Why Another Passport?
is Dual Citizenship and it is legal? What is the
difference between residency and citizenship? Why would
someone want another passport or citizenship? Will you
loose your current citizenship if you obtain another? We
put together some information for you in order to answer these
and many other related questions.
The current news and politicians say that we live in a dangerous world today. We live in a different world today too, or so we are told. But in reality how different are things really, in comparison to say 30 years ago? How about 50 years ago? How about 100 or perhaps 200 years ago? World and even national history is full of political conflicts, one party involved with public events or perhaps what might be deemed even aggressive acts to sway public opinion, trade and economic conflicts draped in the clothing of something else, and many other issues affecting the stability and economic or physical well being of the society at large. However, what is always true is that it becomes important in such a moment, for one group to quickly and easily identify and define the other. What group do you belong to? Who are you? Stated another way, which passport do you carry? Who are you affiliated with, in terms of country? Where do you come from (so we know how to deal with you)?
Whether we like it or not, our identification documents immediately present a stereotype in order to define the rules of social, political and even economic engagement, regardless of who we really are and regardless if we have ill intent or not. Our identity documents, our Passport, becomes our calling card, so to speak - telling everyone else in a foreign land how to deal with us (or not as the case may be). What does your say? Does it say, for example, I come from a large nation that is actively involved militarily in foreign affairs? Does it say - I am from a small, obscure and peaceful country? Does it say, do not do business with me - my government is nothing but trouble and bad news?
For Americans especially (and some other nations also), the above is very true. If you travel, for example, you are singled out, either in a positive way or a negative way all depending where you are from or better stated, what passport you have. In terms of business, many financial institutions will not deal with you, or open an account for you. So, being from the wrong country, even if you yourself are not directly responsible for the things that create such a stereotype, could have a very real effect on your physical safety and financial well being as well.
The question is then, how do you want to be perceived and treated? People in a democratic and free society, have the opportunity to join whatever groups they wish (and carry an ID document or card proclaiming themselves as a member). The American Express Company tells us, membership has its privileges. Maybe, and then again maybe not, but in the least with such an example - you have a choice to join or not. So, why can't you join another country?
Well, the truth is that you can, and probably should. Aside from the issues that might surround personal safety, there also exists the issue of taxation matters as well. Simply changing your country of affiliation can in many cases reduce your tax burden down to zero. Sound unbelievable - does it not? However, it happens to be true. Some countries, such as the United States, attempt and claim the right to tax its own citizens regardless of where they are living and regardless of how the income is earned (income from investments and other kinds of passive income especially). Other nations hold a different point of view, claiming even though you are a citizen, if you are not living in the country of your passport - why should you pay taxes? Sounds good to us. So why is it that ALL countries do not adopt this philosophy? Good question, but is there really an answer as to why one nation feels it has the right to tax its citizens to death and others do not? Another related point to consider are the social welfare benefits programs that current exist is these high tax nations, and the fact that they look like there are and will be, in deep trouble financially going forward. If you hold citizenship from such a country - is it more likely the government may insist on taxing you even more in the future to pay for it all - or less? Simply because you have say, a blue passport instead of a red, green or black one - can it mean the difference between being taxed to death later on - or not? While it can be difficult at times to predict the future exactly, there are of course certain possibilities that seem more likely than others.
So, let us sum up why someone would considering getting a second passport or obtaining dual citizenship. It is an interesting issue that often invokes all sort of patriotic emotions when being considered, but regardless, if you think that you do not need one - better think again. Many will tell you that obtaining another citizenship or passport could result in a loss of your existing citizenship - which is not necessarily true. For example, Americans often believe this to be the case, but it is also the case that many people (including US based lawyers) really do not understand the law and regulations when it pertains to dual citizenship.
However, do consider the idea that a second passport or citizenship could offer the following benefits:
Number One: Allow you to invest or bank abroad when many financial institutions will not accept you as a citizen from a particular country (US Citizens Take Note – Even Today With FATCA).
Number Two: Possibly save your life when the country that has issued your first passport is at war or has engaged in some activity to make you unwelcome in certain places.
Number Three: Offer an existing option should you decide down the road to renounce citizenship from country number one for whatever reasons, including increased taxation.
