Is it possible to lessen your tax burden by acquiring foreign citizenship by investment? Will you have to pay the wealth tax in your new home country? Can you avoid paying the personal income tax when obtaining a second passport? Please read on to find the answers to these and other tax-related questions.
When you plan to apply for foreign citizenship, you should look into the tax issues seriously. If you choose the right country, you may have an opportunity to pay less in taxes. If you ignore certain regulations, you may end up with a heavier fiscal burden.
First: You cannot automatically reduce the income tax when acquiring foreign citizenship by investment
When thinking about getting a second passport, you can be sure of one thing: foreign citizenship alone will not impact your tax burden, except in special circumstances such as US citizens who renounce American citizenship.
Income tax is not directly related to your citizenship status unless you are American.
Most countries levy taxes on those individuals who spend more than half a year (183 days) living in the country. You may be a citizen of the country or a foreign national – but if you reside on its territory for the best part of any calendar year, you become subject to taxation in that country.
The United States does not have a citizenship-by-investment program of the kind that some other countries have. On the other hand, many wealthy Americans look for legal opportunities to acquire foreign citizenship in a low-tax, offshore jurisdiction. They want to have an opportunity to renounce their US citizenship in case the burden in their home country becomes too heavy.
Also bear in mind the fact that you can easily become an accidental tax resident o one or more jurisdictions. If you obtain a second passport and move to your new home country, your income mightl remain taxable in your old home country until you formally acquire a new tax residence. On the other hand, it might not. It all depends – and that is why professional advice is called for in such a complex area.
Will you have to pay a wealth or exit tax when acquiring foreign citizenship?
A wealth tax is a tax based not on what you earn, but on how much you own. As far as we know, no country that runs a citizenship-by-investment program levies a wealth tax. This fact alone serves as an additional incentive for citizens of the countries that do levy a wealth tax to seek foreign citizenship.
Currently, there are only seven countries in the world that levy a wealth tax and they are among the richest states on the planet. The reason why a wealthy citizen of one of these states may want to obtain a second passport is therefore quite clear!
If he or she can invest around US$ 100,000 to US$ 500,000 into the economy of a country that does not levy wealth tax, he/ she may also be able to qualify for residency and avoid the same money being taxed over and over again on an annual basis.
The following national states levy the wealth tax:
- Spain: The tax rate is progressive and it can be from 0.2% to 3.75% of the worth of the property that exceeds 700,000 euros. Residential accommodations worth up to 300,000 euros are excluded from the list of taxable property. The precise amount of the wealth tax depends on the region in Spain.
- Norway: The wealth tax rate is 0.85%. The best part (0.7%) goes to the municipal budget and the rest goes to the national budget. Property that is worth more than 1,500,000 krone (around US$ 170,000) is taxed.
- Switzerland: Swiss citizens’ assets are taxed wherever they are located but foreign nationals’ assets located in Switzerland are not taxed. Most cantons do not levy the wealth tax on assets that are worth less than 100,000 Swiss francs. The tax rate varies between 0.13% and 0.94% depending on the canton and the municipality.
- Belgium: The wealth tax in the country is 0.15%. Both tax residents of Belgium and non-tax residents having property in the country shall pay the tax if the worth of the property exceeds 1,000,000 euros.
- Argentina: Argentina introduced the wealth tax in December 2020. Any property whose worth exceeds 200 million peso (2.5 million US dollars) is taxed. The tax rate is progressive and it can reach 3.5% on the property located in Argentina and 5.25% on the property located abroad.
- Netherlands: The wealth tax is levied on accumulated wealth, property, and investments. The rates are as follows: 0.58% on assets worth between 30,361 and 102,010 euros, 1.34% on assets worth between 102,010 and 1,020,096 euros, and 1.68% on any assets whose worth exceeds 1,020,096 euros.
- Italy: Italy levies a wealth tax in the amount of 0.2% of the financial investments that are made in the country.
According to OECD data, the number of countries that levy the wealth tax was 12 in 1990, then it dropped to 4 in 2017, and then it rose to 7 in 2020. Some countries, such as Argentina, for example, have (re)introduced the wealth tax under the pretext of the COVID-19 pandemic.
