People move borders for stability and better opportunities to safeguard the future. The focus towards this increasing need for security and stability has given rise to the populist movement globally.
Well, the countries have tightened their borders and restricted the path to immigration. But, the need towards creating an insular society has contributed to the rise of a new industry. It is working to bypass those restrictions.
You might have heard about the dual citizenship by investment that caters to the uber-rich class of different countries. They apply for the Second Passport by Investment with the objective of tax optimization.
Let’s understand what dual citizenship is by investment?
Dual nationality by investment requires a person to invest in the economy of a country, usually. As a result of his investment, he legally obtains citizenship status and a passport. The most important aspect of this citizenship category is that the investor can achieve citizenship status in a shorter time frame without any residency requirements.
Why the need for dual citizenship arises?
To Stay Globally Connected: Canada and the Caribbean island of St Kitts and Nevis started investment citizenship programs in the 1980s. U.S. and U.K. followed a similar structure later on in the 1990s. It became a way to boost income for different countries; however, it varies from country to country. Foreigners make economic investments in various countries in exchange for a visa or passport. The aim is to stay globally connected with the help of economic investments.
Shifting Demographics: Wealthy, private investors make economic investments in different countries that create a new trend in the market. It indicates the changing demographics that create a new clientele with a different set of demands. It gives rise to a unique business opportunity that compels people to apply for dual nationality by investment.
Mobility: Globally, where changing demographics have resulted in rising political isolationism, this freedom of movement, has attracted many people. Foreigners can buy legal status to live and work freely in other countries. Perhaps more importantly, they want visa-free travel without the need to acquire residency status.
Is it Good to Apply for Dual Nationality by Investment?
When comparing residency and citizenship by investment, you cannot take sides as it entirely depends on certain factors. Everyone has their requirements and circumstances. Let’s understand what you should consider while choosing one over the other:
Try considering the following:
- Number of members in your family,
- Personal interests,
- Terms of the country involved,
- Business opportunities
- Economic interest
For instance, if you have some political inclination and want to vote in your host country, then applying for dual citizenship by investment would be a viable option for you. Residency by investment refers to a person’s visa status. It is issued for a particular period whose validity may expire after the said period. But, citizenship allows you to carry a second passport, which makes it a better option if you frequently travel to different countries for work or business.
Can I Opt for a Second Passport by Investment?
Dual citizenship by investment can help you obtain second citizenship quickly in exchange for investment or donation. This “economic citizenships” are valuable to three types of people:
- If you are a U.S. citizen and wish to renounce your citizenship quickly, then it is a better option for you. Renunciation requires a second passport, and if you belong to a rich class, the cost of economic citizenship is less than the tax and compliance costs. The credit for the worse tax laws goes to the Trump Tax Reforms that have led to higher taxes
- If you are a Chinese or an Arab citizen, you can take advantage of this citizenship program. Here you can afford great travel benefits in exchange for economic investment if you belong to a wealthy class.
- Other than these, business owners and investors looking who are looking for a “Plan B” to increase their money flow can apply for dual nationality by investment. It is especially true for cryptocurrency investors as they need a second passport to grow their business prospects. If you are earning high, you may find buying citizenship easier and cheaper.
What is the Financial Impact of Dual Citizenship by Investment?
Economic Benefits: Depending on your host country’s laws, dual nationality comes with a host of economic benefits that you should know. It will help you to avoid costly pitfalls. Dual citizenship by investment can have several benefits, including the freedom to travel, security, stability, and perhaps a better place to retire.
If you are an investor, it helps you to broaden your financial horizons where you can expand your investment activities along with heightened privacy in money matters. It helps in tax optimization that may include remittances, exemptions, double tax treaties, residency. The positive implications in terms of financial betterment include domicile considerations, overseas tests, sufficient ties tests, and split year treatment.
All this will have a positive impact on inheritance tax, capital gains tax, estate tax, and income tax.
Some Drawbacks: With the advantages, there come some trade-offs. There could be an increased responsibility to meet legal requirements. You may be bound to serve dual obligations. If you are a U.S. citizen, you have a volunteer military, but in some countries it is mandatory. Generally, U.S. citizens meet the necessary requirements in foreign military service without compromising their U.S. citizenship. But, in some cases, they may lose their U.S. citizenship.
Another negative component that comes with dual nationality is double taxation. Under Trump tax reforms, the U.S. government assesses taxes on their citizens for global income. If you own a dual citizen and have earned income abroad, you may owe U.S. taxes on that income, too, along with a tax of that country where you earn. Fortunately, there are income tax treaties that can help you with U. S. tax policies.
Plan your Move!
If you are planning to move abroad, it can either be financial heaven or an absolute nightmare. It all depends on the level of planning you do. Dual citizenship by investment can be complex, depending on the laws of your home country. But, you don’t need to look further as we will help you to unravel the complexity after analyzing your situation.