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Citizenship Planning
Chapter Summary
Henley & Partners was the first firm to globally specialize in the 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 in 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. Seven countries offer citizenship-by-investment, Antigua and Barbuda, Austria, the Commonwealth of Dominica, Cyprus, Grenada, Malta 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 to the impact and benefits it has on your life.
In recent times, and especially 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, although the concept of citizenship planning was created by Henley & Partners about 20 years ago.
A main characteristic of the modern world system is that economy and trade increasingly take place on an international level, while people are still bound within nation-states by the instruments of citizenship and sovereignty.20 This new, transnational flexibility in business, production, labour and financial markets, travel and international family relations is increasingly being matched with flexible citizenship. This field can be described as the strategies and impacts of internationally mobile individuals and families seeking to optimize their situation in view of different nation-state regimes by selecting different sites for work, investments, leisure and family relocation.21 Indeed, there are many reasons why all over the world more and more wealthy individuals consider becoming a citizen of more than just one country, and consequently holding more than one passport.22
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.23
Furthermore, 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.24
Moreover, even though the necessary visa may be granted to you, getting a visa is always a very tiresome procedure. During this time, the passport on which you are getting the visa is not available – and this can be a significant factor of delay for your travels. 18% of Chinese visitors to Europe, for instance, make it to the UK, but two-thirds visit France, a member of the Schengen travel zone where visas are easier to get.25
Visa-free travel can also be obtained via a residence permit, not only through a second passport. 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, and only citizenship guarantees the long-term security of these privileges.26
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 US in taxing even non-resident citizens.27 In fact, I believe that this will be an increasingly important issue in the future. As individual states are struggling to keep their tax base, both corporate and individual taxation systems will have to undergo substantial changes. For income taxation and other taxes on individuals, citizenship may become an increasingly important, if not decisive, factor. I anticipate that some countries will introduce similar legislation to that which the US currently has and will tax its citizens regardless of their place of residence. At the very least I can imagine that this would apply, for example, to all EU citizens resident within the EU. Therefore, having alternative citizenship options will become even more important for wealthy individuals who may want to plan around such new taxation rules. Being a citizen of more than one country, and ideally in more than one continent, will be the norm for the global entrepreneur and investor in the future.
Meanwhile, citizenship also plays a role in some countries to determine whether you may still be deemed tax resident or domiciled (including Germany, Sweden, the UK and others), and citizenship is one of the tie-breaker rules in most double tax treaties. Alternative citizenship is therefore becoming 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. 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. This is also what the Hong Kong elite was aware of on the eve of the return of the colony from British to Chinese rule, as about 600,000 of Hong Kongers – about 10% of the population – held second passports as an insurance against mainland-Chinese rule. More than half the members of the transition preparatory committee carried foreign passports.28
Generally, as a citizen of two or more different states, you are in a privileged position compared to having just one citizenship, you have more planning options and more personal freedom. If you want to acquire real estate of a certain size in Italy for example, you can only do so if the country of your citizenship in return allows Italian citizens to buy property without restrictions. If that is not the case, you cannot buy in Italy, unless, of course, you are also a citizen of another country which may not have such restrictions in place.
Most importantly, citizenship and a passport, particularly 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 to be 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,29 may be included. Citizenship is for life and can be passed on to future generations.30 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, as states increasingly allow multiple nationalities.31
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 and options. They realize that not only their investment portfolio, but also their residence and citizenship portfolio needs to be diversified to reduce risk and increase international flexibility.
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, in particular kidnapping, is widespread, as in many South American countries; but also where they may be part of an ethnic minority group and may face hostility within their own country or in regions with significant political upheaval, such as the Middle East in recent years, or where the future of their home country is uncertain.
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 embassies or consulates and remain there, sometimes for several weeks, before being sent back. This also includes the risk of one’s passport being lost in the process and therefore having an alternative is critical if you wish to remain flexible with regard to international travel.
Citizens of countries with an uncertain future acquire alternative citizenship and passports to ensure that they will continue to be able to travel or have the option to relocate after possible political changes. Unfortunately, many countries fall into this category; citizens of these countries cannot be sure about the political future of their home. Alternative options need to be secured in good time.
Persons who value privacy when travelling, doing business or for banking and investment are interested in protecting their interests and their personal data by using a different citizenship depending on where they operate and what they do. In times of widespread data abuse, identity theft and cyber-crime, it is increasingly important to be able to protect one’s personal profile. Having more than one citizenship and passport can help achieve this.
