Passports, Citizenship and Residence – What’s the Difference?

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multiple passportsThere are three terms that anyone interested in either acquiring second citizenship or moving residency should clearly understand. They are related but have very different legal and practical meanings, and a lot of people confuse them.

PASSPORTS are the booklets that you show when you cross borders, open bank accounts etc. Passports are issued under the authority of sovereign nation states, or what we commonly refer to as countries, but not by territories.

The British Virgin Islands, or Hong Kong, for example, are not countries, they are territories, so their passports are issued respectively by the United Kingdom and by the People’s Republic of China – even if the booklets look different from the normal passports issued by those countries.

Generally, passports are issued to CITIZENS of the country that issues them. But for the purposes of this article, remember this rule of thumb:

Citizenship always comes with a passport, but not vice versa.

Passports do not always come with Citizenship.

Important examples, that you might come across in your research into this subject, are Panama and Uruguay. Both these countries have programs to issue passports to non-citizen investors. Such passports are of very limited value because they do not come with citizenship.

Sure, you can use them to enter or leave Panama or Uruguay, but their acceptance by other countries depends either on accidents (border guards not paying attention) or treaties (which are very limited in number). Furthermore they are limited usually to five or ten years of validity and after that they may or may not be renewed, depending on your investment and the country’s continued goodwill towards you. Citizenship, on the other hand, is granted for life and can usually be passed on to your kids and grandchildren.

Sometimes we talk in everyday language about acquiring a second passport, but what we really mean by that is a second CITIZENSHIP. The passport itself expires after a time (typically five or ten years) and may be restricted in any number of ways.

Here’s another little-known fact: you could get a second passport from your existing country of citizenship.

These are typically issued to frequent business travelers who want to have two passports on the go at the same time. Despite urban myths to the contrary, it’s quite legal and nearly every country has a system for allowing you to have more than one valid passport at the same time. The main purpose is to facilitate key business people travelling to exotic locales, who may need to travel one place at short notice while their other passport is awaiting some bureaucratic process in the embassy of another country.

These types of second passports are also useful for people who travel to conflict areas: for example many Arab countries will not allow you to enter if your passport has a stamp from Israel. Western governments routinely issue separate passports to business travelers to allow for this.

Beyond that, though, there is no real benefit to holding a second passport from your home country. Whether you have one travel document or two, you can be sure that the government that issues them can control your every move.

What you want, to achieve the benefits of freedom and flexibility, is to get a CITIZENSHIP of another country.

Citizenship should give you a lifetime rights to have passports, ID cards, driver’s licenses, to vote in elections, and things like that. I say ‘should’ because there are always exceptions to the rule… or I should better say, governments that will break the rules. Ask Edward Snowden about how the US cancelled his passport, even though he was and still is a US citizen and he has not been found guilty of any crime in a US court of law.

Maybe we are getting too hung up in technicalities here. The bottom line of all of this, what I really want you to understand, is that actual passport, that piece of paper, is a minor matter. Once you are a citizen you just apply for the passport at the government office responsible for passports, or the embassy in a foreign country, like any other citizen of that country.

CITIZENSHIP is defined by Wikipedia as:

… the link between a person and a state or an association of states. It is normally synonymous with the term nationality although the latter term is sometimes understood to have ethnic connotations. Possession of citizenship is normally associated with the right to work and live in a country and to participate in political life. A person who does not have citizenship in any state is said to be stateless.

RESIDENCE is something different again. Residence is where you live. However, different countries have different definitions in their national laws. Some people may have multiple residencies in different countries. For our purposes, residence might be seen as a stepping stone to full citizenship through naturalization.

‘Residence’ is also the right to live in a foreign country. You may or may not actually spend time there, but in some countries the fact that you hold a Resident’s ID card (like a Green Card in the US) means that you are officially a resident there.

Residence is of interest to us for two reasons:

You might acquire tax benefits by moving to another country. Americans who move their residence to another country get many tax and privacy advantages (such as the Foreign Earned Income Exemption) over their fellow citizens who stay at home, even if they are still ultimately subject to tax on their worldwide income. Anyone who is not American, can legally opt out of their home country’s tax system simply by changing their residence.

Residency can be a path to citizenship. Most countries allow residents to apply for citizenship after a period of residence. This can vary from about 2-3 years (Dominican Republic and Singapore) up to 25 years (Liechtenstein or Andorra.)

 

This article was written by Peter Macfarlane for Q Wealth.

For more information on all legal second passports, citizenships and residency programmes currently available, please read the Q Wealth Report on this subject, which you can download here.

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