Citizenship Trends

Having an EU passport may offer excellent travel now, but tax obligations may increase. Meanwhile, there is speculation Tier B passports may decrease in value.

Dateline: Wroclaw, Poland

A few years ago, Poland was on track to being a relatively open place. I wrote during my first visit to Wroclaw three years ago last month that with Amazon moving in, the city’s pro-business environment was paying off.

While Poland is still a decent place for European companies to base operations, the election of the populist Law and Justice Party has made the country far less appealing for residency and citizenship. The party in power is less interested in immigration, with many chanting that “Poland is for Polish” and a few here even predicting that Poland’s anti-refugee policies will result in it becoming a “haven for white people” in coming decades.

Regardless of your feelings on immigration or refugees in general, those and other factors have the potential to shift travel and immigration patterns for the rest of us.

Just as I have proclaimed that “onshore is the new offshore” as a way to indicate that zero-tax and low-tax onshore jurisdictions will replace places like Nevis, it’s possible that immigration patterns deemed to be anti-tax will be phased out.

For example, a recent 60 Minutes episode attempted to portray economic citizenships as a tool wealthy criminals use to escape the law. The reality is far different, but perception is reality, and in an increasingly populist world, it’s worth considering that being only St. Kittsian could become a bad idea.

Here at Nomad Capitalist, we talk about having options, and that means being protected no matter what. I do believe that the rise of digital nomads will make what I call the “Nomad Tax Trap” a bigger and bigger issue. Governments like Canada and Australia will make it harder to become tax non-resident and avoid taxes entirely, while some might even mimic the US policy of citizenship-based taxation.

As someone who has personally obtained multiple second passports, I’ve done a lot of thinking about what trends will impact those of us who want to go where we’re treated best.

As a native-born US citizen, I do an annual audit of whether my US citizenship is benefitting me or harming me. Two years ago, I almost pulled the ripcord until I was able to improve a few large business relationships by being a US citizen.

Now that I have obtained citizenship through naturalization, by investment, and otherwise, I find myself asking: “What’s next?”

I plan to begin another economic citizenship soon, this time in the Caribbean. However, while a Caribbean citizenship offers rather excellent visa-free travel now, I find it necessary to ask whether countries will continue to offer visa-free travel to economic citizens in the future.

Likewise, I ask myself what changes Tier B passports – those that allow travel to Europe but not to English-speaking countries – will undergo.

Finally, I ask myself how a possible breakup of unions like the Schengen Area could make visa-free travel harder, especially to countries like Poland that if forced to set their own immigration policy, might be more strict.

The European Union has already announced its new “ETIAS” program, which will require non-EU citizens to obtain electronic travel authorization before flying, similar to programs run by the United States, Canada, and Australia. I imagine that three major powers implementing this will lead to others to do the same.

Overall, what I’ve determined is simple: more options are better. Many years ago at the start of this journey, my goal was to obtain Dominica citizenship and renounce US citizenship. My anger at the US, sparked by some events that left a sour taste in my mouth, made me want a quick, clean break.

Ultimately, actually taking action and getting results made me want to be more careful in evaluating my choices, building my options, and doing what is best for me rather what seems vengeful toward someone else.

The idea of having a second passport is good, but I think that true freedom will come from having several passports. Multiple citizenship, with the ability to switch to the most convenient one in any particular situation at a moment’s notice, will be the wave of the future if populism continues.

Below is a list of changes I think could come, and others I think are overblown by the media.

Here is What Could Change

1. The European Union could break up.
I’m not an alarmist, but there has been talk of the European Union falling apart. The conversation has been going for years, but ramped up during Brexit and more recently with concerns of a (now forestalled) Marine le Pen victory in France. It is possible that the 28 member states of the EU could dissolve, or at least the most touristed ones could leave.

If this happened, it could mean the end of “Freedom of Movement”, the concept which allows all EU citizens not only special privileges when traveling in member countries or abroad, but the ability to live, study, and work in any other EU country simply by registering there. If you hold a developed world passport, your visa-free travel would likely not be affected; think post-Brexit Britain, whose citizens will almost assuredly have the ability to visit Europe as tourists on favorable terms.