Citizens who wish to have the option to renounce their current citizenship must first acquire another citizenship; otherwise they would become stateless, which is a status to avoid at all costs.32 There are many reasons why one may wish to give up citizenship, for example to legally avoid otherwise compulsory military service requirements or taxation.
Persons who were rendered stateless by birth or through accidents of history need to acquire citizen status of at least one country, in order to have the freedom of travel and other rights that citizens can enjoy. They may not be able to acquire citizenship by naturalization in their country of residence33 and thus may need to immigrate elsewhere or acquire citizenship-by-investment. If you have no citizenship, the situation can be extremely difficult.
Citizens of countries with high direct taxes may acquire alternative residence and citizenship as part of a strategy to reduce their tax liability. Citizenship may play a role in the determination of one’s tax domicile, even though, of course, the main factor remains the place of residence and usually citizenship has only a very limited role to play.
Finally, anyone who wishes to have the possibility to retire in a safe country at any time in the future can secure this permanently by acquiring citizenship of that country.
2.3 How to obtain a second citizenship
The principal grounds for acquiring citizenship are birth within a certain territory, by descent, marriage to a citizen, and grant of citizenship or naturalization.
The conditions under which the privilege of citizenship by naturalization is granted vary from country to country, but essential factors are usually family relationships or certain periods of residence, besides character, language and other requirements.34
Birth within a territory
Nowadays relatively few countries grant citizenship to anyone who is born within their territory. The US is the most important of those countries. The principle that citizenship is passed on by birth within a certain territory is called ius soli (law of the soil). In most countries which apply the ius soli principle, however, this is limited to second-generation immigrants and requires the parents to be legally resident for some time in order for the children born in the country to become citizens at birth.
If you know where you were born you can find out relatively easily whether you may have the right to another passport – or, in case of the US, whether you may actually be a US citizen (and possibly never filed tax returns and therefore need to consult urgently with a US tax lawyer).
You can plan your children’s citizenship portfolio to a certain extent. If your children are born in a country that grants them citizenship either right away, or will make the acquisition easier later on, the right steps need to be taken prior to their birth.35 Some countries faced significant birth tourism36 and adjusted their laws to make it more difficult to just fly in and give birth. Countries which did not adjust their laws, like the US and some Caribbean nations, are trying to be restrictive in granting visas to pregnant women.
Ancestry
Many people may not be aware that they are entitled to an alternative citizenship by virtue of their ancestry. The principle that citizenship is passed on by descent is called ius sanguinis (law of the blood). Americans (and Argentineans, Australians, Canadians etc.) in most cases have traceable ancestry in Europe. If the ancestry is not too far back, it may be possible for them to re-acquire the citizenship of their ancestors. For example, many US citizens are entitled to Irish, Polish or Italian citizenship due to the mass immigration from these countries to the US in the early twentieth century. An Irish-born grandparent, or also a grandparent from Poland or Lithuania, may be the basis for a successful claim to Irish, Polish or Lithuanian citizenship and – as a result – to an EU passport. In Croatia, having proof of Croatian ancestry, no matter how far removed, is sufficient justification to reclaim citizenship.
Even though many countries have tightened their nationality laws, it is constructive to investigate the option, especially if one of your closer ancestors was born in another country. Dual or multiple citizenships offer numerous benefits beyond the possibility of taking up residence in the country of citizenship (and in case of citizenship of an EU country, to have the right of establishment throughout the EU).
Naturalization
For a person who cannot rely on the ancestral option there are residence and immigration options available to skilled people, investors and wealthy individuals in numerous countries:37 Australia, the Bahamas, Canada, Hong Kong, Monaco, Singapore, Switzerland, and the UK are just a few examples of countries which offer residence to wealthy individuals and investors.
This book deals with the most attractive countries where residence permits are available to investors and wealthy individuals. Thus, the emphasis is not just on general quality of life, business and employment opportunities (in which case, for example, Australia or New Zealand would be among the immigration countries of choice), but specifically on factors concerning wealthy individuals, such as personal tax, privacy and personal security. The countries have also been selected with a view of citizenship planning and the possibility of acquiring an attractive alternative citizenship with relative ease. All these countries are welcoming foreign persons who are willing to invest.
