As a Nomad, you are well aware that our family travels full-time. We have done all of our traveling primarily within the United States. However, as the Nomad Sons get older, our plans may look external to the US and broaden our family’s travel horizons. Many of you have already done so and may be doing so now. With this digital age of connectivity, more and more people are working from mobile phones and laptops as long as they have Wi-Fi or a good mobile signal.
As an US Citizen, if you travel, live and earn monies abroad, many of you do not know that you still likely owe the IRS income tax. And even more of you are unaware that there are completely legal ways to avoid or reduce your income tax burden. I was contacted by author, entrepreneur and fellow traveler Gregory V. Diehl. He turned me onto another traveler who actually has experience in both travel and finance/accounting. His name is Olivier Wagner.
Olivier Wagner wrote a book called U.S. Taxes for Worldly Americans – The Traveling Expat’s Guide to Living, Working, and Staying Tax Compliant Abroad. I was asked to share the following passage that pertained to one avenue of minimizing tax burdens as it pertained to secondary passports. I hope this information is both helpful and useful. As always, feel free to question and comment as appropriate.
How and Why American Expats are Getting Second Passports in Record Numbers
It’s getting more common now for the modern American traveler to hold two or more passports obtained through legal means in other countries. Having a second citizenship can facilitate travel, allowing one to get better immigration status or have a place to go back to if a worst-case scenario occurs. It’s also a necessity if you ever plan to renounce your U.S. Citizenship that you another to replace it with. Having residency in another country can even be very beneficial for your U.S. tax filing, legally reducing the amount you have to pay at home through the Foreign Tax Credit and other tools.
The best place to hold a passport depends on where you plan to travel and how hard you are willing to work to get it. If your ambitions lie in Europe, you’ll probably want to get a passport from a member country of the European Union (or at least one that will let you visit the Schengen zone without a visa). South America has the Mercosur agreement, which will allow you to travel around nearly the whole continent with only your ID card and stay for extended periods of time if you are a citizen of any member country. Some former U.S.S.R. nations will give you easy access to Russia (normally very difficult for Americans) and the surrounding nations.
Many countries have ancestry programs for descend-ants of citizens to also claim citizenship if they desire. The descent programs of Armenia, Bulgaria, Croatia, France, Ireland, Israel, Italy, Lithuania, Poland, Rwanda, Serbia, Turkey, and Ukraine extend for two or three generations, so it’s worth looking into if you have a grand-parent or great-grandparent from one of these places. Just be prepared to produce the documents (e.g. birth certificates) proving your lineage and take at least one trip there to apply for and/or pick up your new passport when it is ready a few months later.
Marrying a foreigner puts you on the fast track to citizenship in their country (and them on the fast track to becoming American), but the process can be different for each nation. Usually, residency is acquired first, and after a predetermined amount of time has passed you can apply for your passport.
For individuals of a certain net worth, economic in-vestment opportunities exist that will either put you on the short path or instantly qualify you for citizenship. Many island nations are notorious for offering these passport opportunities at investment or donation levels ranging from six to seven figures. If you qualify, you can expect to receive your passport in just several weeks. A St. Kitts and Nevis passport allows travel to a large array of countries, including the Schengen area, but it also come with a social stigma not otherwise associated with citizenships obtained through birth, marriage, residence, or ancestry in a world superpower.
But for most people, the best way to obtain a second passport will simply be through the path of naturalization as a permanent resident. The requirements for obtaining residency vary widely from country to country, but they usually involve some combination of registering a local company, investing a certain amount of money (or just holding it in a local bank account), having an employment contract with a local company, and spending a certain minimum amount of time within the country each year.
Becoming a multinational citizen is one of the best expressions of having a worldly mindset, and a strategic move for Americans worried about the liabilities of their tax situation.
About the Author
Certified Public Accountant, U.S. immigrant, expat, and perpetual traveler Olivier Wagner preaches the philosophy of being a worldly American. In his new book, U.S. Taxes for Worldly Americans, he uses his expertise to show you how to use 100% legal strategies (beyond traditionally maligned “tax havens”) to keep your income and assets safe from the IRS.
