best available if you want to live in Belize or if you’re on a budget. If you want access to a larger city, to operate a business, eventually gain citizenship, or not be required to live in your country of residence, look to Panama.

If you want to retire to happy and beautiful Belize, this residency program is for you. If you have a passport from a restricted country and can’t afford Panama, look to Belize.

The Belize residency program allows you to live and retire in Belize. If you’re a US citizen, it will help you maximize the value of the Foreign Earned Income Exclusion. Here’s everything you need to know about the Belize residency program.

 

Basics of the Belize Residency Program

Unlike Panama, the Belize residency program is focused on people who wish to “retire” abroad. But they use the term “retirement” quite liberally. In this context, it means that you have a pension or other type of guaranteed income stream of $2,000 or more per month and are at least 45 years of age.

And the cash doesn’t need to come from an IRA or other traditional retirement scheme. It simply needs to be a guaranteed payment (like an annuity) over a number of years. So, if you’re over 45 years of age, you can purchase an annuity of $2,000 per month and you qualify for the Belize residency program.

Also unlike Panama, Belize isn’t picky on who can qualify for residency. Anyone, no matter what passport you hold, who is 45 years of age or more and has a pension of $2,000+ per month can become a resident of Belize.

  • The only other limitations are that you must pass a medical check and a background check (no criminal history). They don’t want a repeat of John McAfee!

In Panama, those with US, UK, and EU passports have an easy go of it. Everyone else must pay to play. For a detailed article, see Panama Residency from Restricted Countries.

Another distinction is that the Panama residency program has a path to citizenship. This Belize residency program does not… there is no Belizean second passport at the end of the road.

Remember that the Belize program is meant  for those who want to live in the country. So, one of the added benefits is that you can many thousands in taxes and import duty. But I am getting ahead of myself….

Let me tell you a bit more about Belize:

Belize is located at the south eastern tip of Mexico, so a short flight from the US. What draws me to the country is that English is the official language and spoken everywhere. No need to learn a language… no communication problems here.

Belize is the ONLY country in Central America where English is the official language. All business is conducted in English and everyone you come in contact with is fluent. In fact, while I often need my broken Spanish in my home town of San Diego, California, I have never needed it in Belize.

The Belize residency program is a great opportunity because of the many advantages the country has to offer.

First and foremost, cost of living is low.

Second, you can structure your life and business to pay zero taxes in Belize.

Third, because it’s tourist mecca there are tons of attractions, great weather much of the year, a slower but efficient pace of life, friendly people, beautiful beaches, to many islands to count (ok, Belize has 86 islands, but that’s alot!) and the list goes on…

Fourth, the US dollar is accepted as currency in Belize.

 

Here’s a list of reasons to sign up for the Belize residency program.

  • The low cost of living in Belize is one of the biggest reasons why one should think of moving to Belize
  • In Central America Belize is the only English speaking country, as I have already mentioned English is the official language
  • Real estate can be owned by foreigners (no fancy trusts or 99 year leases as in Mexico)
  • Easy access from the US and Canada
  • Being such a friendly country people are drawn by their loving and welcoming nature
  • There are no strict rules to the title to property owned in Belize, it could be taken individually, jointly or in a corporate name
  • One receives fee simple title to your property when purchasing in Belize
  • Financing is also easily available when purchasing property in Belize
  • Incentives is being offered by the government of the Caribbean to encourage more tourism
  • The cruise traffic has risen up to 300% in the last 5 years. This might sound like a negative, but a strong economy rises all boats!
  • Being a British commonwealth country Belize has a long standing tradition and independent judiciary
  • Belize is very diverse with rainforest, rivers, waterfalls, beaches and also tropical forest
  • The exchange rate is stable and fixed. US $1 = BZ $2
  • The waters in Belize is one of the best dive sites in the Hemisphere being the second largest reef in the world
  • The number of retirees gives opportunity to make friends and being social

 

Belize Residency Program – Qualified Retired Persons Incentive Program (QRP)

Ok, enough pontificating on why I love Belize. Let’s get back to the Belize residency program.

Anyone, and I mean anyone, that is at least forty five of years of age and can put up a CD earning $2,000 per month, can qualify for the Belize residency program. Just pass a background and medical check and you’re golden.

You will also need to open a bank account in Belize with cash to pay your local bills while living in the country. I typically recommend an account with an opening balance of at least $24,000 (24 months of expenses).

Sign up for the Belize residency program and bring your family along for the adventure.

A qualified person can bring along his or her dependents – children who are under 18 years of age or who are person up to the age of twenty three if enrolled in a University. “Dependants” also include your spouse… everyone but the primary applicant is called a dependant.

This program was created for people of means who wish to live in Belize and who can prove a consistent permanent income from abroad with a pension or other form of annuity.

As such, the Belize residency program allows you to bring anything you need to live into the country tax / duty free. This includes cars, boats, planes, and everything necessary to build and outfit a home. If you are planning to live in Belize, the Belize residency program can save you tens of thousands of dollars on import duties alone.

 

Here’s how it works and how much it costs to get residency in Belize:

The applications are processed by the Belize Tourism Board in collaboration with the Ministry of National Security and the Department of Immigration and Nationality.

We will take you step by step through the Belize residency program. We will complete an application forms, coordinate your visits and medical, make your best claim for residency to the government, etc.  

Items we will need are:

  • Birth and marriage certificates (the latter is only required if you wish to sponsor your spouse),
  • Copy of police record from current place of residence,
  • Notarized copy of every page of passport,
  • Medical certificate proof that shows that you do not carry any transmitted disease such as AIDS,
  • The items necessary to open a local bank account, like bank reference letters, and
  • Four front and four side view passport sized photographs.