Citizenship-by-Investment
There are currently only seven countries which offer citizenship programs that provide a direct route to citizenship based on investment and which have passed Henley & Partners’ country due diligence.38 These are Antigua and Barbuda, Austria, Cyprus, Dominica, Grenada, Malta and St. Kitts and Nevis. Of these, Antigua and Barbuda enacted the relevant legislation in early 2013 and is now operating a program that is very similar to that of St. Kitts and Nevis. More recently, Malta has introduced a state-of-the-art program, which is the only such program that has the approval of the EU Commission. It held a public tender process for a public services concession to establish a citizenship-by-investment program, which is called the Malta International Investor Program. It is the most attractive citizenship-by-investment program in the world today, featuring the highest standards of due diligence, an efficient application process, and a reasonable contribution requirement. Cyprus has an opaque, and unclear, as well as very expensive, program that is still evolving; while Dominica, having a long-standing but poorly regulated program, and Grenada, which also recently enacted legislation to reestablish its badly run program that had closed in 2001, both have a bad reputation and are therefore of limited interest. Thus, Malta, St. Kitts and Nevis and Antigua and Barbuda are the three most relevant citizenship-by-investment options today. Citizenship-by-investment offers the opportunity to legally acquire a new citizenship quickly and easily, without any disruptions to one’s life.39
Apart from these seven countries, there are several others which have similar provisions in their laws to allow the granting of citizenship to substantial investors.40 However, there is no established and clear practice in these countries; or the structures and processes involved are not transparent; or the conditions not clear and the decisions mostly arbitrary.41 Also, in many countries there are suspicions that an element of corruption may be involved in the citizenship acquisitions. Therefore, if the intention is to acquire citizenship based on investment extreme care has to be exercised. In fact, in most cases it is not advisable unless a real, substantial investment is contemplated in the particular target country.
Some countries also have provisions to grant non-citizens passports42 or honorary citizenships43 which are legal but largely useless as no full citizenship status is acquired and thus the documents are often not recognized by other countries. Furthermore, as no citizen status is acquired, there is no protection and the documents can be revoked at any time just like residence permits, therefore not giving the kind of security that is desirable when acquiring an alternative citizenship.
Caveat emptor
With regard to the acquisition of alternative citizenship, it is important to always obtain proper advice from reputable legal advisors, and to check the citizenship laws and procedures of the relevant country. This is particularly important if citizenship is sought on the basis of an investment or other direct contribution to a country. Unfortunately there are many illegal activities and it is safe to assume that many offers are fraudulent. What makes matters worse is that sometimes even seemingly reputable professionals have been found to be involved in what turned out to be fraudulent offers. For example, between November 2010 and May 2011 a Canadian immigration lawyer and a private client lawyer based in Switzerland simultaneously offered citizenship in Iceland for a US$400,000 investment in some private equity fund. Iceland’s citizenship law requires the passing of a parliamentary bill in order to grant citizenship to a foreigner outside the normal naturalization procedures. A simple check of the Citizenship Act would have revealed this, yet the “marketing” activities of these lawyers made it necessary for the Icelandic Government to publish an unequivocal statement. The government statement underlined that Iceland has never had in the past and has no intention to establish any kind of citizenship-by-investment program.44
Bulgaria has an Investor Immigration Program that leads to permanent resident status if certain investments are made and conditions are met, which later on can lead to citizenship. However, Bulgaria does not have a citizenship-by-investment program as such (although provisions in its law would allow it, and are sometimes used to give citizenship to business people under unclear circumstances). Despite this, some agents mislead interested investors to make them believe that Bulgaria does in fact offer a formal citizenship-by-investment program.
Likewise, there are many companies now which provide services under legal programs (like St. Kitts and Nevis) but where either the company or persons involved have a questionable reputation or are linked to government officials, or real estate developments are being promoted which do not pass closer scrutiny.
2.4 Criteria to consider when acquiring citizenship
The most important criterion when acquiring alternative citizenship is that the acquisition is in accordance with the constitution and laws of the country, i.e. that it is legal. This seemingly obvious premise needs to be pointed out specifically in this context.
