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 reporting from Tocumen Airport in Panama, in transit to the Caribbean…

I don’t write much in Q Bytes about my travels, but most of my clients are aware that I travel almost constantly… meeting clients and suppliers, doing research and due diligence. The last few weeks I have been in South America driving around dirt roads looking at agricultural investment properties, investigating first hand the buregoning gold business in South America, seeking elusive wifi signals in odd corners of hotel rooms (even on the roof of a hotel in one case) and enjoying some great barbeques with foreign investment managers and well-connected locals.

Although the internet is undoubtedly a vast repository of information that has changed the way of doing things beyond recognition in the offshore business, I’m still a firm believer in feet on the ground, and building long-term business through solid relationships. In other words, “you don’t know until you go.”

In fact, I believe this is more important than ever. These days there are unfortunately so many things that could go wrong, that it helps to know who you are dealing with. I only deal with people I have a good feeling about. I don’t look for the cheapest provider. Maybe not even the most successful or the best on paper. My business goes to the person I feel is trustworthy, who will be there for the long term.

I’m happy to have made a few more of those long term contacts on this recent trip – particularly in Uruguay, a very interesting option for tax-free residence and second citizenship, that I’ll be writing more about over the coming weeks. That was one of the main reasons for the trip, in fact: and it was successful. We can now make referrals to recommended experts for residence, citizenship, banking and trust services in Uruguay.

The business climate internationally is getting tougher, and believe me things will get a lot tougher yet. Especially when dealing with matters like offshore banking, asset protection, second citizenships and the like, we also need to deal with like-minded people. People who can see what is going on and who are making adequate preparations. There is no point in entrusting your asset protection planning to somebody who does not see the threats! That’s why it’s a great investment to spend time getting to know your business associates on a personal level, out of the office, to find out what REALLY makes them tick.

Geographic diversification is essential… that means you must be international both in investment terms, and in your outlook. Consider yourself a sovereign individual – because that is what you are. Nobody else is going to look out for you.

A good investment advisor (if you can find one) or perhaps a research subscription might be able to give your portfolio the international diversification you need. But to acquire an international outlook you must travel… to see and understand how things really are in the rest of the world.

Fortunately, more and more people are getting this. Years ago it was quite rare for clients to visit their offshore service providers or bankers. Now we see it all the time. Air travel is easy and cheap. Travel in general has become much ‘easier’ – some would say boring – because on the surface, everything might look so similar. But scratch under the surface by spending time with people in an informal environment, and you will learn so much more.

While I was in Buenos Aires I wrote to Q Bytes readers from an apartment kindly lent to me in Buenos Aires by an North American client who spends about six months of the year here. This place is informally known as ‘PT Southern Command.’ South America abounds with interesting opportunities for attractive returns on your investments, and opportunities for enhancing your freedom. The freedom, of course, is the most important aspect for me.

As a foreigner, nobody bothers you here provided you ‘live and let live.’ You are treated with respect. This particular client and friend, let’s call him Mike, made the leap a couple of years ago and bought his apartment in Buenos Aires. He announced the purchase to everybody at our 2008 ‘Recipes for Success’ event in Cancun and invited all the conference delegates to stay anytime. Mike has never looked back. Sooner rather than later he will qualify for citizenship here and with careful planning he has legally avoided paying a penny in income taxes. Plus, his apartment must have doubled in value judging by the prices I am seeing here now.

I’m not the only one from that 2008 conference who took up Mike on his kind invitation. I’m sure he now has a stream of interesting like-minded individuals visiting PT Southern Command, sealing new friendships, exchanging experiences and information, and providing the mental stimulation that all intelligent people need, but is often to hard to find amongst depressive talk at home fuelled by the mainstream media. I’m proud to think that this came apart from one of our conferenes. (The next one, in September, will be in Ireland – details will be posted shortly on our Events page)

In early July, I will be meeting a number of readers in Santo Domingo, Dominican Republic, who are interested in finding out more about residency and second citizenship opportunities there. I still have a few slots available for in-person consultations, and Santo Domingo is quite easy to reach with many direct flights from both North America and Europe. By meeting a group of clients during the same few days, I am also able to reduce my normal in-person consulting fee by more than half. If you are interested, again please initially contact us to schedule appointment. Due to limited time, please note that only requests from Q Wealth members can be entertained. If you are not a member, please sign up here first.

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.