Proof of income can be in the form of a bank reference letter or a bank statement mentioning the figures to at least be  US $2,000 per month receivable as pension or retirement income. Or any financial statement from a financial institution in Belize stating that your account will be generating $2,000 per month.

If you’re an entrepreneur, we can help you structure your business so that you are not paying taxes in Belize. This typically means a corporate structure in another tax free jurisdiction like Panama.

Legal fees to prepare, file and negotiate Belize residency with Premier are $5,950 for the primary applicant and $3,350 for each dependant. Government fees are $1,000 for the primary applicant and $750 for each dependant plus $200 per person for the Belize residency card.

If you are interested in be Belize residency program, please contact me at info@premieroffshore.com. I will be happy to work with you to develop your international plan.

Residency in Panama from Restricted Countries
Christian Reeves

Residency in Panama from Restricted Countries

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If you are a US or EU citizen, it’s very easy to get residency in Panama. I write about this all the time while singing the praises of Panama’s various visa programs.

For example, the Friendly Nations Visa will allow you to live and operate a business in Panama for about $8,500. Forget investing in overpriced real estate… just pay the fee and you’re golden.

This applies to people holding passports from the following 50 friendly nations:

  • Great Britain
  • Germany
  • Argentina
  • Australia
  • Republic of Korea
  • Austria
  • Brazil
  • Belgium
  • Canada
  • Spain
  • USA
  • France
  • Finland
  • Netherlands
  • Ireland
  • Japan
  • Norway
  • Czech Republic
  • Switzerland
  • Singapore
  • Uruguay
  • Chile
  • Sweden
  • Poland
  • Hungary
  • Greece
  • Portugal
  • Croatia
  • Estonia
  • Lithuania
  • Latvia
  • Cyprus
  • Malta
  • Serbia
  • Montenegro
  • Israel
  • Denmark
  • South Africa
  • New Zealand
  • Hong Kong
  • Luxembourg
  • Liechtenstein
  • Monaco
  • Andorra
  • San Marino
  • Taiwan
  • Costa Rica
  • Mexico
  • Paraguay

If you’re holding a passport from one of these countries, you’re golden. Pay your fee and move to Panama.

But what about the rest of the world? What if you are not on the friendly nations list? Then get ready to pay to play.  

Panama Restricted Countries:

If you are holding a passport from one of the following “restricted” countries, must prove your net worth and jump through all kinds of hoops to get into Panama.  And you must find a way in to Panama before you can apply for residency (as a tourist or with a special invitation from an attorney or large corporation).

Afghanistan, Albania, Algeria, Alto Volto, Angola, Armenia, Azerbaijan, Bahrain, Bangladesh, Belarus, Benin, Bhutan, Bosnia, Bulgaria, Burkina Faso, Burma, Burundi, Cambodia, Cameroon, Cape Verde, Central African Republic, Comoros, Cote d’ivoire, Cuba, Dominican Republic, Equatorial Guinea, Eritrea, Ethiopia, Fiji, Gabon, Gambia, Georgia, Ghana, Guinea, Guinea Bissau, India, Indonesia, Iran, Iraq, Jordan, Kazakhstan, Kenya, Kiribati, Kuwait, Kyrgyzstan, Laos, Lebanon, Lesotho, Liberia, Libya, Macedonia, Madagascar, Malaysia, Malawi, Maldives, Mali, Marshall Islands, Mauritania, Mauritius, Micronesia, Moldova, Mongolia, Morocco, Mozambique, Myanmar, Namibia, Nauru, Nepal, Niger, Nigeria, North Korea, Oman, Palau, Palestine, Papua New Guinea, People’s Republic of China, Qatar, Romania, Rwanda, Saudi Arabia, Senegal, Seychelles, Sierra Leone, Slovakia, Slovenia, Solomon Islands, Somalia, South Africa, Sri Lanka, Sudan, Swaziland, Syria, Tanzania, Tajikistan, Togo, Tonga, Tunisia, Turkey, Turkmenistan, Tuvalu, Ukraine, United Arab Emirates Uzbekistan, Vanuatu, Vietnam, Yemen, Zaire, Zambia, and Zimbabwe.

As I said above, you must be in Panama as a tourist or be invited in by a lawyer or business. If you can get a tourist visa, then you can file to amend your status once you are in the country. If you can’t get a visa, then expect to pay for an invitation letter. The going rate is $5,500 per person per letter. So, a family of 4 will need 4 letters (yes, your kids will need an invitation letter).

Fyi… if you have a valid visa for Australia, any European Union country, Canada or the USA, you can usually enter Panama so long as you have a return ticket. Speak with your travel agent before traveling to Panama on a non-Panamanian visa.

  • When traveling to Panama from a restricted country, you should have a valid visa, passport, minimum of $500, bank statement, travelers check or credit card and a valid onward or return ticket.

So, if you can get into Panama as a tourist you will save some cash on the invitation letter.

Once you’re in, here’s how to gain residency in Panama from a restricted country:

  1. Form a Panama corporation, preferably owned by a Panama Foundation with you as the founder. The corporation will operate a business and the Foundation will serve as your “persona” in the country.
  2. Deposit $200,000 or more in to a personal account held as an 18 month CD. The intent here is to prove you can afford to support yourself while in the country and that you intend to “contribute to the economy of Panama.”
  3. Apply for a change in status and residency. Minimum legal and application fees: $15,250. Processing time 2 to 6 months.

If you are holding a restricted passport and would like to become a resident of Panama, please contact me for more information. Send an email to info@premieroffshore.com or call me directly at (619) 483-1708.

Christian Reeves

Estonian E-Residency Makes No Sense

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The tiny country of Estonia is selling a new kind of residency… one it calls e-residency or e-citizenship. Here’s the bottom line on why e-residency in Estonia is a waste of time for Americans… and might get you into trouble with the IRS.

