First and foremost, a Happy New Year to all our readers. May 2011 be full of wealth, health and peace for you and your family. Before I get on to the topic of new citizenship and residency opportunities (specifically in Latvia, Hungary and Montenegro) I would like to say a few very important words.

We have been extremely busy helping clients here at Q Wealth and we haven’t had time to update this blog as much as we would like to, but rest assured we will keep posting updates here throughout this year and beyond. The 2011 edition of our Practical Offshore Banking Guide is in the final stages of preparation and will be released shortly. It contains many updates. And if you like what we read, the best way to move things forward is to subscribe, read our material and – most importantly of all – make yourself known to us!

One issue we constantly come up against here is the situation in the USA. We often get e-mails from readers complaining that our articles have a bias towards the USA and there is not enough information applicable, for example, to Europeans. The fact is, the tax rules in the ‘land of the free’ are more draconian than anywhere else in the world. I doubt even Obama would argue with us on that one, though I suppose he might put a positive spin on it by claiming the IRS are the most efficient tax authority in the world…

The fact is, a growing minority of Americans – the ones who can see beyond the propaganda – are very scared. One e-mail that arrived an hour or so ago from a long-term reader is typical of the comments we receive every day: “The World, and the USA in particular, is starting to get really crazy…”  Many of our readers are hard-working and honest American citizens just looking to protect what they’ve achieved so far, and go on working productively, peacefully and unmolested.

We are also seeing a lot of interest in Q Wealth from places like Ireland and Spain, countries where entrepreneurs have built up substantial portfolios over the years only to see them evaporate. The other side of the coin is that we are seeing a lot of interest from Germany… Germany has been doing surprisingly well lately, but Germans are rightly concerned about being the biggest bailer-outer country.

I would say to our European fans that any advice we give to Americans basically applies to you to… but you have one big advantage. While Americans have to acquire a second citizenship then renounce their first – a lengthy, expensive and emotionally charged process – all you Europeans have to do is move to another country… you can do it tomorrow if you want. As I said in my last article, you might be surprised, but life is often better offshore!

Even given more flexible tax systems in Europe, the days of hiding money offshore are well and truly over. Corporate structures like LLCs, trusts and foundations can still provide strong legal asset protection if used properly (read those last 3 words again!) but ultimately, the way things are going, it will be almost inevitable at some point that if you don’t think taxation in the country you live in is fair, you will have to vote with your feet – by getting up and going. For this reason, we’ll be focusing more and more on residence and citizenship programs in 2011.

The 1st of January this year saw an interesting new fast track to European Union citizenship. Hungary’s new naturalization law is designed to make it much easier for anyone with a few drops of Hungarian blood to acquire citizenship in this EU country. Hungary, having fought on the losing side in the first world war, lost a lot of its territory in a division that remains highly controversial to this day, leaving at least half a million ethnic Hungarians in bordering countries like Slovakia and Ukraine, who have not been counted as Hungarian citizens for generations. The political motivation behind this new law was to help these ethnic Hungarians reclaim their ‘national identity’ (Hungarians being nothing if not proud, even as this same government has just blatantly seized private pension funds to help stave off national bankruptcy)

What does this mean for you? People from these countries emigrated by the boatload to places like the USA, Canada and Australia. Previously, a direct line of descent from a Hungarian citizen was required in order to reclaim the citizenship right. This just got a lot easier. Let’s say your Great Uncle Arpad was born in Ukraine but was an ethnic Hungarian (who spoke Hungarian language for example) then you might well qualify for this expedited Hungarian naturalization procedure. You can read the Hungarian government’s statement on the matter, in English, here.

As this procedure is only a few days old, we have to see how it works out in practice. For example, how toughly will the requirement to speak Hungarian be enforced? But if you think you have a little Hungarian in you, you might want to look into this opportunity sooner rather than later. We’ll be following up on it more depth in a forthcoming issue of The Q Wealth Report. Q Wealth members are welcome to contact the office for referrals to our contacts in Hungary.

Another program that has been receiving publicity lately is Latvia’s residence program. This has generated quite some controversy. Whilst not leading to citizenship (but not ruling it out either) this grants instant residency in the Republic of Latvia to anyone investing a few hundred thousand euros in a bank deposit, or buying a property there. Riga, a regional trade hub well known for its art nouveau architecture, may not be everyone’s cup of tea (cold and wet in winter) … though the seaside resort of Jurmula is quite trendy and is within easy reach of Riga airport, one that is surprisingly well connected for such a small country.

