Dateline: Kuala Lumpur, Malaysia
We’ve been talking a lot recently about all the changes occurring in the offshore world as of late. From the Trump tax reform to upcoming tax deadlines for expats, and from my plans to slow my travel down a bit to new multi-currency cards for expats.
I want to take a step back from all these “shiny” topics and go back to the fundamental principles of being a Nomad Capitalist. After all, I have only been able to deal with the unforeseen consequences of the Trump tax reform and all the other new developments of life because these fundamentals are in place.
I have my Plan B and that allows me to roll with the punches, but I realize that many of my readers may still be new to the offshore world, and even those who’ve been around a while could use a refresher.
So, let’s go back to the basics today and talk about second passports: why you need them and the four main ways you can obtain a second citizenship. There’s a lot of misinformation out there on the topic and a lot of people aren’t sure which method is best for them. This leads a lot of people to make numerous ill-advised and expensive mistakes.
Even as a fundamental of the Nomad Capitalist lifestyle, if you don’t know why you’re pursuing a second passport, it could very well be that you are chasing after a shiny object that sounds important but may not really help you to achieve your end goals.
That said, what is so important about obtaining a second passport?
Second Passport Basics
The entire argument behind the importance of having a second passport can be boiled down to one word: diversification. With only one citizenship, your life is completely in the hands of one group of (often unelected) government workers.
This one government system is entirely in control of how you are taxed and how much you are taxed, and they can help themselves to your assets or restrict your freedom of movement around the world as they see fit.
Having a second passport puts the power back in your hands by dividing that control between different governments and giving you the option to get rid of the citizenship that serves you least if the need were ever to arise.
Now, some erroneously believe that if having one passport could hold you back, having two or more must mean you’re really screwed. In reality, it doesn’t work that way.
I like to compare having more than one passport to the trick most young children use to get what they want. When an eight-year-old wants something, they’ll ask the parent they think is more likely to approve the request. If mommy says no, they’ll ask daddy in hopes that he will say yes.
If you have two passports, you can play the sovereign country equivalent of the mommy-daddy game within limits. With only one passport, one country is in charge. They can decide to take your assets or throw you in jail. They can do this because you technically have nowhere else to go; no other country has to let you in or provide you with assistance. A second passport provides you with a way out.
It is the ultimate escape hatch no matter what happens. It serves as a Plan B if nothing else, but your second passport will also allow you to live, work, and go to school in another country and gives you the ability to travel and increase your personal freedom.
There are many different reasons to do get a second passport, but it will always serve as a form of diversification. For some, it’s the first step to dramatically lowering their tax bill. For others, it’s an insurance policy. For others still, it’s a way to connect with long-lost ancestors. And, for a select few of us, at some point, it’s just fun.
But most people do not worry themselves about the benefits or reasons for obtaining a second passport, let alone understanding the many ways that they can do so. And for those who have asked, they have likely encountered a lot of misinformation on the topic.
So, let’s clear up any misunderstandings and examine the four different ways that you can get a second passport.
The first method is the most common and the one that we are all most familiar with: naturalization. I call this the “take-it-easy approach” because you can simply go and establish your residency in another country, spend a little time there, and pay your dues. You wait three or five or seven years – or whatever the established number of years may be – and after those specified number of years, you go and apply for your citizenship and get your second passport.
Now, we’re all familiar with this path to citizenship. If you grew up in the US, as I did, you may have turned on the news at some point and seen some big ceremony where a bunch of people were being sworn in as US citizens. Those people had lived in the United States for many years and they were finally receiving their citizenship.
The difference for Nomad Capitalists is that you no longer have to pick up and move everything to one country in order to get citizenship in another country. There are countries that only require that you spend as little as one day a year there in order to get citizenship. Others require seven days, two weeks, three months a year, etc.
There are different requirements, but the main idea is that you spend at least a little bit of time in the country to get to know it, but not so much as to compel you to pick up and move your entire life there.
Some of these are countries that you might not want to live in but they offer a good passport. So, by spending a little bit of time in your new country of “residence” every year for X number of years, you can become a naturalized citizen. This is a great way to get a relatively affordable second citizenship, but it does take time.
Citizenship by Descent
The next way to get a second citizenship is through your ancestry by what is officially known as citizenship by descent. This is primarily for folks of European origin who can go back through their family tree and find out who their ancestors are and in which country they held citizenship.
Almost every country will make you a citizen (if you aren’t one already) if your parent is a citizen of the country as well. The one exception to this that is common for people that I work with is people from the United States who have one parent from Canada who could receive Canadian citizenship by descent but have not.
But Europe is where you can go back further and draw your claim to citizenship from second and even third generations or more. Poland, Lithuania, Latvia, Spain, Italy, Ireland, many of the Balkan countries, and Hungary all allow you to go back at least two generations (i.e., Ireland). Other countries will allow you to go back as far as you can within certain year limitations (such as Italy) to find out if you have an ancestor from that country that would qualify you for citizenship by descent.
Of the programs currently available, Ireland is definitely the easiest and the rest are somewhat tricky.
