Introduction – This is a guide for spats or expatriates or those seeking to obtain a second or a third passport. Some of you will also be looking to live in another country that is a tax haven and some won’t. Often the second passport process is a step before giving up ones birth citizenship and becoming a full fledged expat or expatriate. This guide discusses the things to look for, what to avoid. The country you chose must have favorable taxations laws, privacy laws and respect individual and personal freedoms. Unfortunately some of the countries that pass this test have high real estate prices and a high cost of living. There is no perfect country anywhere, there is always going to be a compromise.
Why a Second Passport? – This is a complex question and the answers are going to be individualized greatly. Many people live in a country that taxes their worldwide income to varying degrees and extents. This makes the accumulation of wealth extremely difficult. Some people wish to renounce or give up their citizenship with the country that taxes their worldwide income thus freeing themselves up for a tax free existence. Some people merely wish to open bank accounts using a passport from another country. This could be to circumvent any tax treaties or mutual legal assistance treaties that their country is in with a country they chose to live or bank in. Some people come from a country where traveling with their passport can be burdensome or even dangerous. Some of the narcotic trafficking country issued passports can lead to long interrogations and body cavity searches in many airports around the world if the person can even get a visa to travel with in the first place. Some of the politically unpopular countries can also cause questioning and visa denials. Many of the countries that are good choices for second or third passports offer visa free travel to numerous countries. Getting visa free travel to the USA from a tax haven is not something you should plan on. If you really want visa free travel to the USA Argentina is probably one of the easier countries. Argentina is the opposite of a tax haven. They have high taxes on worldwide income. Their taxing agency requires bank statements to be submitted with tax returns. One really needs to be careful that they do not make their tax problems worse when acquiring second passports/citizenships/residencies.
What about Diplomatic Passports? – Forget these and consider those offering them as scam sites. It is most doubtful they could deliver except from an archaic third world country. Please bear in mind that diplomatic passports almost always require a visa and this visa should be applied for in the country that issued the diplomatic passport by the government as if it was processing a visa for a bona fide government executive or else it will raise suspicion. They will have to state the nature of your trip, your title, how long the trip will be for and describe your diplomatic posting. If you are not traveling on government business then why are you using a diplomatic passport? So by now you figured out the sellers of these products are not going to be able to get the government to keep applying for visas and multiple visas for you every time you travel and if they did imagine how many thousands of dollars they would charge each time. If you do not look like you are a national of the country that issued you the diplomatic passport expect even more problems. In a word run in the other direction when you see a web site offering these diplomatic passports. If they could deliver which is most doubtful it would be from a questionable country that may have hundreds of these floating around the world being used by criminals and so forth and it would be difficult if not impossible to get the required visas to correctly use the passport. Forget diplomatic passports. What you should be seeking to do is lower your profile not raise red flags.
Name Changes – Often people think it is a good idea to do a name change when applying for a second passport. Our answer is maybe but there are some negatives associated with this. First negative is name changes are generally recorded in some sort of public registry. Do you know for sure your government does not get the name change records from every country in the world it can get such data from? If you delayed in answering assume they do collect such data and this is like sending your country a telegram that you are intending to become a citizen of another country. Most people that get a second passport do not notify their home country since there normally isn’t any requirement requiring one to do so. The country granting the second passport will generally never notify your original country. How they will deal with this information is another question that we will leave you to answer on your own. In some Latin American countries it is normal for the person to use three names – their first name followed by their father’s last name followed by their mother’s last name. Thus you would pick up a name, your mothers last name added on to your current last name. Now you may know why your government asks you for your mother’s maiden name. So if possible you may want to go this route with the extra name which does not require a name change process. Your financial enemies may or may not know your mothers maiden name and even if they do they may never put two and two together making four by looking for you or your assets using these three names. Whatever you do never ever travel with your picture in two passports with different names unless you enjoy lengthy border or airport interrogations. This would not normally apply to the addition of your mother’s maiden name to your name since it can be explained and demonstrated easily enough.