The Estonian e-residency program has been written up by the Wall Street Journal and The Guardian, and recommended by Simon Black and International Man. Simon went so far as to suggests it will change the “nation state” as we know it.

What a bunch of BS… here’s the real story.

Let’s start with the pitch: Sign-up for e-residency, turn over your information and biometrics, pay small fee (about $62), appear at one of their embassies and you get a biometric ID card.

What can you do with your Estonian e-residency card? Not a lot.

That card “allows” you to form a company in Estonia online. WIth corporation in hand they  might, just might, allow you to open a bank account in the country. Note that you’ll need a legitimate business purpose and travel to the bank in Estonia to open the account.

The ID card doesn’t make the process of opening an offshore bank account easier or provide any additional privacy. The bank will want all of the usual supporting documents, such as your US passport and reference letters. No, you can’t use the card as your ID to open the bank account and they’ll report your account under FATCA just like any offshore bank.

Sure, e-residency in Estonia sounds hip and cool, but it offers zero value. In fact, it might get you into trouble.

Now, you might be wondering what I’m on about. So what if people want to spend $62 for an online ID card? Most of the headlines cited above are from 2014. Why am I harping on it now?

Because the Estonian e-residency program might cause all kinds of confusion and IRS trouble for Americans.

First, e-residency isn’t a path to citizenship, a second passport, or even traditional residency. It’s only an online identification card… which doesn’t include your photo, so it can’t even be used as an ID or travel document in the normal world.

And here’s my real concern with this program:

I new client came into my office last week looking to prepare his U.S. taxes. Let’s call him Bob.

Bob spent about 240 days out of the U.S. in 2014, operated an online business through an offshore corporation and netted about $100,000.

Bob thought he qualified for the Foreign Earned Income Exclusion because 1) he was out of the US for most of the year and 2) he was an e-resident of Estonia.

Bob was wrong. In order to qualify as a resident of a foreign country under the FEIE you must be living in the country, have legal resident status, and generally “make that country your home.” You should be filing taxes there and it should be your base of operation… the place you return to after traveling.

Estonia’s e-residency program provides none of those things. Sure, you can call yourself a resident, but all you really have is a fancy online ID card.

Had he not been confused, Bob could’ve qualified for the FEIE without putting down roots or paying for a real residency permit. But he should have been out of the U.S. for 330 out of 365 days, not 240.

Had he not been confused by internet sites hyping Estonia’s e-residency program, and had he planned his offshore business structure properly, he could have saved big money in 2014 and again this year.

This confusion cost Bob about $36,000 in US taxes in 2014. He’ll probably pay through the nose again this year. He relied on the e-residency program, and his own research rather than a hiring a professional, and got burned.

Those of us who write about the offshore industry are always looking for the next big thing. What can we do to increase privacy and protect our assets? In the case of Estonian e-residency, I must call BS.

The bottom line is that Estonia e-residency offers little value to the American and is likely to do more harm than good.

You will find many articles on this site on how to legally minimize taxes and protect your assets abroad. If you’re new to this offshore thing, take a read through my Getting Started section.

Don’t be like Bob. Hire a firm experienced in U.S. tax planning to form your offshore structure and plan your offshore adventure.

 

Russian Second Passport
Christian Reeves

Russian Second Passport and Citizenship

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Russia will begin offering second passports and economic citizenship in early 2015. The law authorizing citizenship by investment was passed on June 23, 2014 and we await its implementation. Expect second passports to be issued by Russia in the next few months.

This is the first world power to offer a second passport or economic citizenship by investment. And the costs are lower than passports from Caribbean islands. Here’s what you need to know to get a second passport from Russia.

Introduction to Second Passports

Let me take a minute to review second passports with you. There are several ways one can gain citizenship, and thus a passport, from another country.

  • If your parents or grandparents were born in certain European countries, you might be able to get citizenship by lineage / descent.
  • You can move to a number of countries, live there for 7 to 10 years, and apply for citizenship.
  • You can usually marry a citizen and qualify for citizenship. Though, this is not always guaranteed, so read the fine print first!
  • You can (legally) purchase a passport from countries such as Dominica and St. Kitts.
  • You can make an investment in to a few countries and receive citizenship.

It’s this last option Russia is offering. Start a business, or invest in a company and bring with you a needed skill, and gain citizenship within three years. And  you will get residency in the interim.

So, if you have a profitable business and dreams of “pulling a Snowden,” Russia is calling.

Visa Free Travel with a Russian Passport

We usually value a passport by the number of visa free countries it offers. Using this criteria, a second passport from Russia is one of the best.

A person traveling on a Russian passport may visit 78 countries visa free. Plus, another 35 will issue a visa upon arrival and 9 will grant an electronic visa. So, by my count, about 122 countries are easily accessible.

Some “easy access” countries are:

  • Brazil,
  • Chile,
  • Colombia,
  • Costa Rica,
  • Cuba,
  • South Korea,
  • Mexico,
  • Most of the Caribbean,
  • Panama and
  • Hong Kong.

I note that this list is based current published data (last updated Nov. 2014). I expect there will be changes in the coming months. For example, Ukraine might not allow visa free travel any longer.

Investment Requirements

Per sections 1(g) and 1(h) of the statute below, there are two paths to a second passport by investment in Russia.

The first is for the entrepreneur or self-employed individual. Move your business to Russia and, if your taxable profits from that business are 10 million rubles or more over in each of the next three years, you will earn citizenship.

The second is for a specially skilled worker who invests in to a large business. Invest 10 million rubles, own at least 10% of the total shares after the investment, with a total capitalization of at least 100 million rubles, and pay taxes of at least 6 million rubles per year for three years, and you will qualify for citizenship.

