Plan B Passports and Taxation

For many years the demand for ”Plan B” passports and citizenships has been growing at an astonishing rate. Here at La Vida we have assisted clients from over 100 countries worldwide to obtain second citizenship through investment. Investor’s incentives vary, but the typical reasons for applying include security purposes, expanding visa-free travel and enhancing global opportunities including education and business prospects.

In recent years there has also been a substantial surge in interest from applicants looking to improve their tax situation, specifically US citizens.  For most countries taxation is based on residency. However for the USA taxation is based on citizenship and US passport holders can be paying taxes back to the US irrespective of which country they live in. A large proportion of these enquiries come from investors who have made a small fortune trading cryptocurrencies such as Bitcoin.

In many places tax law is now extending to gains made on Cryptocurrency. Earlier this year the Biden Administration announced they will be cracking down on Crypto gains and that any transfers over $10,000 should be reported to the IRS. The US also impose a 15-20% capital gains tax to be paid on Cryptocurrency gains over $40,000. Many Bitcoin investors are looking for ways to legally avoid these taxes by renouncing their US citizenship and becoming a citizen elsewhere, namely in the Caribbean where several of the islands do not impose capital gains tax.

Antigua, Dominica, Saint Lucia, Saint Kitts and Grenada all have favourable tax regimes for their citizens and their Citizenship by Investment programmes start from just $140,000. For example, by applying for Citizenship by Investment in Saint Kitts, one could reside here and benefit from no income tax on worldwide income, as well as no capital gains tax on cryptocurrency gains and other financial gains. For US Citizens to benefit from these tax incentives they would either have to apply for a non-tax residency status in the US, which can be complex or sacrifice their US citizenship altogether. Many are willing to do this though.

Other nations also clamping down on Cryptocurrency taxes include the UK, Canada and parts of the EU. Everyone’s tax situation is unique and no blanket advice will suit all, but a ”Plan B” citizenship or second residency through investment could provide a simple, low cost and legal solution to improving your tax status.