Drivers Licenses and other Government Issued ID – Generally the tax haven country granting you the passport will allow you to apply for a driver’s license based on your existing driver’s license. The driver’s license expiration date will be the same as that of your passport or residency in many cases. This gives you an additional government issued photo ID and is highly recommended to obtain this if at all possible. Another option is a government issued residency or citizenship photo ID card. Most banks will expect to see two government issued photo ID documents so bear this in mind if you wish to open bank accounts with your new passport. Banks will also ask for a lawyer reference letter or one from an accountant. They will also require a reference letter from a bank. Normally the bank, lawyer and accountant can be from any country. Some banks in some countries require a utility bill to establish your address. This can be a problem if you are not living in the country your new passport is from. It has been our experience that if this is required and you can not produce it they will not process your application no matter how good your explanation is. Often you can say you are living in another country and supply a utility bill from that country. At times this may trigger a request for your visa for that country, generally stamped in your passport. There is no real set of rigid rules, things vary from bank to bank, country to country and things will also vary depending on the country of the passport being presented.
Immediate Passport Programs – There are such programs available from tax havens and they generally require one to make a substantial investment in the country. Usually this investment can be in residential real estate but of course must be part of an approved program by the government. The figure $250,000 comes up frequently but some countries allow as low as $100,000. Other countries allow general business investments like starting a business and hiring locals. Usually the figure required to be invested is about the same as for real estate. Some countries have additional fees that are steep to be paid to the government one time only usually over $10,000, sometimes $35,000. Panama has the cheapest instant passport program we know of, essentially it is free. What Panama requires is that one place enough money in their national government owned bank to generate $750 a month for five years, which is currently about $170,000. They then issue a Panama Passport good for five years and you get $750 a month each month from the bank. At the end of the five years you can get your money back or roll it over again and get another passport for five more years. When you think about it not only is this Passport free Panama even pays you money to participate in the program. With any of these programs there are other fees to be paid to the law firm assisting you with the immigration process. Always use a law firm. Only a law firm really understands the process and has any sort of recourse available to it if there is a problem or error made by the immigration department. You have attorney client privilege only of dealing with a law firm. If you decide to use us, Panama Legal to assist you with your immigration needs we in turn only work with local lawyers in the country you are seeking a residency/citizenship/passport from. This keeps the chain of attorney client privilege intact all the way through.
Residency Programs - Some of you may not be able to get an immediate passport from a tax haven probably due to financial considerations. You may be able to qualify for a residency. This is not so bad and is a start. Generally residency programs lead to the eligibility to apply for citizenship in three to five years. Citizenship enables one to have a new passport. Residency will come with a government issued residency photo ID. This usually allows you to apply for and receive a driver’s license. These two pieces of government issued ID will allow you to open bank accounts in the country of the residency and sometimes in other countries. Generally a passport is what the banks like to see but you may be able to find an exception in neighboring countries.
Residency Travel Without A Passport – In Latin America there are organizations of different countries. These countries allow cross border travel amongst themselves without a Passport, just a residency card from any of the countries is required to cross the border and actually live in the country. This is a little bit like the EU but without the taxation and loss of privacy. One of these organizations is Mercosur. Mercosur consists of the following countries: Argentina, Brazil, Paraguay, Uruguay and Venezuela. Mercosur is a Free Trade association. Their gross product is almost one trillion dollars. Their combined population is about 275,000,000. Ok suffice it to say Mercosur is not insignificant. Mercosur does not get on well with the USA and Canada, they dislike NAFTA (North American Free Trade Association – USA, Canada and Mexico) and believe any free trade agreement with the USA will leave them short changed. So if you had a Mercosur country issued residency card you could travel without a passport to any of the Mercosur countries which is not that bad considering you would only have to wait a few years to become passport eligible. Andean Community of Nations is another Mercosur like trade block of nations consisting of Bolivia, Columbia, Peru and Ecuador. The Andean Community also permits the residents of one country to travel without a passport into the other Andean Community nations. The Andean community has 120 million people and a gross product of $745 billion dollars. It gets better. The Andean Community has been issued associate member status by the Mercosur Nations and there is travel permitted without a passport by all the nine nations – Argentina, Brazil, Paraguay, Uruguay, Venezuela, Columbia, Bolivia, Peru and Ecuador plus Chile as well (in 2006 Chile became an associate member of the Andean Community). Folks this is a lot of countries and geography to travel around in without having a passport. It comes to about 500 million people. We tend to favor the Latin American countries for second passports. Next we go to the Caribbean Island countries. Brazil, Argentina, and Venezuela are not tax havens and do tax worldwide income. We do not suggest Columbia, Chile, or Peru for numerous reasons. Ecuador is best for a person experienced in life in Latin America that speaks Spanish. This leaves Bolivia, Uruguay, and Paraguay and not that many of you are familiar with these countries but they each have their pluses and minuses.