At the time of this writing (February 19, 2015), 10 million rubles is about $162,000 US dollars and 100 million rubles is about $1.6 million USD.

So, start a business in Russia that has net profits of $161,000 and you qualify for a second passport as a self employed businessman.

Otherwise, you can buy at least 10% of a business with total capital of $1.6 million and which pays $161,000 per year in taxes. This second option can be done as an investment group or as an individual. For example, you could invest $2 million and own 100% of the shares. To qualify under this section, you must also be bringing an important skill with you in to the country.

But remember, it’s not just about the investment. Your business must be profitable for the three years preceding your application for citizenship. You will need to hit the ground running and earning to hit these numbers.

I also note that one reason this is such an attractive program is the strength of the dollar vs the ruble. Don’t expect that to last for more than a couple of years. But, while it does, $161,000 compares favorably to a St. Kitts citizenship which costs anywhere from $250,000 to $450,000.

Get a Free Passport from Russia

Here’s some food for thought: One could say that the second passport and economic citizenship program offered by Russia is free. That’s right, you can get a second passport from Russia for free! In fact, you might even make a PROFIT from your new passport.

Before you assume I’ve been hitting the vodka a bit too hard, here’s my reasoning:

You will pay tax on your business profits to one country or another. The only thing certain is death and taxes. So, you can buy a second passport from St. Kitts or you can move your business to Russia, pay some of your taxes to that country, and earn a second passport on the side.

Let’s say you’re operating a successful internet based business in Silicon Valley and your total US tax obligation is 40%. If you take a salary of $300,000, you’re paying $120,000 in taxes. Bump those profits up to $1 million and you’re paying $400,000 in US taxes.

Even if you move your business offshore and qualify for the Foreign Earned Income Exclusion, only the first $100,000 is tax free. If you take $300,000 in salary, you will pay about $60,000 for the right to hold a US passport. Take $1 million and pay $300,000 (I’ve assumed State taxes don’t apply). For more on this, see my post Foreign Earned Income Exclusion 2015.

Taxes in Russia on $300,000 in salary are $39,000. Taxes on $1 million in wages is $130,000. See details below.

If you move that business to Russia and renounce your US citizenship you pay nada to Uncle Sam. Brave the Russian winter to pay less in taxes and get a passport for free!

Taxation in Russia

You may elect to be treated as a foreign national and non-tax resident of Russia during your first three years before citizenship is granted. To avoid becoming a tax resident, you shouldn’t spend more than 183 days in country during any 12 month period.

A non-resident is taxed on their Russian sourced income as follows:

  • Ordinary income from within Russia: 30%. If you obtain a visa as a “highly skilled specialist,” this is reduced to 13%.
  • Dividends from Russian companies: 15%
  • Gains from real estate are taxed at 30%

If you become a tax resident of  Russia during those 3 years, and once you receive your passport, you’ll pay Russian tax on your worldwide income as follows:

  • Ordinary income: 13% – also applies to most other types of income such as short term capital gains
  • Dividends from Russian companies: 9%
  • Long term capital gains in real estate (property held for over 3 years) is tax free.

Russia operates on a flat tax. They deduct either 13% or 30% from your pay and 9% or 15% from dividend payments.

Therefore, if you give up your US citizenship and become a Russian passport holder, you’re exchanging America’s 40%+ ordinary income rate and 23.8% long term capital gain rate for Russia’s 13% flat tax and long term property exemption.

If you’re a high net worth non-resident, you might negotiate a tax contract along with your citizenship. For example, you might agree to pay $300,000 per year in taxes regardless of your worldwide income. I’ll leave this one for another day.

I hope you have found this post helpful. Please phone me at (619) 483-1708 or email Christian Reeves at info@premieroffshore.com with any questions.

Russia’s Second Passport Statute

Here is an an English translation of Russia’s second passport and economic citizenship program. The original (for those of you who can read Russian) is at http://www.consultant.ru/popular/civic/34_2.html#p172

This post covers 1(g) and 1(h) only.

1. Foreign citizens and stateless persons residing in the territory of the Russian Federation, may apply for admission to Russian citizenship in a simplified manner without observing the conditions of the period of residence specified in paragraph “a” of the first part of Article 13 of this Federal Law, if these citizens and persons:

a) were born on the territory of the RSFSR and had the nationality of the former Soviet Union;

b) are married to a citizen of the Russian Federation for at least three years;

c) are unable to work and have a capable son or daughter under the age of eighteen years and who are citizens of the Russian Federation;

d) have a child who is a citizen of the Russian Federation – in case the other parent of the child who is a citizen of the Russian Federation, died a court decision which entered into force, declared missing, incapable or limited in capacity, deprived of parental rights or restricted parental rights; (introduced by Federal Law of 28.06.2009 N 127-FZ)

e) have a son or daughter under the age of eighteen years who are citizens of the Russian Federation and the decision of the court, which entered into force, recognized as incapable or limited in capacity, – if the other parent said citizens of the Russian Federation, a citizen of the Russian Federation, has died or a court decision, which came into force, declared missing, incapable or limited in capacity, deprived of parental rights or restricted parental rights; (introduced by Federal Law of 28.06.2009 N 127-FZ)

f) received after July 1, 2002 vocational education in basic professional educational programs, state-accredited, educational and research institutions of the Russian Federation in its territory and carry out work in the Russian Federation in the aggregate not less than three years before the date of the application for admission the citizenship of the Russian Federation; (introduced by Federal Law of 23.06.2014 N 157-FZ)

g) self-employed and carry on business in the Russian Federation for at least three years preceding the year of the application for admission to citizenship of the Russian Federation, and in this period of their annual revenue from the sale of goods (works, services) as a result of doing business in established by the Government of the Russian Federation economic activities is not less than 10 million rubles; (introduced by the Federal Law of 23.06.2014 N 157-FZ)