Citizenship documents and passports obtained by illegal means such as bribery are sadly not uncommon. In many countries it is possible to make (illegal) direct payments to corrupt government officials in return for passports and citizenship documents. Holders of such documents run a serious risk of exposure, arrest and deportation. Even in those countries where the law gives the President, Prime Minister or other government ministers relative discretion regarding the granting of citizenship, if any payments are involved, these are bribes – a crime in almost every country. Often the result is a revocation of previously granted citizenship and passports, for example after a change of government. Persons who have acquired documents this way are also frequently blackmailed and forced to pay further ‘fees’ later on.45 It is therefore crucial that citizenship is obtained based upon specific provisions in the law and clear, official procedures.
A related criterion is that the granting of citizenship and the passports issued in conjunction therewith have to be recognized by other countries. If full citizenship has been granted based on the legal provisions of a country, it will normally be recognized by other countries. However, if only non-citizens passports are granted, generally this is not a good option. One example is Panama where a (legal) non-citizens passport under the retiree residence program can be acquired.
Other important points to consider when intending to become a citizen of choice include the geographic location of the country, the official language, political and economic stability, the legal system, the banking and business environment, visa-free travel possibilities for passport holders of that country, the reputation of the country and the passport, and of course initial and future overall costs.
You will also need to consider restrictions on dual citizenship. Some countries do not allow you to hold any other citizenship besides theirs. About half of the world’s countries allow dual nationality, and the other half does not allow you to be a citizen of another country at the same time. Among those countries which do not allow dual nationality, various degrees of strictness can be observed, but often the acquisition of another citizenship without first obtaining a formal permission (which may or may not be obtainable) leads to the automatic loss of one’s current citizenship. Therefore, one needs to carefully check the legal situation in the home country with regard to dual citizenship, prior to taking any steps to acquire another citizenship.
The following is an overview of citizenship regulations in selected countries.46
Among others, the following countries allow the acquisition of another citizenship:
| Antigua and Barbuda | Australia |
| Austria47 | Bangladesh |
| Barbados | Belgium |
| Belize | Brazil |
| Bulgaria | Canada |
| Chile | Colombia |
| Croatia | Cyprus |
| Dominica | Dominican Republic |
| El Salvador | Egypt48 |
| Finland | France |
| Germany49 | Greece |
| Grenada | Hungary |
| Iceland | Iran |
| Iraq | Ireland |
| Israel | Italy |
| Jordan | Latvia |
| Lebanon | Lithuania |
| Macedonia | Malta |
| Mexico | Montenegro |
| New Zealand | Pakistan50 |
| Philippines | Romania |
| Russia | Serbia |
| Spain51 | Sri Lanka |
| St. Kitts and Nevis | St. Lucia |
| Sweden | Switzerland |
| Syria | United Kingdom |
| United States of America | Vietnam |
| Western Samoa |
On the other hand, countries which do not allow the acquisition of another citizenship include the following:
| Azerbaijan | Brunei |
| China | Czech Republic52 |
| Denmark | Ecuador |
| Fiji | India53 |
| Indonesia | Japan |
| Kazakhstan | Kenya |
| Kiribati | Kuwait |
| Malaysia | Mauritius |
| Myanmar | Nepal |
| Norway | Papua New Guinea |
| Peru | Poland |
| Portugal | Saudi Arabia54 |
| Solomon Islands | South Africa55 |
| Singapore | Turkey |
| Spain56 | Venezuela |
| Ukraine |
One of the most important criteria specific to citizenship is of course the overall reputation of the country and its passport. It is futile to obtain a second passport if the country has a poor reputation at a regional and international level, and therefore its passport is not well regarded and does not afford much visa-free travel, or causes suspicion at international borders.