General Requirements for Residency/Citizenship/Passport Programs – In this section we will not cover the specifics financially or otherwise. We will briefly discuss the general guidelines applicable to most countries. An existing passport is required, and the passport must enable the person to travel to the country in question with or without a visa in that the application process is always going to require a personal visit to the immigration department. If your passport does not enable you to travel to the country, you are unable to apply. One will be required to obtain a clear police record report from the country where they are currently residing. People with police records may or not be able to get into the various programs. If the offense was many years ago – say you are 54 years old and it happened when you were 22 years old it would be easier to get in. If the offense was related to narcotics of any sort this is much harder and may not be possible. If it was a sex offense it gets harder and probably will never get approved. If it was drunk in public, reckless driving, well not so hard. Generally anything pertaining to sex offenses, narcotics, money laundering is not going to be well received. Organized crime backgrounds will not be well received. Multiple offenses make chances of approval dismal. Long periods of incarceration make it most difficult. There is no guarantee that one can qualify with a police record, one never knows until they apply and find out. It will be expensive to find out. The immigration authorities look at the whole application to make a determination. What does this person do, are they retired, do they have a pension that is adequate, how is their health, any dependents coming with them, do they have assets in the bank and other factors. Generally several photos are required. Marriage licenses and birth certificates are required. Usually a health certificate is required to be completed in the country you are applying in. Generally people with major ailments or diseases like Aids will experience great difficulty with immigration and generally will not be approved. Some documents will need to be sent to the consulate or embassy in your country for authentication by the country you are applying in. Sometimes this can be bypassed by notarizing and apostilling these documents. You will need to come to the country and stay for a while. Sometime a week or two, sometimes longer. You usually will need to return to pick up the documents once they are completed. Application times can be a few weeks up to a few months, times will vary. Sometimes you can apply in a smaller city for faster processing. The law firm being used in the country should appear with you at the immigration department when you are required to present yourself.
Marrying your Second Passport – There are a lot of unscrupulous people out there who say to perspective clients “Why waste your money on a residency program”? They then suggest you marry a local country gal or guy for a few years. You will get an immediate residency and then in 2-3 years generally a citizenship without having to invest any serious money. Usually the gal or guy gets a few thousand dollars plus the fee to the outfit arranging it, figure $10,000 or so. Typically you are required to actually live with this person under the same roof, think your roof, to make it work. So now you are in for living with this stranger from a much lower socio-economic class. How will this work? Did you know he or she is a chain smoker and drinks a lot while listening to loud rap music late at night? What if they like to use recreational drugs in your house in a country where the penalties can be very steep? What will it cost to support him or her for a few years in the lifestyle you are used to? Since this is a sham marriage you both will be dating while living together, so how does this work? Are you okay with their dates sleeping over in your house? Are your dates okay with this? Ever think one of your dates or your new spouses dates may get angry and blow the whistle on the sham marriage? So now it may be better to live undercover for a few years. If you are already married you will need to divorce (bigamy can be a crime) before getting married and how much will this cost? Then will you really remarry the same person a few years later? Will both of you want back together? Immigration inspectors will visit you periodically and if they see your former spouse living in the house it will be over right then and there. They may bring you and your new spouse in for an interview. You will be separated into two different rooms. You will each be asked personal questions like toothpaste used, when you brush your teeth, food likes and dislikes, what did you do last night, watch TV, what shows did you watch, what is your spouses main health ailment. Your new spouse will then have to answer these questions and the answers need to match up. There will be sex life questions as well such as are condoms used and if so which brand and who puts it on, describe birthmarks on spouse’s body, etc. Getting the idea. It is not a simple procedure. What if you get caught? Forget getting your money back, it will be your fault that you got caught of course. Will the government prosecute you? Probably just get rid of you since most of these countries do not like loading up their jails since this costs money, but they might prosecute you and fine you or worse, no telling if they want to send out a message or make an example out of you. Marrying your passport is a bad idea to be avoided. If you visit the country and actually fall in love and get married for real of course this is an entirely different matter but sham marriages are something that worked many years ago but now the immigration officials have woken up and know what to look for. You’ll be doing it for the first time and they have been through it hundreds of times so your odds stink.