Expatriation or even just becoming a dual citizen from another country is an interesting issue that often invokes all sort of patriotic emotions when being considered, but regardless, if you think that you do not need one - better think again. Many will tell you that obtaining another citizenship or passport could result in a loss of your existing citizenship - which is not necessarily true. For example, Americans often believe this to be the case, but it is also the case that many people (including US based lawyers) really do not understand the law and regulations when it pertains to dual citizenship. Possibly you have made up your mind to live in another country - to expatriate as it were. Maybe you are just thinking about it. Regardless, there certainly are some myths and falsehoods floating around - especially among Americans principally when it comes to matters related to Expatriation, Residency in your new country and Dual Citizenship as well.
First off, the topic of expatriation - The Merriam-Webster dictionary defines it as follows: Medieval Latin expatriatus, past participle of expatriare to leave one's own country - 1: to withdraw (oneself) from residence in or allegiance to one's native country, 2: to leave one's native country to live elsewhere; also to renounce allegiance to one's native country.
In other words, the term expatriate could refer to someone that simply has decided to live in another country (and maintain previous nationality or citizenship) or it could refer to someone that has decided to renounce previous citizenship as well. Both definitions apply. So, for example, you are an expatriate if you are an American that decided to retire to say Ecuador, or where ever else for that matter, but of course maintain your existing citizenship as well. Simply moving to another country does not mean you loose your existing citizenship, just as obtaining legal residency status in your new country does not jeopardize your existing nationality or citizenship either (more on this in a moment). So, becoming an expatriate does not mean you are a criminal or some kind of anti-patriotic malcontent - nor does it mean that you have necessarily renounced or relinquished your previous citizenship either (although this is something you could do as well). It simply could be that you decided to live in Thailand or the Dominican Republic, for example, because in such places you can live very well on your US$1,500 per month pension (whereas this is near impossible in many parts of the US or Europe). Some people do of course take it a step further, and seek to become a citizen of their new country as well. But again, dual citizenship is recognized and perfectly LEGAL in most countries, including the US. However, choosing a country because of residency and or citizenship requirements can be just as important of a factor as climate, real estate prices, and so on. Important because perhaps the requirements are too restrictive for you, too costly in terms of real estate purchase or other kinds of investment - or perhaps not - as the case may be.
So, let us discuss residency first and then move on to dual citizenship as the next progression thereafter. It is important to note that in your new country, one should obey the local laws and adhere to whatever legal requirements might exist. In terms of immigration or residency matters, each country of course has their own set of rules and requirements. In fact, this alone may be an important point to decide where you wish to live as well. For example, in places such as the Turks and Ciacos Islands, in order to qualify for residency status, one must demonstrate a fairly expensive home purchase and or investment. This is true also for the Bahamas, and a number of other destinations as well. So, as an illustration, if you are not prepared to spend say US$250,000 for a second home - then that may eliminate such jurisdictions from the list of consideration. Also, keep in mind that in can be almost impossible to obtain naturalization (ability to become a citizen) in the Turks and Caicos, so you must remain with residency status alone (and are subject to the whims of local government if they want to renew your residency status or not, and if not - you have a problem, especially after spending a considerable amount of money on a home purchase). This was the very recent case in the Turks and Caicos, whereby many foreigners were forced to leave simply because the local political tide turned against them (and renewal of residency status refused).
In contrast, countries such as the Dominican Republic have a fairly simple and straight-forward process for obtaining residency, and should you decide to apply as a qualified investor you have the opportunity to apply for naturalized citizenship after 6 months. Of course should you wish to apply under the ordinary residency status in the Dominican Republic (which requires NO investment) then in that case you are permitted to apply for naturalized citizenship after completing 7 years of residency. In this regard, and in comparison to some programs in other countries as well, it all comes down to what you have more of: Time or Money.
Naturalization in your new country, whether you decide to maintain dual citizenship (have two citizen-ships and thus two passports) or relinquish your previous one is often a natural progression for some people, but certainly not all. However, in today's climate both in Europe and in the US, many people decide to obtain another citizenship out of investment necessity. To explain further, any American that has attempted to open a banking or investment account in Switzerland and a host of other jurisdictions, will find the door closed to them simply because they are American. Is it somehow illegal for an American to open a bank or investment account abroad? Not at all, and neither is there any law or regulation prohibiting a bank in say Ireland, Switzerland, Liechtenstein, etc. to accept an American client either. They simply will not do so, because they feel it is more hassle than worthwhile (hassle and aggravation from the American IRS to name just one). It is interesting to note that for Americans, as just stated, a foreign account is perfectly legal - IF you can find a bank or broker to take you on as a customer.