However, the end of the European Union could be negative for economic migrants. No longer would Latvia’s real estate residency program or Portugal’s Golden Visa program be as valuable for non-EEA citizens because they would not offer the same unfettered access to Europe they currently do. That could be a negative for those who wish to hold a Tier B passport and then add residency in Europe to expand their lifestyle options.

2. The Schengen Area could dissolve.
It’s possible that the European Union could fall apart but that its newly unassociated member states could continue offering some form of freedom of movement. It’s also possible that, whether the EU breaks up or not, the Schengen Area could be dissolved. If you don’t know what the Schengen Area is, it’s a group of 26 European countries (including a few non-EU countries like Switzerland) that allow free travel within their borders. Occasionally, countries like France or Austria have temporarily suspended such travel, putting police on their land borders and checking passports of those who cross.

If the Schengen Area were disbanded, each country in Europe would enforce its own visa policy and check passports at its border. While US and other western citizens would likely still be welcome in most if not all of the countries, it means that holders of lesser travel documents would need a visa for each separate country, rather than one Schengen Visa.

Let’s say you get a second passport from a country that allows you to visit Europe without a visa; if the Schengen Area was cancelled, it’s possible that some countries would require you to get a visa before visiting. It’s possible that you could visit Belgium visa-free, but would need a visa to cross into Luxembourg. Again, this might not affect Americans (then again, it might in a few countries), but if you’re planning to become a citizen of St. Kitts and Nevis, you might have some countries asking you to get a visa.

3. Economic citizens could be scrutinized more.
The fact that the media is drawing attention to citizenship by investment programs could potentially be an issue in a few corners of the world. Note that I have used an economic passport in Malaysia, Hong Kong, Singapore, and elsewhere without issue, and I expect this to continue to be the case.

Most countries buy into the idea that a citizen is a citizen, and it’s not their business to police another country’s affairs. Many of these countries also don’t have the idea that “anyone from XYZ place is terrible”, meaning that even if an Iraqi got a St. Lucia passport, they would chalk it up to him being a wealthy guy who wanted a better life and not assume he’s a terrorist.

You see where I’m going with this: countries like the United States probably won’t think that way. I have spoken to a lot of US citizenship renunciants, both who have Visa Waiver passports and those who need visas. None have expressed any discrimination for being former US citizens. However, it is possible that some future directive might discourage visas for economic citizens from St. Kitts and Nevis or wherever else. (Maltese citizens, including those who became so through investment, do not need a visa to visit the United States.)

It is also possible that countries like the United Kingdom might become more strict about letting in Caribbean citizens with visa-free access. For now, I believe this is rather far-fetched, but it’s possible. I wouldn’t use an African passport in Europe because I’d be asked “why aren’t you black?” Asia, on the other hand, doesn’t much care.

4. Naturalized citizens from “bad” places could be scrutinized more.
While I generally believe that naturalization offers a safe path to a second passport (more on that in a moment), it is ostensibly possible that some countries could impose policies to limit tourist visits from people born in war-torn areas. Thanks to bullying by the United States, all passports worth anything must now list a person’s place of birth. If you’re a naturalized US citizen born in Syria, most countries would probably accept that you’re “one of the good guys” and not hassle you.

There is a possibility, however, that a Serbian citizen whose place of birth is Syria might get scrutinized. Every country has their own perceptions of corruption, and they might

Here What Probably Won’t Change

1. Most if not all countries will continue to support naturalization.
If you become naturalized as a Serbian, you’ll be fine. I highly doubt from everything I’ve seen that an EU country will refuse you entry because your last name isn’t Serbian, for example. The only time I’ve personally been questioned on one of my passports was in Azerbaijan, where I imagine they wanted to make sure I wasn’t Armenian.

2. Many countries will still welcome those with wealth.
If you renounce US citizenship, there is a possibility you won’t be able to go back to the United States. As mentioned, I think that’s a slim chance if you build the right passport portfolio, but any country you are not a citizen of has the right to deny you entry at their discretion. We tend to forget that just because we have access to a country doesn’t mean they’re required to admit us.