Country Tax Basis – This is important. Some countries have no income tax, no capital gains tax, and no inheritance tax so as a means of raising money they tax imports, all imports. Frequently these countries are Caribbean Islands or third world when it comes to manufacturing so most everything is imported and heavily taxed. They may have import duty and then add on a VAT tax. Things like refrigerators, televisions, tires and so forth may cost 50% or more than what you are used to paying. Be careful here. Some countries do not tax offshore derived income, have no inheritance tax and have no capital gains tax but they do tax onshore derived income and generally these onshore income taxes can be high. If you are going to be retired and not working then this will not matter. If you are going into business locally and are going to receive money from the residents of the country this type of tax setup is bad and should be avoided less you see your tax contributions rising again. Panama has no capital gains tax, no inheritance tax, and does not tax offshore derived income. Panama is perfect if your income is going to come from outside of Panama plus they have great banking and privacy laws.
USA, Canada, and the EU – These are not tax or privacy havens. Save yourself the trouble of researching these countries. There are people on the internet touting EU countries and even Canada as retirement havens. While I am sure it is true that low cost housing and reasonable living expenses is available is some EU countries please bear in mind you are opening yourself up to a big complicated tax system that you probably will regret doing one day and also forget about having any privacy. You can do better, keep looking.
Economic Factors – Consider carefully the cost of acquiring a home in the target country you have selected. Forget about home shopping on the internet. These prices are greatly inflated as a rule. These are realtors, sellers and others looking to grab an inexperienced person with a lot of money who acts spontaneously without thorough research. Make sure there are no significant issues regarding getting clear title to the real estate. You will probably fare better if you start out buying an existing home rather than have one built. Many people who hire builders to build them a house wind up waiting many extra months, have a lot of problems, cost factors, modifications of design, materials etc. If you are new to the country and not a builder yourself try to get an existing home. Do have an attorney represent you in the sale process. In many countries there is no multiple listing service. To make it worse the seller has no written agreement with the realtor. It gets worse yet. Most of the realtors in these tax havens and retirement havens are not licensed and there may not even be licensing of realtors in the country. The realtor is told by the seller what the seller wants to clear from the sale and the realtor can keep anything over this price. Well needless to say when the seller sees that the realtor is able to get $30,000 more than they asked, they will immediately change their mind and the price will go up or the house off the market for a few days anyway. Of course you may have gone and looked at the house five times and even had an appraiser and inspector go through the house. The seller will then offer the house to other realtors at a higher price. This is how the seller learns what their house is really worth. It costs them nothing and they can care less about you and the realtors. Another ploy is they will tell the realtor they have to take a lower commission which starts a fight on another front and then the realtor may tell you there is some sort of problem with this house to move you to another house where he or she hopes they can get this outrageous commission from another seller. If you do not find it to be a jungle out there you will be paying inflated prices. Do consider renting your first year if owning real estate is not required for your residency or passport. After a year of renting you will know pretty much where you want to live, what things should cost, who to deal with, who to avoid and so forth. When renting in some countries you can be required to place a deposit equal to one or two years rent in a bank as a security deposit. In some countries this type of deposit is made instead of paying rent and it is up to the landlord to make enough on the investment to make up for the no rent scenario. Make sure that this is done lawfully and the landlord can not sell the house out from under you. Remember things are going to be much different than what you are used to. Do use a lawyer in these situations.
Infrastructure – By this we mean phones, cell phones, internet, roads, electricity and so forth. Some of these tax havens will have awful phones, internet and electricity. They will be subject to hurricanes, lengthy power outages and the roads may get washed out after rains. Pay attention to how many people have cars versus SUV’s in that this could be a giveaway as to the awful road conditions. Generally you can get satellite TV which will work independent of the island as long as you have power. You may want to also get a satellite for your internet if you are dependent on it for business. By this we mean real satellite internet where you actually transmit up to the satellite, not the kind that uses a phone line to transmit uploads or requests for pages. If you have high bandwidth internet you should be able to use VOIP phones for your off island communication by phone or fax. Make sure the island is not blocking VOIP packets to increase phone revenue for their government owned Phone Company.