h) are investors, whose share of the contribution in the authorized (share) capital of a Russian legal entity operating in the territory of the Russian Federation established by the Government of the Russian Federation economic activities, is not less than 10 percent. The size of the authorized (share) capital of such entity and the size of its net assets must not be less than 100 million rubles each or the amount paid by such entity tax to the budget system of the Russian Federation and mandatory insurance payments must be at least 6 million rubles a year on for at least three years from the date of investment; (introduced by Federal Law of 23.06.2014 N 157-FZ) and exercise at least three years prior to the date of the application for admission to citizenship of the Russian Federation labor activity in the Russian Federation in the profession (specialty positions) included in the list of professions (specialties, positions) of foreign nationals – qualified professionals who are entitled to receive Russian citizenship in a simplified manner approved by the federal executive authority responsible for the formulation and implementation of public policy and legal regulation in the sphere of employment and unemployment. (“And” introduced by the Federal Law of 23.06.2014 N 157-FZ)

2. Foreign citizens and stateless persons permanently residing lawfully in the territory of the Russian Federation, recognized native Russian speakers in accordance with Article 33.1 of this Federal Law, may apply for admission to the citizenship of the Russian Federation under the simplified procedure, provided that the said citizens and persons:

a) undertake to comply with the Constitution of the Russian Federation and the legislation of the Russian Federation;

b) have a legitimate source of livelihood;

c) abandoned their existing foreign citizenship. Renunciation of citizenship of a foreign state is not required if provided for by international treaty of the Russian Federation or if the renunciation of citizenship of a foreign country is not possible through no fault on behalf of causes. (Federal Law of 23.6.2014 N 157-FZ , from 14.10.2014 N 307-FZ )

3. Disabled foreign citizens and stateless persons who arrived in the Russian Federation from countries that were part of the Soviet Union, and the registered place of residence in the Russian Federation as of July 1, 2002, may apply for admission to the citizenship of the Russian Federation in the simplified order without complying with the conditions of the period of residence in the territory of the Russian Federation specified in paragraph “a” of the first part of Article 13 of this Federal Law, and without presenting a residence permit.

4. Foreign citizens and stateless persons who had citizenship of the USSR, arrived in the Russian Federation from countries that were part of the Soviet Union, and the registered place of residence in the Russian Federation as of July 1, 2002 or to obtain a temporary residence permit in the Russian Federation or residence permit shall be adopted Russian citizenship in a simplified manner without observing the conditions stipulated in paragraphs “a”, “c” and “d” of the first part of Article 13 of this Federal Law, if they are before 1 July 2009, stated their wish to acquire citizenship the Russian Federation. (Federal Law of 03.01.2006 N 5-FZ , from 01.12.2007 N 296-FZ , from 30.12.2008 N 301-FZ )

5. In the citizenship of the Russian Federation shall be adopted in a simplified manner without observing the conditions stipulated in paragraphs “a”, “c”, “d” and “e” of the first part of Article 13 of this Federal Law, and without presenting a residence permit veterans of Great Patriotic War had the nationality of the former Soviet Union and residing in the territory of the Russian Federation.

6. The citizenship of the Russian Federation shall be adopted in a simplified manner without observing the conditions stipulated by the first part of Article 13 of this Federal Law, the child and the incapable person who are foreign nationals or stateless persons:

a) a child, one of whose parents is a citizen of the Russian Federation – at the request of the parents and with the consent of the other parent on the child’s acquisition of citizenship of the Russian Federation. Such consent is not required if the child resides in the territory of the Russian Federation;

b) the child, a single parent is a citizen of the Russian Federation – at the request of the parent;

c) a child or incapable person under guardianship or custody of a citizen of the Russian Federation, except as provided for by Part 1 of Article 13 of the Federal Law of April 24, 2008 N 48-FZ “On guardianship” (hereinafter – the Federal Law “On guardianship “) – at the request of a guardian or trustee; (Federal Law of 20.04.2014 N 72-FZ)

d) a child placed under supervision in the Russian organization for orphans and children left without parental care, except as provided by paragraph 2 of Article 155.1 of the Family Code of the Russian Federation – at the request of the head of the Russian organization that placed the child; (introduced by Federal law from 20.04.2014 N 72-FZ)

d) incapable person placed under supervision in the Russian educational organizations, medical organizations, organizations providing social services, or another Russian company, except as provided by Part 4 of Article 11 of the Federal Law “On guardianship” – at the request of the head of the Russian organization that is placed incapable person.

U.S. Passport
Christian Reeves

Should I Give My Son a U.S. Passport?

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My son Timothy is nearing his first birthday and our household is filled with debate and discord.  Should I give him a U.S. passport?  Is a U.S. passport his birthright or a curse?  Should my son identify as a U.S. citizen, a Panamanian, or both?

Allow me to give you a bit of background.  I am an expat American living and working in Panama.  I spent 15 years in the U.S. as a tax lawyer and now call Panama home.  Timothy was born in Panama, his mother is Panamanian, and he holds a passport from Panama.  By filling out a few forms he can become a U.S. citizen and become subject to the laws of my home country.

As a Panamanian, he has no trouble visiting the U.S.  We travel to San Diego often to see his grandparents.  He and his mother both have 10 year U.S. visas and I don’t expect travel to become an issue.

A Panamanian passport is a solid travel document that gives him access to most countries.  Had his mother been Cuban or Venezuelan we wouldn’t be having this debate…he’d have a U.S. passport.  Likewise, if his mother was from the U.K. or an EU country, we wouldn’t have an issue…I wouldn’t burden him with U.S. citizenship.

