Last week I started the case study of the young American, looking to have his exit strategy or ‘Plan B’ in place, who was looking for a second passport. He was focusing in on options in South America, preferring that to the economic citizenship programs of St Kitts and Nevis and Dominica in the Caribbean. And we looked at  Uruguay as a residence and citizenship option. If you haven’t yet read, part one, I suggest you do so here.

I finished up last week by touching on the wild-card option, Paraguay. I said that for young-at-heart individuals with a sense of adventure and a slightly higher tolerance for risk (or perhaps an appetite for profit?) there is Paraguay. And I pointed out that somebody might choose Paraguay over Uruguay because:

• you can apply after three years for citizenship, with no need to worry about family units
• no need to buy real estate: $5000 deposit in a local Paraguay bank is enough
• costs in Paraguay are much lower
• it’s a country full of business opportunities
• it’s more anarchic than Uruguay, meaning less control and more freedom… for example, nobody is really going to count how many days you are there. Having residence on paper is enough.

You might feel freer in Paraguay because government is less developed and less intrusive. Paraguay has always been somewhat cut off from the world, a landlocked frontier state in the middle of South America, that was very hard to reach until maybe 20 years ago. It is known, unfortunately, as a place where Nazis went after the second world war… but it’s less well known that many Jews went there too.

Basically Paraguay’s immigration policy, enshrined in its constitution, is that everybody is welcome provided they come to live in peace and obey society’s norms there. There is plenty of room for everybody, with a low population density, and smart individuals with money and business experience are particularly welcomed. Other people who think outside the box, particularly the hard-working Mennonites, have also found safe haven in Paraguay over the years. Paraguay is very much a secular state… the current President is a former Catholic archbishop who was ex-communicated!

This liberal immigration policy continues into the granting of Paraguayan citizenship, as little as two years after taking up residence. Paraguay’s constitution specifically allows dual or multiple citizenship, though the government sometimes insists that those applying for naturaliation renounce their previous citizenship. This is not enforced however and there are legal ways around it.

Paraguay’s passport, issued to citizens, is an excellent travel document. Since Paraguay has a small population and most of its higher class citizens (the ones who have money to travel) are of European extraction, it has visa-free travel agreements with the European Union and many other countries around the world.

Even before you qualify for the Paraguayan passport, you will receive a cedula – the national ID card that is recognized as a travel document in other members of Mercosur such as Argentina, Chile and Brazil. This card is issued automatically to residents.

Obtaining residence is a relatively simple matter. We have access to good, experienced immigration lawyers in Asuncion, the Paraguayan capital, who can help you and have a track record of helping Q Wealth members before you. Referrals are free of charge to Q Wealth members – just contact the office.

Obtaining citizenship, that is necessary to obtain a Paraguayan passport, is a little more complicated. You will need to learn some basic Spanish in order to carry out the necessary civics test – a multiple choice paper with questions about history, geography and the like. You will need to know things like the major rivers, the names of important historical personages, and the system of government. You will also need to demonstrate some connection with the country, but the lawyers can assist you with that.

All in all, Paraguay is not for those who want a comfortable life in an apartment overlooking a beach. For those people, Uruguay is the better option. However if you are looking for a country where land is cheap, and most businesses are virgin and unregulated, look at Paraguay.

One final note: Paraguayan residence is a very attractive base for world travellers, particularly Brits and Europeans, Canadians and Aussies, seeking to travel the world in search of income while leaving behind their home country taxes. The passport is really only important for Americans who are taxed on their worldwide income unless they renounce citizenship, or for those from countries like China or Russia who have problems travelling anywhere on their existing passports.

More information, as always, can be found in Q Wealth Report. The back issues available online in our Members Area include information on Paraguayan residence.

More Americans than ever before are renouncing US citizenship. That’s the conclusion of a recent article in the New York Times. The steady stream of US citizens expatriating is turning into a flood – to the extent that many US consulates now have a waiting list for appointments to renounce citizenship.

Taxation, offshore investment and banking issues are, unsurprisingly, the main reasons given for renunciation by former Americans. The most productive Americans no longer want to be American… because they don’t feel they are being treated fairly or reasonably by their government.

American expatriates are furious at US attempts to tax their worldwide income… but the straw that broke the camel’s back in this case is the fact that due to the HIRE Act and money laundering legislation, both US banks and offshore banks are beginning to treat American passport holders as personas non grata, denying banking services and unilaterally closing bank accounts.

There’s an interesting change of mindset going on too, according to the NYT article. I quote:

“What we have seen is a substantial change in mentality among the overseas community in the past two years,” said Jackie Bugnion, director of American Citizens Abroad, an advocacy group based in Geneva. “Before, no one would dare mention to other Americans that they were even thinking of renouncing their U.S. nationality. Now, it is an openly discussed issue.”

