How to use the offshore Belt and Suspenders strategy

This is Week Five of the 26-week series #MyEconomicCitizenship. Each week I give you a glimpse into my life as I share the ups and downs experienced in pursuit of a second passport through economic citizenship. Each feature includes my weekly journal walking you through the process of obtaining economic citizenship, followed by an in-depth look at some of the most important topics people considering economic citizenship should understand. The series is presented by Nomad Capitalist in partnership with Peter Macfarlane & Associates, whom I worked with to obtain my passport. To read the entire series, just click here.

Dateline: Cape Town, South Africa

One of the biggest concerns second citizenship seekers express involves the lower quality of the passport they are obtaining through either naturalization or, as I did, economic citizenship.

The idea of being a US citizen, for example, and jumping through hoops to become Dominican or Serbian or Paraguayan seems a bit odd to people who have spent their entire lives accustomed to holding one of the “best passports” for visa-free travel.

Heck, I’ve even seen a couple examples of people from places like Egypt and Eritrea who, despite having a rather poor travel document, use the excuse of a potential second passport not being “good enough” as an excuse for not taking action. Funny how we as humans tend to make excuses for not getting what we think we want based on some technicality.

We’ve spoken extensively about the value of what I call the “second-tier” passport. One of my favorite examples of this is how many westerners look down on Mexico – entire presidential planks are based on that notion – yet Mexico has one of the best passports in the world. Anyone smart would gladly be Mexican in lieu of a “first world” nationality that taxes and spies on them.

When I talk to people about renouncing US citizenship, for example, many will insist that only a passport as good for travel as that of the United States is acceptable. Considering the US passport is among the five best in the world for travel, that’s a nearly impossible order. When you add the fact that the people I work with don’t want to live in one place and pay a lot of taxes for five years to get a passport, it becomes even more difficult.

The “Belt and Suspenders” strategy

Here’s the deal: if you want a “Plan B” passport, I certainly wouldn’t worry if it’s as good as the one you have now. A Swiss guy I’m working with is interested in purchasing Dominica citizenship as a backup knowing full well that, if the worst happens, he’ll lose a little juice traveling on the Caribbean passport rather than his top tier passport.

Even more so, if you’re looking for better visa-free travel or a path to citizenship renunciation, it likely doesn’t pay to be TOO picky. One way to accomplish your goals without breaking the bank is what I call “the belt and suspenders”.

If you aren’t familiar with the term, belt and suspenders is an old term for a built-in redundancy. Both a belt and suspenders will hold your pants up, making the use of both together unnecessary. You either wear a belt like most of us, or rock it Larry King style, but not both.

In the arena of second citizenship, a Belt and Suspenders strategy involves getting a lower-quality second passport AND a higher-quality second residency that may or may not lead to citizenship in the future.

By combining a decent passport and a better residency, usually in an area like the European Union that allows wide freedom of movement, you get the freedom of travel you want with the benefits that come from a more immediate second passport.

Applying the method

Let’s say you’ve read the blogs that claim you can get Dominican Republic citizenship in a mere two years. Now, from people I know that got citizenship in the DR, that timeline is rather unlikely. For purposes of illustration, let’s assume that however long it took, you’re now a DR citizen.

If hanging out on the beach is your thing, being a citizen of a country that’s largely coastal is a great thing, and if you’re a US citizen seeking to lower your tax bill, you might even be content to give up your US citizenship in exchange for the white sands of the DR.

However, a Dominican Republic passport isn’t so good for global travel. It may get you into some beach countries, but you’ll need a visa for Europe and a lot of other places. That can be rather inconvenient and turn you off from using the DR citizenship to its fullest potential.

However, under the Belt and Suspenders method, you can obtain residency in the European Union – or anywhere else you’d like to spend time – and improve your travel options immediately. By attaching a high-quality EU residency to a low-quality passport, you can increase the number of countries you can visit by up to 50%.

The Belt and Suspenders approach also separates the two most common reasons for wanting a second passport: personal freedom (i.e. lower taxes) and better freedom of movement.