My position on second passports for U.S. persons is that they provide wealth and lifestyle insurance.  If you hold a second passport, you have the ability to give up your U.S. citizenship, stop paying U.S. taxes, stop reporting your income and assets as an expat, and become a more complete part of whichever country you have decided to make your home.  You might pay a significant “exit tax” but you will be free and international banks will no longer report your transactions under the Foreign Account Tax Compliance Act (FATCA).

While that’s all fine and good for adults, what about a child who’s just starting out in life?  Do I have a right to impose my biased worldview (all be it based on experience) by refusing him U.S. citizenship?  Is U.S. citizenship something to be valued or a burden that he will have to carry in the years to come?  Am I helping him to walk in my footsteps and to benefit from my experience?

Being the logical sort I made a list of pros and cons of giving little Timothy a blue passport:

For

  • Easy access to U.S. schools,
  • Can live in the U.S., as I did,
  • College scholarships and aid are available to U.S. citizens
  • Work in the United States during and after college,
  • Right to renounce U.S. citizenship if he chooses… gives him the right to decide when he’s of age,
  • Gives him a choice in where to live, go to school, and in the lifestyle he finds to his liking.  My choice is to live in Panama and vacation in Colombia, but I spent 35 years in the United States.  Without citizenship, Timothy wouldn’t have that opportunity.

Against

  • The U.S. could prevent Americans from renouncing their citizenships or make it more difficult.  Since FATCA, expatriations have quadrupled and are expected to double again in 2015.
  • U.S. citizens are taxed on their worldwide income, no matter where they live.
  • U.S. citizens are a part of the U.S. tax, legal, and court system.  He will always be subject to the whims of U.S. judges and politicians.
  • U.S. citizens can be forced to return at any time for any reason.
  • A risk of falling in to the U.S. inheritance and estate tax system if parents were to pass away unexpectedly.
  • Costs of compliance with U.S. tax laws of about $2,500 per year on average.
  • Costs of $10,000+ to expatriate.

* If you can think of arguments on either side, please post them as comments.  This is obviously an area near and dear to my heart.

As I write them out, it seems most of the benefits apply through Timothy’s college days and then come the risks and costs of being an American.  It becomes time to pay the piper, as it were.

As long as the laws don’t change, one might come to the conclusion that he should hold U.S. citizenship through college and then renounce if he so chooses before making any real money.

Of course, the risks of a law change are significant.  Also, the risk that we as a family put off expatriation too long and he gets caught up in legal troubles or tax problems with the great collector is a concern thousands of expats, especially Canadians with U.S. parents, are dealing with today.

Let me take a minute to explain my thought process.  We American expats wear a scarlet letter A on our chests, which is now stamped on any financial transaction or bank account application we touch. The majority of international banks, brokerages, insurance providers, and mortgage lenders don’t want to have anything to do with us.  Since FATCA turned foreign banks tellers into unpaid IRS agents, we are persona non grata in many corners of the world.

And this will impact Timothy’s early life.  It will limit his ability to get a “starter” job at most companies in Latin America.  Almost no one is willing to hire an American citizen these days.

* Of course, as his mother points out, he can always work here at Premier!

Also, being an American means that the U.S. government will collect massive amounts of information on his life and financial history.  Is it right to allow the American authorities to invade his privacy from day one?  Is it preferable to keep him away from his unscrupulous and nosy Uncle?

And these issues extend to Timothy’s mother.  Spouses of U.S. citizens with shared ownership of assets are subject to FATCA’s disclosure requirements.  Because she chose an American (me), all of her personal data and banking information are likely to be shared with the United States.  This may currently applies to joint accounts, but I expect Panama to take the conservative or CYA approach of sending all data.  They will report on their own citizens if there is any risk of running afoul of the U.S. authorities.

Finally, if I don’t give Timothy a U.S. passport, is he at risk of being caught up in the U.S. tax system anyway?  Will banks only consider clients with U.S. addresses or passports and send them to the IRS?  Will they take the extra step of doing a forensic analysis of everyone’s account activity, legal status, and ancestry?

When you look at FATCA, a complete analysis of all customer data is what the law requires.  How far the banks will go is to be seen.

So, there’s my dilemma.  Do I give my son a U.S. passport?  Our household is greatly divided on the issue.  Your comments or suggestions are welcome.

Give Up U.S. Citizenship
Christian Reeves

Give Up U.S. Citizenship

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As America becomes ever more intrusive in the daily lives of expats and residents alike, and the tax burden of the “haves” increases each year, the number of people giving up U.S. citizenship is also increasing. In some studies, the number whom give up U.S. citizenship has grown by a factor of 10 in five years.

First, let’s talk about what you get when you give up U.S. citizenship. You get a life free of the U.S. IRS. You’ll never need to pay in to the U.S. tax system again. While the U.S. does tax its citizens no matter where they live, once you dump that blue passport, you’re free of Uncle Sam.

It is fear of the IRS, and unreasonable taxation of Americans abroad, that are the most common reasons cited by those who give up U.S. citizenship. I think it is safe to say that, if the U.S. stopped taxing its citizens living abroad, the number of expatriations would drop significantly.

Note that the U.S. taxes its citizens on passive/investment income no matter where they live. If you also earn a salary from a foreign corporation, and qualify for the Foreign Earned Income Exclusion, you can earn up to $99,200 before Uncle comes calling. If you are living abroad, and your primary source of income is a salary or an active business, you may be able to operate tax free without expatriating.

If you are convinced you want out of the U.S. system, there are three steps you must take BEFORE you disengage.

–  Step 1: Move your assets out of the U.S. and to a tax free offshore jurisdiction

– Step 2: Decide where you would like to live abroad … where you would like to make your home base.

–  Step 3: Obtain a Second Passport

Step 1: Move your Assets Out of the U.S.

