There is an ongoing hype among certain “offshore experts” to acquire a second or even third citizenship (and renounce your current citizenship in the process).
By getting another citizenship and/or renouncing your current citizenship, it is argued, you can access travel and tax benefits.
In reality, however, renouncing your current citizenship and getting another one instead is rarely worth it.
Let’s have an in-depth look at the purported benefits of acquiring another citizenship.
Benefits of Second or Alternative citizenship
Visa Access
Citizens from countries with limited visa access to other countries, specifically individuals from Russia, China, and developing countries in Africa and Asia, can attain the freedom of international travel by obtaining a second citizenship.
Both Caribbean citizenships and of course European citizenships accessible through investment or ancestry offer excellent travel privileges.
As we are discussing later on in this article, the cost of obtaining a new citizenship can be substantial, both in terms of money and time. As a result, you should weigh the advantage of not having to apply for visas with the time and money spent on getting a new citizenship.
Unless you are constantly traveling internationally, or regularly are refused visas (e.g., if you are Russian), a second citizenship for travel purposes is likely not worth it.
Tax Purposes
Except in the case of three countries, your citizenship does not have any impact on taxation.
As a British citizen, for example, your personal income is taxed in the UK if you reside and work there. If you move abroad and do not maintain a UK home, you won’t be taxed in the UK on your (international) income.
That is because the UK, like most other countries in the world, operates on a residence-based taxation system. In other words, anyone residing in the UK has to pay UK income tax. It does not matter whether that income is derived from UK or international sources.
The only three countries operating a citizenship-based taxation system are North Korea, Eritrea, and the United States of America. As a United States citizen, you have to pay tax on your personal income whether you reside in the United States or not.
Eritrea and North Korea are small and relatively poor nations and are unable to enforce their citizenship-based taxation systems properly. The countries do not have the resources to collect information on the incomes generated by their citizens living and working abroad, and thus struggle to enforce tax collection across borders.
The United States, on the other hand, as the world’s most powerful country, is able to and does enforce its citizenship-based taxation system globally. International banks are reporting transactions done by US citizens directly to the IRS, meaning there is no way to hide.
As a US citizen, if you reside in the UK, Germany, or the UAE, you will still have to file your US tax return, even if you do not have any US place of residence.
The US has double tax treaties with many (usually high-tax) countries. As a result, if you live in a high-tax country such as the UK or Germany, you may pay reduced or no US income taxes as you are already being taxed in your country of residence.
The main challenge for US citizens is that countries without personal income taxes, such as the United Arab Emirates, usually do not have double tax treaties with the US.
The good news, however, is that even if you are a US citizen living in a country without a double tax treaty, you still benefit from the US’ Foreign Earned Income Exclusion (FEIE) tax benefit. This benefit allows an income exemption amount of $120,000 per year. In other words, if you live in Dubai as a US citizen, you won’t have to pay US income tax on any amount below $120,000.
The exemption amount is adjusted annually for inflation. For example, the 2022 exemption amount was $112,000, while the 2023 exemption amount is $120,000.
In conclusion, unless you are a US citizen with an annual income above $120,000 living in a tax-free country like the UAE, renouncing your citizenship for tax reasons won’t be worth it.
How to Acquire Second Citizenship
You can get a new or second citizenship through one of three means, these are citizenship by descent, citizenship by residency, and citizenship by investment:
Citizenship by Descent
A number of countries grant you citizenship if you have a direct ancestor from that country.
Countries that offer such programs include:
Hungary
Italy
Poland
Bulgaria
Lithuania
Luxembourg
Slovakia
Ireland
Greece
The exact conditions of these citizenship through ancestry programs vary from country to country. In Italy, for example, you qualify for citizenship if you had a male Italian ancestor after 1861, or a female ancestor after 1948.
The main benefit of these citizenship-through-ancestry programs is usually the minimal nominal fees of just a few hundred or a few thousand dollars, and the lack of any residency or investment requirements. Most countries do not even require you to learn the language.
Citizenship by Residence
Countries such as Canada and Australia issue work and residence permits to people with certain professional backgrounds. If you stay long enough in the country, you will get the right to apply for local citizenship.
The issue here is that citizenship-through-residence programs are impractical if you do not intend to live in those countries for a prolonged period of time, and if you are looking to save taxes.
Citizenship by Investment
If the other two means of obtaining citizenship are unfeasible or too impractical, you can still acquire a new citizenship by investing in a select few countries.
Countries with citizenship by investment programs include (as of 2023)
Antigua and Barbuda
Austria
Dominica
Grenada
Jordan
Malta
Montenegro (ended in 2022)
St Kitt’s and Nevis
St Lucia
Turkey
Minimum investment requirements vary widely by country but tend to start at around $100,000 as a non-recoverable donation or a $250,000 property or business investment with a minimum investment holding period of 5 years.
Bearing a Child - Birthright Citizenship
Virtually every country in the Americas and select countries in Western Europe grant citizenship to anyone born within their borders, irrespective of the parents' citizenship.
The caveat here is that as a parent of a child born in one of these countries, you may get permanent residence rights, but not citizenship unless you agree to reside for a minimum amount of time in the country.
Birthright citizenship is really a long-term strategy through which you may benefit the next generation.
UAE Citizenship
Obtaining UAE citizenship as a foreigner is possible, but much harder than in most countries. We cover in detail how to attain UAE citizenship in a separate article.
Do I Need to Renounce My Citizenship When Getting a Second Citizenship?
In most cases, acquiring a second citizenship usually leads to the automatic withdrawal of your original citizenship. Few countries recognize dual citizenship, and those that do restrict dual citizenship to people who acquired their citizenships at birth or limit dual citizenship to select countries. For example, a European Union member state may restrict dual citizenship to other EU countries.
Conclusion
Obtaining a second citizenship is really only worth it for US citizens earning six figures and living in a tax-free country like the UAE.
Citizens from countries such as Russia and China who would like to benefit from greater and easier visa access to other (Western countries) can also benefit but need to weigh the substantial costs of second citizenships against the limited savings in time by not having to apply for visas.
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