20 Wallerstein (1974) and Zolberg (1981)
21 See Ong (1999)
22 See for example Torpey (2000), Lloyd (2005), Joppke (2010), Hokema (2002)
23 See The Henley & Partners Visa Restrictions Index (HVRI); www.henleyglobal.com/international-visa-restrictions/
24 This can happen even to citizens of small and generally neutral countries, as Danish citizens experienced following the publication of Mohammed cartoons in the Jyllands-Posten newspaper in Denmark on 30 September 2005
25 The Economist, 19 February 2013 “Tourist visas: You’re not welcome”
26 For a good discussion of the differences between residence and citizenship statuses, see Joppke (2010)
27 See Betten (1998) and Chapter 3 in this book
28 See Ong (1999)
29 For example in St. Kitts and Nevis
30 Although some countries, such as the UK and New Zealand, have introduced limits to the passing on of citizenship infinitely through blood line if not also remaining a resident
31 See Hokema (2002) and Hansen/Weil (2001) on multiple citizenship
32 Some countries do not even allow you to give up your citizenship unless you have another one. For a good discussion of statelessness, see Stiller (2011)
33 For example in China, Malaysia, the UAE and many other countries, there are minority groups which are resident there but are prevented from acquiring citizenship of the country they live in
34 In some Swiss Cantons for example, you have to pass an “integration” test, which means that you may need to learn some Swiss history and other things deemed useful to qualify for the privilege of applying for Swiss citizenship. In some Asian countries, if you are not of a particular ethnic origin, your chances of ever being granted citizenship are close to zero. In most Muslim countries you need not apply if you are not Muslim
35 See the chapter by Professor Weil for further information on this
36 Ireland for example
37 For an extensive overview see Bauman (2009) and www.henleyglobal.com
38 Henley & Partners constantly monitor and evaluate residence and citizenship programs around the world against a number of criteria
39 For an in-depth discussion of these options see Part IV
40 For example, Bulgaria, Cape Verde, Grenada, Nauru, the Seychelles, most South American countries, and others
41 Montenegro, for example, granted citizenship to the controversial former Thai Prime Minister Thaksin Shinawatra on the basis of a mere promise to invest in the country
42 Panama, under its retiree residence program
43 Tonga and a couple of African countries
44 For more information see the website of the Ministry of Interior of Iceland http://eng.innanrikisraduneyti.is/laws-and-regulations/english/citizenship/nr/27049
45 As has been the case in Costa Rica and other Latin American countries for many years
46 The information is based on the author’s own interpretation of citizenship legislation in the relevant countries; for a definitive assessment of the legal situation and possible exemptions, it is necessary to seek legal advice from a specialist in the relevant country
47 Persons may retain their former citizenship only if they apply to do so prior to taking out another citizenship (Beibehaltungsgenehmigung) or if they become citizens under section 10(6) of the Citizenship Act. Otherwise, dual citizenship is generally not allowed and if another citizenship is acquired, Austrian citizenship is lost ex lege
48 You may become a foreign citizen only if you apply to do so prior to acquiring another citizenship. Otherwise dual citizenship is generally not allowed, and if another citizenship is acquired the Egyptian citizenship is lost ex lege
49 Persons may retain their German citizenship only if they apply to do so prior to obtaining another citizenship (Beibehaltungsgenehmigung). Otherwise dual citizenship is generally not allowed, and if another citizenship is acquired voluntarily German citizenship is lost ex lege
50 According to Chapter 14, Annex J-Article 6* of 1951 Pakistani Nationality Law and the amendments 1952, 1972, 1973 and 2000 stated that holding dual citizenship was not permitted. But now the government of Pakistan, based on bilateral treaties signed by Pakistan, recognizes and allows its citizens to also hold citizenships of 16 countries, including Australia, Belgium, Canada, France, Iceland, New Zealand, Sweden, Switzerland, the US, the UK and others
51 Spain has dual citizenship treaties with Argentina, Bolivia, Chile, Costa Rica, the Dominican Republic, Ecuador, Guatemala, Honduras, Nicaragua, Paraguay and Peru. Spanish citizens residing in these countries do not lose their citizenship if they adopt that citizenship. For all other countries, Spanish citizenship is revoked upon the acquisition of foreign citizenship
52 In the case of the Czech Republic two specific exceptions apply. Most importantly, in the case of restoration of Czech citizenship (while keeping the one possessed to date, for example US citizenship) when the citizenship of former Czechoslovakia was illegally taken away between 1948-1990 by the Communist regime; or without losing the Slovak one, thus becoming a dual citizen
53 India has introduced ‘overseas citizenship’, which is very close to giving Indians the possibility to hold full dual citizenship. It is therefore possible for an Indian citizen to acquire a foreign citizenship, thereby losing full Indian citizenship but immediately acquiring ‘overseas citizenship’. As an ‘overseas citizen’ you have the same rights as Indian citizen as before, including the right to own property etc. in India, except political rights
54 In Saudi Arabia there are even criminal penalties for exercising another citizenship; regardless, many Saudi citizens hold dual citizenship, mainly from the US
55 In the South African Citizenship Act it is an offence for a South African citizen aged 18 years and older to enter or depart the Republic of South Africa using of the passport of another country; you can however obtain permission to travel on your foreign passport abroad
56 Limited dual citizenship allowed. See footnote 51 for Spain above