…

“It is a sad outcome,” Ms. Bugnion said, “but I personally feel that we are now seeing only the tip of the iceberg.”

Renouncing American citizenship certainly doesn’t have the stigma attached to it that it might have had in the past. It seems to many like a smart business decision. Of course what the Times didn’t mention is the fact that in order to renounce American citizenship, the person renouncing must first have a second citizenship.

Many Americans are entitled to European Union or other countries’ citizenships based on ancestry – having a parent or even a grandparent born in other countries can open up a door to obtaining a quick and cheap second passport.

Those who are not so lucky may look instead to economic citizenship programs such as those of the twin island federation of St Kitts and Nevis, or the nature-island nation the Commonwealth of Dominica, the only two countries where one can still ‘buy’ citizenship. (Dominica and Dominican Republic are two different countries, often confused) The cost of such programs is usually in the six figure range, but it still makes good business sense to those who might be paying hundreds of thousands or millions a year in taxes. With the St Kitts and Nevis program, at least, one can invest in real estate and hopefully resell the property at some point in the future.

Fortunately, there’s a third route for those who are not millionaires, but still cherish their freedom: obtain a second citizenship through naturalization. This can typically be achieved for under $10,000, though of course it takes time… typically 3 – 7 years, depending on the country chosen and the category they are applying under. Some of the best countries for those wishing to follow this route are Uruguay, Paraguay, Dominican Republic and Ecuador.

More information on second passports and citizenships appears regularly in The Q Wealth Report. If you’re not yet a member, you may choose to subscribe to the full privately-published newsletter, or sign up for the ‘lite’ free offshore asset protection and second citizenship news in Q Bytes.

Although the Dominican Republic is not typically regarded as a tax haven, that is actually one of its attractions. Unlike traditional offshore centres, it has not been under pressure from the likes of the OECD, the G20 and the Obama administration. The Dominican Republic has a territorial tax system much like Panama’s, meaning that you can live there and enjoy the beaches tax free, provided your income comes from outside the country. It’s also known as one of the more liberal places for those seeking a second passport or citizenship.

The following is an edited version of an article by Rob Montes appeared in last week’s Q Bytes, our free newsletter. If you are not yet on the distribution list, sign up here: Free Q Bytes Membership to receive more exclusive content like this on a weekly basis.

Three Good Reasons to Consider the Dominican Republic for Second Passports and Offshore Investing

The more I learn about the Dominican Republic, the more I like it and see potential. Learning more was my original purpose in studying its national history. Right now the country has three things about it that would be particularly appealing to our members:

• Tax Haven – Dominican Republic has a territorial tax system, meaning that if you live there, you would only be subject to pay taxes if you had local income. You can earn what you like outside the country and you don’t even have to declare it, yet alone pay any taxes. This applies to both individuals and companies.

• Second Passports – Dominican Republic is one of the most liberal countries when it comes to granting citizenship through naturalization. After two years of residence, you can ask for a passport. As long as you haven’t done anything to upset the President, he will sign a decree making you a citizen. Absences of up to one year at a time don’t affect your residency status. This liberal naturalization law dates back to 1948, and there is much talk of it changing soon. Dual citizenship is allowed.

Note: Please do not confuse the Dominican Republic with the Commonwealth of Dominica. The Commonwealth of Dominica is a small, English-speaking island state with an established economic citizenship (second passport) program catering mainly to the super wealthy. The Dominican citizenship program requires an investment of hundreds of thousands of dollars. With Dominican Republic, however, you could likely obtain your second passport for as little as $10,000 – $15,000 plus the two year wait.

• Liveability – Dominican Republic is a good place to live. First of all, it’s affordable. The tax exemption you get in the Bahamas by buying a half-million-dollar property you get almost for free here. The capital, Santo Domingo, is a modern cosmopolitan city with a beautiful colonial heart. The Spanish colonised it, then the Americans were mainly responsible for the development of the city. The country’s second city Santiago, and the beautiful north coast, were only joined by decent roads built by the Americans in the 1920s. Before that, the north was almost a separate country – trading more with the British and Germans. Today there is a substantial Jewish population up there, and parts where French and Italian are frequently spoken. So there’s really something for everybody.

Dominican Republic has not been high on the traditional lists of places to retire to, that are hyped on the internet. This might be a good thing. Real estate is good value, it’s relatively easy to immigrate and obtain citizenship, and the business environment is nearly as favorable as the climate!

We will be in Dominican Republic next month and if any subscribers would like to get together, feel free to e-mail me. We can also recommend a special VIP immigration processing service, so you can get your initial residence by spending as little as one day in the country.