Fiscal burdens and tax incentives for those acquiring citizenship by investment
Below please find the basic tax-related facts concerning the countries that run citizenship-by-investment programs:
- St Kitts, Antigua, and Vanuatu are among the countries that do not levy any income tax neither on the local nor on the global incomes of their tax residents. If you are looking to become a citizen of a 0% income tax country, one of these jurisdictions should be your choice!
- No Caribbean country granting citizenship to foreign investors levies capital gains tax, wealth tax, nor inheritance tax.
- Turkey has one of the best tax systems for new citizens.
- Some countries are especially attractive for entrepreneurs engaged in Fintech or crypto business because they offer serious tax incentives in these areas – for example Serbia.
Note that many countries running citizenship-by-investment programs have made treaties on double taxation avoidance. Some of them are with members of the OECD. The table below shows the tax burdens in those countries that grant citizenship to foreigners in exchange for investments.
|Country||Corporate tax||Income tax||Wealth tax||Capital gains tax||Inheritance tax||Tax treaties|
|Antigua||25%||0% for local tax residence regardless of the source of income||0%||0%||0%||Caribbean community, UK|
|Saint Kitts||33%||0% for local tax residence regardless of the source of income||0%||0% (<1 year)||0%||Caribbean community, Monaco, Switzerland, UK|
|Dominica||25%||Residents are taxed on global personal incomes; non-residents are taxed on the incomes made in Dominica. The rate is up to 35%||0%||0%||0%||Caribbean community|
|Saint Lucia||30%||Residents are taxed on global personal incomes; non-residents are taxed on the incomes made in St Lucia. The rate is up to 30%||0%||0%||0%||Caribbean community, Switzerland|
|Grenada||28%||The income tax is levied exclusively on the incomes made in Grenada regardless of the person’s residence. The rate is up to 30%||0%||0%||0%||Caribbean community, UK|
|Vanuatu||0%||0% for local tax residence regardless of the source of income||0%||0%||0%||19 countries|
|Turkey||22%||Up to 35%||0%||22%||1-30%||94 countries|
|Malta||35%||Up to 35%||0%||12%||0%||76 countries|
|Montenegro||9%||Up to 12%||0%||9%||5%||42 countries|
|Egypt||22,5%||Up to 22.5%||0%||0%||2.5%||50 countries|
|Jordan||20%||Up to 14%||0%||0% (excluding sales of company ownership shares/ depreciable assets)||0%||32 countries|
Please apply for a personal consultation on tax-related matters to an expert here at InternationalWealth portal if you are planning to acquire foreign citizenship. The figures given above are for your information only, E&OE. Each particular case requires separate consideration.
Consultations on immigration and tax issues to candidates for foreign citizenship
Tax rules are different in all countries and, yes, sometimes they are rather complicated! In many countries the regulations that apply to native-born long term residents do not apply for foreign investors having dual citizenship.
Please request a free consultation on tax-related issues concerning those individuals who are planning to apply for foreign citizenship.
When applying for citizenship of a foreign country, seek professional advice. The process involves many moving parts and some of them are rather complex. Tax issues have to be investigated with special care – because they will have a direct bearing on your bottom line! Experts of InternationalWealth portal will be happy to provide a personal consultation to you on these and other immigration-related matters. Please contact us by email, live chat, or WhatsApp and we will get back to you very soon!
What low-tax jurisdictions offer the least expensive foreign citizenship?
The most affordable foreign citizenship can be found in the Eastern Caribbean. Antigua and Barbuda, for example, is a country to put at the top of your lists if you are planning to acquire second passports for all members of a large family. A family of six applying for Antiguan citizenship should make a donation of US$ 100,000. Please mind that certain additional fees and state duties have to be paid as well.
What European country offers the least expensive foreign citizenship?
Montenegro in the Balkans offers the most affordable European citizenship. The minimum amount of money that you have to invest in the country to qualify for its citizenship is 250,000 euros.
Why do I need expert support when applying for foreign citizenship?
There are over a dozen countries that have citizenship-by-investment programs and each program is different from others. Each country has its own advantages and more or less obvious disadvantages. Each country will service someone’s purposes better than someone else’s purposes. Offshore Pro Group has people on the ground in every country that has a citizenship-by-investment program and we will be glad to give you the most reliable consultations on acquiring foreign citizenship.