Even while your most important asset is in America (you), begin moving liquid assets and retirement accounts out of the U.S. Before you give up U.S. citizenship, you must plant that first flag offshore in the form of a corporation, business and/or investment accounts under the foreign structure, and more your retirement accounts abroad.

We can provide introductions to a number of offshore banks and brokerage firms, as well as international real estate investments and physical gold facilities. We are experienced in helping citizens diversify out of the U.S. in anticipation of giving up U.S. citizenship. We will ensure you do it effectively, efficiently, and, most importantly, legally.

Even if you are going to invest in to the U.S. markets, you should be doing so through a foreign company and brokerage. Yes, you will have access to all areas of the United States markets, as well as a range of international investment opportunities. If you are looking to diversify out of the U.S. dollar, you can hold your accounts in just about any currency you choose.

Step 2: Identify Countries Where You Would Like to Live

Once you give up U.S. citizenship, you won’t usually be able to live in the United States … though, I did know one person who did exactly this because his spouse changed her mind after the expatriation process was complete. For the rest of us, we shouldn’t plan to spend more than three or four months in America. If you’re here six months, then you are a tax resident, even though you have no U.S. passport, and get to pay U.S. tax on your worldwide income.

So, you need to figure out where you would like to live. Those of you who follow my postings know I’ve been a fan of Panama for a decade, was recently reintroduced to Chile, and have always had a soft spot for Medellin, Colombia, as having the highest quality of life in South or Central America.

Most of my recommendations center around Latin America because I like to be within the same time zone as the United States in nations with first world telecommunications. This is because I am running a business. If I were retired, I think my suggestions would be more diverse.

If you’re undecided on where to live once you give up U.S. citizenship, I suggest you take a look at www.liveandinvestoverseas.com. They are the best site on the web at providing the information and tools future expats need to make decisions.

I will note that where you live does not need to be the same country where you bank or invest, but it should be where you obtain a residency permit. I believe you should hold your assets in a country other than where you reside and plant multiple flags to ensure maximum diversification. Keeping in mind that most countries don’t tax worldwide income, this is usually an effective tax mitigation technique.

Though, you should live in a country that will grant you a residency. This will allow you to maximize the Foreign Earned Income Exclusion during your first year or two and while you are in the process of giving up U.S. citizenship. If you’re a resident of the country where you live, then you can spend more time in the U.S. If you don’t gain residency, then you must be out of the U.S. for 330 of 365 days and other issues may arise that will cost you when it comes tax time.

All of the countries I list above have efficient residency programs. I suggest that the least expensive, that doesn’t require you to make a significant investment and thus commit resources to a particular country, is Panama. Here, you can buy a small teak parcel for about $15,000 and gain residency through their Favored Nations Visa. No matter where you decide to live, you should have a solid understanding and plan for obtaining residency.

Step 3: Obtain a Second Passport

You might be surprised to find that the majority of calls I get from those who want to give up U.S. citizenship forget the most important component to the plan – you must have a second passport to go to before dumping your U.S. document. If you become a person without a country, you won’t be able to travel, open bank accounts, do business, or find a country that will grant you residency. You must have a new passport and citizenship in hand before you can terminate your U.S. tax paying obligations.

For detailed information on how to obtain a second passport, please see my page (top right menu). The basics are these:

You may qualify for a second passport by ancestry, marriage, religion, or extended residence in another country. For example, if your parents were born in certain EU countries, you can qualify for a passport and citizenship. If this is available to you, I strongly recommend you move on it immediately. Many countries have closed these programs, and others are sure to do the same.

Countries like Panama have residency programs that lead to citizenship. They require you to live and invest there for several years before applying, take 5 or 7 years, and are subject to change as national policies and the president change. In other words, the president in office and national policies will change during your residency period, and you are hoping not to be left out in the cold … or required to make a large campaign donation to the current president’s party.

If you don’t want to wait for years, and don’t have parents who can get you citizenship in their home country, then you will need to buy a second passport before you give up U.S. citizenship. The best program is from St. Kitts. I say it’s the best because the passport offers the largest number of visa free travel options. The least expensive with many visa free options Dominica. The lowest cost second passport with limited visa free options is the Dominican Republic.

If you want to buy a second passport, you should be aware that both Dominica and St. Kitts will do a very thorough background check on you and your family. Neither country will grant citizenship to anyone convicted of a felony … and you must provide a U.S. FBI report if you are going to give up U.S. citizenship.

* If you have a non-violent conviction in your distant past, you might have some options. Feel free to send us an email at info@premieroffshore.com with questions.

Thank you for taking the time to read through this post on how to give up U.S. citizenship. For more information, please see my second passport page. Feel free to phone or email us with questions.

Give Up US Citizenship
Christian Reeves

Americans Give Up US Citizenship in Record Numbers

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Record numbers of Americans gave up US citizenship in 2013. As the IRS mafia becomes ever more hostile to its citizenry, Americans give up US citizenship in record numbers. In 2013, 3,000 Americans lined up at embassies around the world to renounce their citizenship and get Uncle Sam out of their pockets for good. This is an increase of well over 200% in the last year, up from 933 renunciations in 2012, 1,780 in 2011 and 235 in 2008.

Why did so many Americans give up US citizenship? The three most common reasons given were 1) the IRS, 2) the IRS, and 3) the IRS.

Let’s take a step back: America is about the only country in the world that taxes its citizens on their worldwide income, regardless of where they live. So long as you hold a U.S. passport, the IRS wants its cut. And the IRS has become very hostile in attacking American’s abroad and those offshore accounts, putting a number of them in prison over the last few years. Of course, these attacks are limited to average people and not big corporations, who have record amounts of cash offshore.