Europeans also have a problem in countries such as Switzerland now that the European Union has gone into full force, and has recently started pressuring tax reporting (and tax collection) when a citizen from one EU nation has an account in another. Switzerland is not a member of the EU, but they have certainly been feeling the heat. So, many Europeans as well are interested to become a citizen of Brazil, Costa Rica, where ever - simply for banking purposes also. But banking or investing is not the only reason one might consider a dual nationality. Travel is another concern, all depending upon what former country you come from. To be sure, I know of many people that would prefer to travel as a Dominican, or a Costa Rican, etc. rather than their previous nation of citizenship (always better to be from some peaceful country not involved in politics or war elsewhere). Of course the reasons for seeking dual nationality or dual citizenship do not stop there. Some countries for example have more favorable tax legislation when it comes to inheritance matters. Many others do NOT tax its citizens on interest or earnings from outside the country as well, so there are indeed many reasons on a personal level for someone to have an interest in this topic.
One of the most troublesome things about the topic of dual citizenship (and residency also) is the lack of knowledge most people have. Which is to say, they often rely upon rumor, innuendo or simply bad information to formulate an opinion. Many Americans especially are ill informed. For example, if you visit the following US State Department Web Site, you will find the information reprinted below:
A person who: (1) is naturalized in a foreign country; (2) takes a routine oath of allegiance or (3) accepts non-policy level employment with a foreign government and in so doing wishes to retain U.S. citizenship need not submit prior to the commission of a potentially expatriating act a statement or evidence of his or her intent to retain U.S. citizenship since such an intent will be presumed. When, as the result of an individual's inquiry or an individual's application for registration or a passport it comes to the attention of a U.S. consular officer that a U.S. citizen has performed an act made potentially expatriating by Sections 349(a)(1), 349(a)(2), 349(a)(3) or 349(a)(4), the consular officer will simply ask the applicant if there was intent to relinquish U.S. citizenship when performing the act. If the answer is no, the consular officer will certify that it was not the person's intent to relinquish U.S. citizenship and, consequently, find that the person has retained U.S. citizenship.
DUAL NATIONALITY (From US State Department Web Site):
Dual nationality can occur as the result of a variety of circumstances. The automatic acquisition or retention of a foreign nationality, acquired, for example, by birth in a foreign country or through an alien parent, does not affect U.S. citizenship. It is prudent, however, to check with authorities of the other country to see if dual nationality is permissible under local law. Dual nationality can also occur when a person is naturalized in a foreign state without intending to relinquish U.S. nationality and is thereafter found not to have lost U.S. citizenship the individual consequently may possess dual nationality. While recognizing the existence of dual nationality and permitting Americans to have other nationalities, the U.S. Government does not endorse dual nationality as a matter of policy because of the problems, which it may cause. Claims of other countries upon dual-national U.S. citizens often place them in situations whereby their obligation to one country are in conflict with the laws of the other. In addition, their dual nationality may hamper efforts to provide U.S. diplomatic and consular protection to them when they are abroad.
In summary, dual citizenship is perfectly legal if you are a US Citizen - Now You Know. In addition, it is perfectly legal and accepted if you are a citizen of a large list of other countries as well.
Do you become a legal resident of your new country or do you eventually become a citizen? That is entirely up to you, and certainly a very personal decision for each individual. But, the important point is, investigate the TRUTH and know the facts regardless of what you decide. Also, remember the old boy scout motto: Be Prepared.
About The Author: This article was written by John Schroder of Ascot Advisory Services. John's firm has been helping clients in the Dominican Republic for the last 17 years with residency application services, naturalized citizenship filing, banking assistance and legal services pertaining to real estate (title transfers, legal representation at closing, sales contract review). You can contact him by telephone at 809-756-1917 or click the about the author link above to reach a contact page to send an email directly.