By Uglobal Staff
Cape Verde. Belize. Dominica. Grenada. St. Kitts and Nevis. Ireland. Canada. United Kingdom. Eight passports in all – and the most citizenships attorney David S. Lesperance of Canada-based Lesperance & Associates has ever seen one client obtain.
Lesperance, who specializes in assisting high net worth individuals with tax-efficient residence, citizenship, and domicile planning, said his client would have had nine but renounced his United States citizenship for tax purposes after securing his first new citizenship.
The quest for not dual, but multiple citizenship appears to be on the rise. Switzerland-based Caputo & Partners citizenship expert Enzo Caputo estimates that every year several thousand people spend $2 billion to acquire a second, or even third, passport.
“The advantages are easy to define. You get the benefits of being able to freely travel to more places around the world and can easily relocate to any country you have citizenship with,” said Samantha Snow, client services director at Abacus Corporate Services Limited in Malta.
Getting more than one passport is often driven by applicants’ need to secure their own future and that of their families and being able to make the best choice under the most favorable conditions. Lesperance described it as designing an optimized passport portfolio for a “backup plan.” He said the number of citizenships and/or residences appropriate for a family depends on their specific situation. But, he said, at a minimum, it requires at least one additional citizenship and place of residence.
“The place of residence may or may not be the place of second citizenship. As with an insurance policy, one needs to weigh the cost of additional insurance – additional citizenships and residences – against the cost to the family in terms of freedom, mobility, finances, and lost opportunity of not having those additional elements,” said Lesperance.
There are things to be aware of when pursuing multiple citizenships. Every country has different requirements of its citizens regarding taxes, military service, retirement, and other issues, said Nuri Katz, founder and president of Montreal-based Apex Capital Partners, which specializes in investment consulting and wealth management for multinational, high net worth clients. Katz said it is important for those acquiring multiple citizenships to understand that they must know and follow all the laws of all the countries of their citizenship.
“For example, with the U.S., even if a person has another citizenship and lives abroad, that person is liable to taxation in the U.S. under FATCA – Foreign Account Tax Compliance Act – tax regulations, as well as filing other financial reports on a yearly basis,” said Katz.
Jeremy Savory, CEO and founder of Dubai-based Savory and Partners, said obtaining citizenship by investment is typically into low to zero tax jurisdictions since few investors would seek a passport that exposes them to more tax. Savory said there are zero taxes on foreign income, personal, capital gains, wealth, and inheritance. And, he said, if the second passport applicant is not paying taxes then neither should he or she be entitled to social service and other state benefits.
“The same applies to military service in that no investor seeking second citizenship would want to be drafted for national service. In fact, some second passport applicants – Egyptian, Singaporean ¬– apply for dual citizenship as a means to excuse their children from military service,” Savory said.
For example, Katz said if an Israeli citizen leaves before completing mandatory Israeli military service, he will be liable for such service and may be jailed upon return to Israel without having a special exemption. Katz said issues of taxation and various other requirements are based on where a person lives and not his citizenship.
“As such, taking on a second citizenship does not usually create obligations to a state if residency is not taken on in that country,” said Katz.
Savory said residency is not required for most citizenship by investment jurisdictions except for Cyprus, Malta, Antigua, and Barbuda. He said second passports do not typically bring burdensome responsibilities apart from ensuring that taxation and dual taxation is respected.
“Also, most countries don’t limit or prohibit second citizenship and how many passports one can hold, but there are some countries that do prohibit dual citizenship – for example, India, Saudi Arabia,” said Savory.
Lesperance said many individuals who want to have a backup plan come from countries that do not allow dual citizenship or have some restrictions, such as China and Russia. He said nationals from those countries seeking a backup plan are not doing anything ethically wrong. But, if they want to retain their current citizenship, they need to be aware of the ways their home country might discover their second citizenship. For example, Lesperance said in 2014 Russia began to put reporting and other restrictions on the holding of second nationalities, particularly for Russians holding political office.
“It was, therefore, reasonable to expect that this law would likely become even more restrictive over time. In 2014, Malta had recently introduced a citizenship by investment program, which required the names of those granted Maltese citizenship to be published. As a result of this, I recommended that my Russian clients not consider Malta as part of their passport portfolio,” said Lesperance.
Katz said having several passports simply gives a person more freedom. He said there really are no ethical problems and that the circumstances of a person’s birth should not dictate where or how he lives his life. Savory said a second passport can be used to protect assets and family and as a tool for international tax planning and investing.
“As a dual citizen, one can enjoy an extra degree of privacy in banking and investment activities, as well as a hedge against geo-political instability,” said Savory.
Lesperance said his eight-passport client seems to be content with his passport portfolio. He said those interested in multiple passports should seek out an advisor who thoroughly understands their situation, goals, and any particular issues that may arise and begin designing their backup plan.
“The benefits far outweigh the inconvenience of holding dual citizenship,” said Savory.