This attitude has resulted in some very unreasonable tax assessments. For example, I have met many people who have never set foot in the U.S., but whose parents wanted them to have a U.S. passport at birth, who have been caught in the IRS mill. Once in the government’s sites, they were forced to pay enormous fines and penalties, in addition to the tax due. Adding insult to injury, some of these people had their bank accounts seized and real estate sold at auction to pay in to the Obamanation.

Then there are the laws targeting offshore banks. If you are a U.S. citizen, you are not wanted at most financial intuitions. Of those banks that will do business with you, most will hit you with extra fees, such as $500 to open the account and a $300 per year special assessment to cover compliance costs.

Finally, there is the invasion of privacy. As an American, you have zero right to privacy in your financial dealings. In fact, nearly all offshore banks will report your transactions to the IRS.

  • If an offshore bank fails to report your transactions, they are on the hook for major fines or being locked out of the banking system all together. Considering this risk, and the high cost of compliance, it’s no wonder that Americans are persona non grata.

HOW TO GIVE UP US CITIZENSHIP

If you are thinking of giving up your US citizenship, there are several hoops you must jump through. First, you don’t just show up at the embassy, burn your passport, give the ambassador the finger, and go along your way. You must complete a complex process and receive a renunciation letter before you are free. This might include an audit of your last 3 to 5 years of tax returns and an in-depth review of your finances to ensure you are paid-up.

  • Before you open a new account as a free man or woman, the bank will want proof that you have renounced your U.S. citizenship. Even if you have a second passport, you must prove that you gave up your US citizenship. Therefore, getting this renunciation letter from the consulate is of the utmost importance. It also ensures the IRS will not come after you years later looking for more cash.

Second, you might need to pay an exit tax. If your worldwide assets exceed $2 million, or your average tax bill over the past five years has been more than $151,000, a tax may be due on unrealized capital gains.

Basically, you will be required to file a final U.S. return as if you have sold all of your assets for fair market value and you will be taxed on that gain the year you give up US citizenship. Calculating this cost to escape is simple for those who hold major stocks. If your assets include private investments, real estate that has not easily appraised, or you have other issues in determining fair market value, you could be in for a battle with the IRS.

Third, you must have a second passport in hand before you give up your US citizenship.  If you give up your US passport and don’t have another ready and waiting, you will be a person without a country and it will become impossible to travel or immigrate.

If you don’t already have a second passport, there are three ways to get one.

By nationality or family history: If your parents or grandparents were born outside of the U.S., you might be able to get naturalized in their home country. For more information on this option, I suggest you read up at Live and Invest Overseas.

Earn your second passport through residency: If you move to a country like Ireland, Panama, Chile, New Zealand, or Singapore, you should be able to gain citizenship within 3 to 9 years (assuming the rules don’t change while you are waiting).

Of the residency programs that I have investigated, I believe the best is the favored nation’s residency permit linked to a teak investment in Panama. This requires a minimal investment of $15,000 and allows you to gain residency immediately. Citizenship should be processed in 4 to 5 years. For more information on this program, please contact me at info@premieroffshore.com.

Pay for it: You can purchase citizenship and a second passport from St. Kitts and Nevis, Dominica, and a few other nations. Most of the available programs require you to have no criminal history and cost anywhere from $165,000 to $300,000, depending on family size and other factors.

For a detailed description of the available economic citizenship programs, please see my Second Passports page. You will find the requirements and costs for Dominica and St. Kitts on this page. If you have issues in your past and need a more lenient jurisdiction, please contact me for a consultation.

I hope this information has been helpful. As the IRS becomes ever more hostile to its populace, I believe we Americans will have fewer and fewer escape and banking options. I also predict it will become very challenging to move assets out of the United States. If you would like to know more about how to give up US citizenship, please contact me at info@premieroffshore.com for a confidential consultation.

Christian Reeves

Expatriation – The Final Solution

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Each month I get one or two inquiries from U.S. citizens who have had enough and want to give up their U.S. citizenship. While it is rare for someone to take such drastic steps, especially after they learn how to manage their U.S. tax obligations while living abroad, it is an important subject. Here are the facts:

Individuals who give up their U.S. citizenship, or long-term residents who give up their residency status after June 16, 2008 are subject to a mark-to-market tax regime under which they are taxed on the unrealized gain in their property to the extent it exceeds $651,000 for 2012.

To calculate gain, the IRS assumes the all of your assets were sold at fair market value on the day before you expatriated. If the net gain from these deemed sales exceed $651,000, you pay tax on that difference.

These rules apply to any U.S. citizen who relinquishes citizenship or any long-term resident who ceases to be a lawful permanent resident of the United States, and the individual who has:

  1. An average annual net income tax liability for the five preceding years of more than $145,000,
  2. A net worth of $2 million or more on the expatriation date, or
  3. Fails to certify under penalty of perjury that he or she has complied with all U.S. tax obligations for the preceding five years or fails to submit evidence of compliance required by the IRS.

Of course, paying tax on assets you do not sell can cause a problem, for which the IRS has graciously made allowances: You may elect to defer this tax so long as you provide adequate security, as required by the IRS, to ensure payment and you give up any treaty rights that would preclude assessment or collection of the tax in the future.

In addition to any other requirement, an expatriate must also file an information return on Form 8854 in each tax year they are subject to the rules above. This form can be found at http://www.irs.gov/pub/irs-pdf/f8854.pdf

There are a lot of contingencies and complexities to the rules above. For example, special rules apply to deferred compensation items, interests in non-grantor trusts, special gift and inheritance rules, etc. Anyone considering expatriation should consult a tax expert.

U.S. licensed tax and expatriation experts are available to speak with you. Feel free to phone us at (619) 483-1708 or send an email to info@premieroffshore.com for a confidential consultation.

Offshore Privacy
Christian Reeves

New Life and New Passport

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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.