However, I do think you will see more countries catering to those whose citizenships impair their travel freedoms with great residency programs. If you are willing to buy a house in Montenegro or show a bank deposit in Mexico, plenty of countries will be willing to give you a residence permit.

As I reported recently, these countries may not be in the European Union (or those countries may not make it easy), but there will be plenty of places where successful people can go. I think that the keys going forward over the next twenty years will be holding multiple citizenships and maintaining a little flexibility. It’s possible a country like France could leave the European Union and impose stricter visa policies that prohibit you from visiting Nice. However, there will be plenty of Montenegros that offer a similar experience and will let you visit or live there without much fuss.

3. Countries will still welcome those who can start a business.
The western world is changing, and the economy is equalizing. As a recent podcast guest of mine said, there will always be countries that want to accept business owners. If you can start a business and create tax revenue and jobs, you will be welcomed in many countries. Even here in Poland, I spoke with attorneys who believe the process here is easier than in my EU countries. Poland doesn’t necessarily want a lot of foreigners, but it doesn’t entirely have a choice seeing that it is in the middle between the more well-known but expensive economies to the west, and lowest cost countries to the south and east.

If you are a western citizen, I don’t think there is a need to start a business in an EU or western country now if your main goal is citizenship. None of the potential changes above will go into effect in the immediate future, if ever. However, I do believe that the world economy is equalizing, and with the rise of Asia and Africa, the rest of the world will be forced to allow entrepreneurs to live there and options will always exist. In the meantime, sit back and enjoy a very light tax burden, knowing that there will always be somewhere to accept you… even some relatively jingoistic countries.

Here’s What I Recommend

1. Don’t rely entirely on economic citizenship.
I’ve come to view citizenship by investment as an excellent tool for some successful people to avail themselves of. That said, if you’re getting an economic citizenship, start a path to naturalization also.

For example, I recently advised a client who is working with me to get Antigua citizenship to also obtain Mexican residency. He likes living in the Americas anyway, and with a little business structuring, he’ll pay next to nothing to live in Mexico and get one of the world’s best passports in five years.

Naturalization is a great path to take, especially if you can speed up the naturalization timeline with some kind of investment. Since most African and Asian countries don’t offer a pathway to citizenship, it’s likely whatever country you select is a place where you could pass as a local. And it’s not like most immigration officers outside of the strictest countries known much about what a Montenegrin looks like, anyway.

2. Build a passport portfolio.
Between citizenship by investment, citizenship by investment, naturalization and “paper residency” options, and the random exceptional citizenship, there are plenty of ways to become a citizen. Do an audit of everything you are doing and determine which ways you could adapt to get a passport without a lot of effort.

For me, that will include one or two economic citizenships, passports by naturalization, and hopefully one through ancestry. Identify which passports are easiest to obtain; many think that their grandparent’s citizenship makes for an easy second passport, but in reality second citizenship through ancestry can often be a time-consuming pain.

3. Plan for tax reduction first.
If you’re a US or other western citizen, you have plenty of time before any potential changes occur. For US citizens in particular, I don’t think there is an immediate need to start setting up tax residency and paying more taxes than you need to. Instead, I would focus on building a passport portfolio while keeping your tax burden low. If you are seeking a passport that requires some type of investment, try to find one that allows you make investments you would otherwise be interested in making, so that any tax is the result of a profitable venture and not merely a donation.

Overall, I am not extremely worried about any changes. The world is becoming a more open place, and Tier B and even some Tier C second passports should rise in value with a few exceptions.

However, there is a growing populism against wealthy individuals, especially those being seen as bending the rules. In the long-term, having some identity outside of tax havens and perpetual travel will be important for visa-free travel, to obtain visas, and for immigration proceedings. Taking steps to increase your options now will increase your readiness.

Andrew Henderson

Andrew Henderson

Andrew has been internationalizing since 2008, and has learned what works and what doesn't work when it comes to reducing taxes, increasing personal freedom, and creating wealth. Click here to work with him personally.
Andrew Henderson
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