As someone who has gone through this process myself, I understand that it is a lot of work, a lot of digging through archives, and a lot of frustration. I know a guy who got Italian citizenship after about four years. People often look at this method as a cheap, easy, and fast way to get a second passport, but it is not always fast or easy.
However, if you want a high-quality passport and you think that you have someone two or three generations back, primarily from Europe, you may be able to obtain a high-quality second passport if you’re willing to put in the work.
The third way that is often talked about for second citizenship is what is often referred to as economic citizenship, or citizenship by investment. You can learn more about exactly how the process works in our many articles on the topic throughout the blog, but the title basically explains itself: you can become an economic citizen through a monetary investment or donation to the country of your new citizenship.
You are somebody that they value because of your money.
In some cases, you can make an investment in the country in something like real estate or government bonds, but in most cases, the best thing for people to do is to simply make a donation to a struggling country. St. Kitts and Nevis has the longest-running program of this nature. It costs in the low six figures for a single person and you get your passport very quickly.
As opposed to the first approach of naturalization where you sit back and relax, this approach is all about getting your second passport quickly. Economic citizenships can be issued in as little as two or three months, although six months is the average time for most programs.
You can use your new economic citizenship to get a passport that allows you to travel or renounce your US citizenship or whatever it is you may want to do. You get all the benefits of a second passport in a matter of months. And all in exchange for putting a little bit of money into the country’s coffers.
The fourth way of obtaining a second passport is a method that a lot of people don’t often talk about. It is known as exceptional citizenship.
Now, if you Google around the internet and you’ve been stuck reading blogs, as many have, you may have heard some people talking about Austrian citizenship and referring to it as an economic citizenship. But Austria has no law specifically stating that they are in the business of selling citizenship and passports.
What Austria has is just a general idea that if you’re willing to donate an amount 2-3 million EUR or invest in creating jobs with about 10 million EUR, then they will give you a passport. But there is no actual law that says that anyone who brings ten million euros gets a passport.
Basically, Austria’s program is all about getting the right people to approve of you. Sometimes, a donation or job creation is what it takes to sweeten the pot for these folks to make a decision in your favor. If they do, then you can be granted Austrian citizenship through exceptional circumstances. Austria is not in the business of selling passports and it takes more than just money to impress them, but you can be granted exceptional citizenship.
Other countries allow this as well, like Poland (although they are making it very difficult right now), or New Zealand ( who granted exceptional citizenship to Pieter Thiel). If you can prove this about yourself, then the President or the Prime Minister or Congress or whatever government body that has jurisdiction over such a decision can choose to waive all the other requirements for citizenship in your exceptional circumstance.
If a decision is made in your favor, then you don’t have to meet the naturalization requirements or learn another language or make a donation, they just waive all that and you become a citizen.
Obviously, it can be very difficult to qualify for citizenship under this method.
In countries like Singapore and the Gulf countries, they are primarily looking for actors and artists and people who can bring a lot of art savvy into their country because they fear that they don’t have enough culture. So, if you’ve been in a big TV show or something like that, you may be able to get citizenship in the Gulf.
Also, Olympians often get this kind of exceptional citizenship from countries like Qatar that want to win Olympic medals and make a name for themselves in international competitions.
There are other countries that are not so wealthy that want investors that will give you citizenship if you can come and start an amazing business and hire a lot of people or whatever it may be that they believe will bring acclaim to their country. If that’s the case for you, then the President or Congress or whoever has that power may be able to grant you exceptional citizenship as well.
Obviously, this is the most nebulous method of them all. Nobody else really talks about it. They primarily focus on the first three methods and group Austria in as an economic citizenship program when, in reality, it is a special kind of citizenship that is difficult for many folks to obtain but available in many different countries in one form or another.
A Word of Advice
The best advice I can give to anyone looking for a second citizenship is to understand why they need one. Once you know that, you can examine each method and see how they work within your personal timeline.
Perhaps you want better visa-free travel. I may be the only guy on earth who thought about investing in a citizenship just to avoid waiting at the Russian Embassy for a visa, but if you’re missing out on travel opportunities because of your passport, a second passport could be worth it. Or, perhaps you’re more focused on paying less in tax or gaining more privacy. Knowing your reasons is important.
So, too, is focusing on those reasons and not chasing the latest shiny object. The actual passport you obtain is just one tool in your tool chest. Each person needs a different tool.
The US citizen who needs a second passport to escape tax has different needs than the Chinese millionaire who is tired of applying for visas and worried his children are eating soup with lead in it.
If you’re the Chinese millionaire with no passport offering good visa-free travel, then getting good visa-free travel is probably top of your list. However, the US or UK citizen seeking a second passport should consider a passport that complements what they already have, rather than offering more of the same.
The secret ingredient in second citizenship isn’t “fast,” but “diversity.” For most Nomad Capitalists who already have a decent passport, a second passport offers the chance to be tied to a country that doesn’t read your emails or tax you into oblivion.
Like anything else in your Nomad Capitalist lifestyle, don’t be dogmatic. Determine your desired outcome and work backward to find the best passport and the best method for obtaining it. You don’t have to waste your time insisting on one particular option when there are so many countries and so many ways to obtain a second passport.
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