The real point about Latvian residency, however, is not spending time in Latvia. Latvia is in the Schengen Area. Wealthy non-Schengen nationals (Russians and Chinese to give two examples, but also Americans or Australians) will find this a very attractive way of establishing a low cost base in Europe that allows them to move completely freely around the Schengen zone. Germany and Spain are already concerned about the huge influx of new immigrants this could bring… people theoretically resident in Latvia but living as quasi-permanent tourists, even carrying on cross border businesses quite legally, in their countries.

Latvian taxes, while theoretically high, can probably be mitigated by a bit of careful pre-immigration tax planning. So Latvia could turn into an easy and cheap alternative to Monaco, Andorra or San Marino, to rival the roles currently filled by the residence programs of Cyprus and Malta.

Finally for now, an update on Montenegro. Back in August 2010, while all the European top brass was on holiday, the government of Europe’s newest country, Montenegro, announced an economic citizenship program, priced to rival the existing St Kitts and Nevis citizenship. Several options were outlined, involving payment of around EUR 200,000 to the Montenegrin government for an almost instant second passport.

Soon after that announcement I attended a small meeting of offshore professionals in the beautiful Montenegrin resort town of Herceg Novi. I was taken aback by the temperate climate and the outstanding natural beauty of the country. There is serious investment pouring in too: for example the huge Porto Montenegro development, down the road from where we met, is being spearheaded by Barrick Gold’s founder Peter Munk and by other people who know about good investments: do the names Rothschild and Bernard Arnault ring a bell?

Details of the program, however, proved elusive, as the government kept stalling. Finally, in November, they announced that the citizenship program had been ‘frozen’ until further notice, by request of the European Union.

However, my few days on the ground there convinced me that this announcement is only part of the reality. The website of Henley and Partner, for example, claims that “in the interim, citizenship will be decided on a case-by-case basis.” Anyone who shows up with a serious investment – my guess, half a million upwards – would still receive a warm welcome I think. I was impressed with Montenegro’s possibilities… given the choice between living in St Kitts and Nevis, and Montenegro, I would go for Montenegro – a couple of hours from London, Paris, Milan or Barcelona – any day.  I’m pretty sure I’ll be back there. So it’s another one to watch in 2011.

Still, we are beginning this year with a more traditional focus on citizenship and residence programs in South America: we still like Paraguay and Uruguay. Myself and members of the Q Wealth team will be in South America meeting with clients and experts later this month. There’s still time for you to join us. Either in person, or by signing up to Q Wealth Report.

Peter Macfarlane is just back from a Caribbean trip taking in St Kitts and Nevis and Dominica, the only two countries in the world that still offer Economic Citizenship programs. Things have changed a lot down there in the last few years. Here’s what he found out…

More and more people are looking for second passports. And most of those people these days are US citizens looking to renounce their citizenship. There are only two economic citizenship programs left in the world today, both in small Caribbean nations. I wanted to see what was really going on with these programs and to get some on-the-ground intel that you can’t always gather from the internet. So, I booked a flight into Antigua and got some connections on LIAT, the Caribbean airline.

Although (unlike many others) this publication was launched in England, has a worldwide readership and was never originally aimed at Americans, it’s easy to see that the USA accounts for most of our new subscriptions these days. I believe these are people who value our international outlook.

An increasing number of Americans, it is clear, have simply had enough of taxation, attacks on their civil liberties, Obamacare and most recently the dastardly HIRE Act – perhaps the biggest attack ever on those who have worked hard to build up assets and savings. And who can blame them?

I had imagined that the HIRE Act would have some deterrent effect, making Americans more scared to go offshore. In fact, I am seeing people scrambling to set up offshore structures before the deadline next year and place assets in the best offshore banks that are not likely to co-operate in what is a back door currency control system.

Many Americans are looking for second citizenships these days. A decade ago we saw Russians looking for second passports, then came the Chinese… since Obama’s election, the offshore banking countries catering to those seeking economic citizenship (St Kitts and Nevis, and Dominica) are seeing a wave of Americans.

Americans are a patriotic people, but more and more are realizing that their government has been conning them for a long time – trying to confuse patriotism with support for the government. In fact, it’s the American government that is unpatriotic… constantly fighting to undermine the American ideals of freedom, liberty and prosperity. The USA is the only country in the world that expects its citizens to pay taxes even if they don’t live there.