Security – Make sure there are ambulances, police and fire that will respond to a phone call for assistance. Find out how long they take to arrive, a forty five minute arrival time is not worth much. People can have their house broken into when they are home and call the police to find that they are not there and there is no answer while some nut is using a pick axe to break through your concrete walls. Consider your security carefully. If you see a lot of gated communities there is probably a reason why. Concrete walls and steel bars on windows, fences with razor ribbon tend to keep honest people honest. If you remove the police from the equation these devices are of little value. What they essentially do is give you a warning time, but to do what is the next question. Gated communities have their own security so these situations are stopped before they start. If you have no idea what to do, go for a gated community with guards or a condo with security guards. If you have lived in less developed countries before, speak the native language; understand the culture then this is a different story. Remember if you have a house, not a condo, and you go away for a few months the locals may think you went home for good and pick axe their way in through the wall and take out everything you own. When you come home your neighbor who always said hello to you may be in his house sitting in your chair watching your TV and not think these things are yours anymore, he worked hard to take them and had them for a few months. Think about having a maid live in the house when you are gone, adding in a groundskeeper often the maid’s husband is even better. Know what you are doing before you go and get yourself a house. Gated communities with security, condos with security are much better choices if you really do not know the lay of the land. Some of you will be thinking dogs. In most of these countries the locals will have a fear of a big dog. The bad guys will just try to poison your dog so he needs to be trained to not take food from strangers. If you have a solid wall fence the dog will be more effective than with a chain link fence through which the dog could be secured and tied to the fence using a dog catcher pole with rope loop. The dog will announce strangers loudly and that will trouble the bad guys some in that they do not want the whole neighborhood watching. Maybe they robbed your neighbor last month or he might think they did and grabs his machete or shotgun. Dogs are of some serious value if it is the right dog. If the country experiences a lot of home invasion robberies look elsewhere. If there are a lot of ATM kidnappings or carjacking look elsewhere. Check the national crime rates for violent crimes and avoid the countries that have high crime rates. You want a tax haven with a low cost of living and a low crime rate. There are such places, just keep looking. In passing Panama is quite safe and a tax haven that is affordable.
Medical – Make sure the country you selected has adequate medical facilities especially if you at retirement age. Panama is great in this regard even having a John Hopkins Hospital. Check out the prices of prescription drugs and health insurance. In many countries what are prescription drugs to you are sold over the counter and often the drugs can be obtained for a fraction of the price you paid for them back home, the very same drugs and the same company just located in a different country.
Banking – One common mistake is to forget that you do not have to bank in the country you live in. If the country has weak banks, a weak currency etc. no worries just keep the bulk of your funds in a substantial banking country like Panama and wire in funds every three months to cover incidentals. You can also use an ATM card to get living expense money in your new country. Paying by credit card is also generally an easy way to cover expenses as well.
Political Stability – Be careful here. Things can happen fast and suddenly. Look at Thailand in recent months. There was a military coup. The military took control and said they will return control when they are able to do so comfortably. There are a lot of expats in Thailand from other countries and they all seem to be doing fine but things don’t always go this way. Sometimes all foreigners could be expelled. Banks and stock markets get closed, often for months. Martial law can set in. When you go to the store some 15 year old child in military uniform with an assault rifle may check your papers. Basically life can be awful and getting out may not be so easy. Be careful, do your research and pick a safe place. Panama did away with its military years ago after deciding that the only thing the military is good for is suppressing the people on behalf of a government that does not want to relinquish power. The thinking is no military guarantees a democracy. Since they have the USA protecting the Panama Canal they can get away with no military, not every country can. Do your homework.
Treaties – Determine what treaties your target country is in with your home country if any. Treaties
What to do next – If you just want a passport look over the various countries and their options available. Panama is the cheapest and probably the fastest and there is no requirement to live in Panama. The other countries generally require an investment of a substantial amount. If you are going to go the long route and get a residency first and wait a few years until you can apply for a passport you may have to actually spend some time in the country, sometimes not. Panama has reforestation visas that do not require any time to be spent in the country. If you are going to live in the country go there and rent an apartment for thirty days or even stay in a suite hotel. After the thirty days you will know what you want to do. Feel free to contact this law firm if you thing we can be of service.
http://panamalaw.org/bearer_share_corperation.html
http://panamalaw.org/panama_foundations.html
http://panamalaw.org/foundation_protectors.html