For the same reason I often advise against owning your personal residence, it might make sense to separate the two goals of second citizenship into two different strategies. The desire to combine personal freedom AND travel freedom into one passport leads people to seek expensive solutions like Malta’s economic citizenship, which will relieve you of about $1 million.

Instead of spending $1 million, most of it never to be seen again, you could invest in a Tier B or Tier C passport that offers personal freedom, then invest another amount in residency.

Reducing your costs

There are a number of other Tier B and Tier C passports with similarly low price tags that could be paired with European residency. In another example, a friend of mine recently obtained Armenian citizenship through descent; his grandfather was an Armenian citizen, which qualified him for the citizenship, too.

Unfortunately, Armenia’s passport offers relatively weak visa-free travel with the exception of Russia. Armenians can’t visit the EU without a visa, and my US citizen friend would be pretty agitated waiting in visa lines as an Armenian were he to surrender his US passport. It would be an instant demotion.

However, the Armenian passport that cost him a couple thousand bucks in legal fees could be paired with residency in Greece or Latvia, which requires a 250,000 real estate investment and a small government fee to obtain residency. While Greece does not offer citizenship to non-Greeks and citizenship in Latvia takes ten years of actually living there to get, the European citizenship wouldn’t matter under my Belt and Suspenders plan.

After all, Armenian citizenship is still a halfway decent citizenship to have. If my friend wanted to renounce US citizenship or do anything else that required his Armenian passport, he could. His biggest loss would be the loss of easy travel to Europe… which a residency in Greece, Latvia, or any number of other EU countries would solve.

This Belt and Suspenders approach makes sense, not only because Tier B and Tier C passports are less expensive and easier to obtain, but because it dramatically lowers the hard costs you never get back.

While Greece or Latvia do require you to invest 250,000 euros, you should theoretically be able to get that back if you ever sell the real estate. Unlike an expensive economic citizenship where you never see the money again, your real estate should hold its value if you do it right. (Which, sadly, means Greece might not be the best place.) You’re tying your money up, but not sending it away to die.

Increasing your freedom

The Belt and Suspenders method makes passports that may have previously appeared inadequate become more valuable. My friend that thought an Armenian passport wasn’t good enough on its own now knows that starting a business, making an investment, or even depositing cash in the bank in the European Union will make his passport as good as most others.

Holding an EU residence permit also opens up several countries in Eastern Europe and Central America; even if your passport doesn’t allow you visa-free access to these countries, your EU residence permit will.

Of course, the EU isn’t the only place to get residency as part of a Belt and Suspenders plan, but access to the 28 countries of the Schengen Area makes it the most attractive. Countries from Colombia to Malaysia to Hong Kong allow the average investor or entrepreneur to obtain residence relatively easily.

The best part is that obtaining residence in many of these countries doesn’t automatically signs you up for tax obligations. If you don’t live in Latvia, for instance, you don’t pay tax there. You can easily use Latvian residency to travel throughout Europe with no actual home base, with no obligation to pay tax anywhere.

So the next time you think you can’t accomplish your second passport goals so quickly or easily, remember the Belt and Suspenders approach: pairing residency with citizenship.

Get your own economic citizenship and second passport

My goal in doing this series is to help as many people as possible become global citizens by obtaining second citizenship. I live this stuff, in part, so that I can better help individuals like you reduce taxes, obtain a second passport and experience more freedom.

If you’d like to work with me directly to create a wholistic global citizenship strategy, then click here. We’ll go through an entire deep dive process to determine exactly what you need — from passports to residency to where you’re going to live — all so we can get you to your end goals.

If you’re just interested in getting a passport and already know which passport is the right choice for you, then you can go directly to Peter MacFarlane & Associates’ website and contact them by clicking here.

If you’re still determining which approach you should take, feel free to keep reading this series to garner all the knowledge you need to form a vision and actionable plan for the future.

Andrew Henderson

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The Nomad Capitalist team has helped hundreds of people create and execute holistic offshore plans to help them legally reduce their taxes, become dual citizens, and live the Nomad Capitalist lifestyle of success

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