You might already know this, but to expatriate from the USA and renounce American citizenship – thereby breaking free of your US tax obligations provided you don’t intend to live there any longer – you must first have another citizenship. There are basically three ways you can do this:

• Through birth: for example if you are lucky enough to have close family from Europe, you may be able to obtain a European passport
• Through naturalization: this requires a period of residence, sometimes as short as three years (Paraguay and Dominican Republic) but typically five to ten years.
• If you don’t have family connections and you don’t want to wait years, you can basically buy a new citizenship by developing a connection with a foreign country by making a substantial investment: this is what is called Economic Citizenship.

On this recent trip I visited both the Federation of St Kitts (St Christopher) and Nevis; and the Commonwealth of Dominica, both small Caribbean countries that offer you the chance to acquire a new citizenship for you and your family within a few short months, by making an investment. By the way, don’t confuse the Commonwealth of Dominica, a small English speaking island nation, with the much larger Dominican Republic which is hundreds of miles away. (Editor’s note: Dominican Republic citizenship might also be an attractive option, but is outside the scope of this article as it is not an economic citizenship program. You can read more about that here: Joe Gonzalez article on Dominican Republic citizenship)

I had visited both of these nations some years ago, but things have changed – drastically. While you can do a certain amount of research on the internet, there’s no substitute for spending a few days on the ground talking to government officials and well-connected local lawyers who know the score. Most of what you read on the internet is written by foreign promoters of citizenship programs, who will naturally have a certain bias and may never even have visited the islands. In the case of St Kitts, most of the promoters also have a vested interest in selling over-priced real estate.

These two economic citizenship programs are the remnants of what used to be quite a little industry in the region. Countries like Belize, Grenada, Guyana and Suriname have offered economic citizenship programs in the past, but they are long gone. That doesn’t stop unscrupulous promoters from still offering them.

I’ll be writing up a more detailed report on this in a forthcoming issue of Q Wealth Report (available only to members) but I can give you the bottom line now. Dominica is in my view a beautiful country, full of opportunity for tourism development and the like, but that might have to wait for the economic upswing that will be a long time coming. Dominica’s citizenship program is definitely going downhill since I last visited in 2006. I would not be surprised to see it coming to an end soon. While St Kitts and Nevis is doing well, attracting quality, heading further upscale. Here is a little of my reasoning:

• St Kitts and Nevis recently signed an agreement with the European Union allowing visa-free travel for all their passport holders, including economic citizens. This is an important coup that shows major western governments have confidence in the St Kitts program. Dominica does not have this benefit.
• Very importantly in my view, St Kitts and Nevis has refocused its program in recent years away from the idea that it is selling passports. This shows political savvy that seems to be working to their benefit. Naturalization implies a connection with the new country that is not merely financial. That is exactly what they are promoting, by strongly encouraging investors to purchase property in the country. St Kitts and Nevis are both pleasant places to stay, with great golfing and yachting, serious investments by groups like Marriott and Four Seasons, and more and more direct flight connections coming in. And the political savvy has extended to getting the twin island federation not just off the OECD’s blacklist but on to the whitelist… without changing much.
• St Kitts and Nevis enshrined economic citizenship in its constitution back in 1984. It is a well established program. They have maintained the price high and kept out the riff-raff which has negatively impacted other, less well regulated economic citizenship programs. Applications are processed efficiently and according to deadlines.
• Dominica, on the other hand, seems to have lost its direction with regard to economic citizenship, and is caving in to demands from the OECD and wealthier countries. There is greater domestic opposition to economic citizenship, and politicians are arguing over how to spend the money while keeping applications languishing for months without approval. The government seems to be heading more in the direction of accepting aid from Hugo Chavez in Venezuela, which is admittedly probably easier money in the short term and less controversial than selling passports. While I was there, in fact, the Dominican government signed a new Memorandum of Understanding whereby Chavez will give them a new coffee processing plant.

So at this time, although the options for economic citizenship in St Kitts and Nevis are definitely much more expensive that those in Dominica in terms of cash you have to put down on the table, I would consider the difference in cash outlay money well spent. Another good thing is that with the St Kitts investment option, you can buy attractive Caribbean real estate which you can enjoy in the meantime and will be free to sell after five years.

We’ll shortly be releasing a more detailed report on St Kitts and Nevis. If you would like to receive it, please go here: Free Nevis Offshore Report

Otherwise be sure to check out my upcoming article in Q Wealth Report, and you can be sure that this will be a hot topic for discussion at our next Q Wealth event in Cork, Ireland this September. See you there!

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.