Buyer beware
2
Citizenship Planning
Chapter Summary
Henley & Partners was the first firm to globally specialize in the unique field of Citizenship Planning. Today there are many reasons why you should consider becoming a citizen of more than one country.
There are a variety of different benefits to alternative citizenship. As citizenship may impact on your tax status, it could be a key factor in international tax planning. Alongside this, you may gain more privacy and security across your banking and investment portfolio. Frequent travellers, especially those who often require visas, find a second citizenship invaluable in ensuring flexibility and the ability to travel at short notice. Those who have the need to live a safer country than their own, either now or in the future, can obtain that security through citizenship.
The most common factors in acquiring citizenship are by birth, by descent, by marriage or by grant. The US is an important example of the few countries that still grant citizenship by birth. Many people will be entitled to another passport by descent or by birth, and this may be easy to establish.
If birth, descent or marriage do not offer a solution, there are other options open to wealthy or skilled individuals. Three countries offer citizenship-by-investment, Austria, the Commonwealth of Dominica, and St. Kitts and Nevis, and can give you a new passport swiftly and legally, which is of paramount importance, as illegal options are commonplace.
When considering any of these options, you must remember to take guidance on dual citizenship, as roughly only half of the world’s countries allow this.
Finally, and of great importance, is the reputation of the country and its passport. The level of visa-free travel it affords you will be critical in the impact and benefits it has on your life.
The term citizenship planning was created by Henley & Partners, the first firm to globally specialize in this unique field. In recent times and to a greater extent since the dramatic events of 9/11, questions of citizenship, visa restrictions and freedom of movement have become more and more important for internationally active individuals and families.
Indeed, there are many reasons why you should consider becoming a citizen of more than just one country, and consequently hold more than one passport.18
2.1 Why become a citizen of more than one country
Due to political or economic circumstances, citizens of many countries find it difficult to travel abroad and are confronted with strict visa requirements each time they want to enter a foreign country.19
But also, nationals whose passports usually allow them easy access to most countries can find it impossible to obtain visas due to temporary travel restrictions during trade sanctions and other geopolitical disturbances, or due to their nationality may be overly exposed to terrorist threats and other hostility.20
Moreover, even though the necessary visa may be granted to you, getting a visa is always a very tiresome procedure during which your passport on which you get the visa is not available – and can be a significant factor of delay for your travels.
Visa-free travel can also be obtained via a residence permit. For example, residence in any of the Schengen countries will offer visa-free travel throughout the Schengen Area of Europe. However, only the acquisition of a second citizenship and a second passport can guarantee the desired long-term visa-free travel.
If you cannot acquire or renew your passport in your home country, for example due to political instability, civil war, revolution or change of government, having another passport can be very useful, even critical. Even if you simply lose your passport, it may take some time until you can get a replacement.
There is a growing tendency in many countries to follow the lead of the United States in taxing even non-resident citizens.21 Citizenship also plays a role in some countries to determine whether you may still be deemed tax resident or domiciled (including the United Kingdom, Sweden, Germany, and others), and citizenship is one of the tie-breaker rules in most double-tax treaties. Alternative citizenship is therefore also increasingly important as an effective tool for international tax planning.
If you wish to have the possibility to retire in a safe haven in the future you can only fully secure this option if you acquire either permanent residence or citizenship of that country. However, even a “permanent” residence permit does not mean full security as it may still be subject to renewal, revocation, or new conditions.22 Becoming a citizen is the only way to secure a life-long status and guarantees a secure and truly permanent alternative place to go to.
Generally as a citizen of two or more different states more planning options are available and you also enjoy more privacy in banking and investment.
Most importantly citizenship and a passport from a small, peaceful country can save your life when travelling in times of political unrest, civil war, terrorism, and other difficult situations. Many international businesspeople and important people who are active worldwide actually consider an alternative passport as the best life insurance money can buy.
In an unsettled, ever-changing world, acquiring a second citizenship is a wise decision and an investment for the future. When you acquire citizenship, your spouse and children, and sometimes parents,23 may be included. Citizenship is for life and can be passed on to future generations.24 Depending on the other country or countries of which you are a citizen, there is often no need to give up your present citizenship while you enjoy the benefits of a second citizenship and passport.
2.2 Who is interested in a second citizenship?
People from all over the world and from a wide range of backgrounds are interested in multiple citizenships and consequently hold more than one passport.
Many of the wealthiest individuals and most internationally successful people hold more than one passport. In recent years, an increasing number of internationally forward-thinking entrepreneurs and investors have specifically acquired one or more additional citizenship(s) to diversify their personal exposure. They realize that not only their investment portfolio, but also their residence and citizenship portfolio needs to be diversified to reduce risk.
More than ever, wealthy citizens are becoming a target for kidnappings, terrorism, and in some countries politically motivated violence. Wealthy people are at risk in insecure countries where organized crime is widespread, like in many South American countries, but also where they may be part of an ethnic minority group, or in regions with significant political upheaval such as the Middle East in recent years.
Even if the home country is stable and personal security is not an issue, citizens of countries where the political and economic situation does not allow widespread visa-free travel for its passport holders are a further group where an alternative travel document offers great merits.
Persons who travel frequently to countries requiring visas also need an alternative citizenship and passport. They may need to travel at short notice while they are waiting for such visas to be issued on their current passports, and often passports have to be sent to the relevant
