Is Now The Time To Become A Global Citizen
As the political game is heating up in the U.S. (and lockdowns due to the pandemic don’t seem to be ending anytime soon) there is an interesting trend that is happening. The concept of becoming a global citizen.
Everyone is trying to figure out what’s true and what’s not true, what’s real, what’s not real, and many are concerned that we are losing more and more of our freedoms, more and more of our liberties, and getting more taxes forced upon us.
In the U.S. today, there are Americans migrating out of New York and San Francisco and Portland and Seattle, and they’re all migrating to safer cities.
And there is a growing trend for Americans to leave the country altogether by obtaining dual citizenship.
Kim and I have traveled the world for 30 years now. We’ve traveled to Australia many times and always thought, “Well, maybe someday we’ll move here.” We’ve never really considered leaving the United States. But for the first time, we’re thinking about it. (Here’s why)
For many Americans, I believe, we are born in the United States and we are raised to believe that there is no place better than America. We also buy into the old advice of “going to school, getting a job, and paying taxes!”
A second passport, or dual citizenship is ultimately an insurance policy for getting “out of dodge” whenever you need. And 2020 has shown us we may all need it.
As we saw when the coronavirus first broke out and borders were closed to non-citizens, it became difficult for people to leave.
Without the right passport, visa, citizenship, or residency in the country, you wouldn’t even be allowed to board a plane.
For example, Americans have been banned from entering Europe for most of 2020, but had an American been a dual citizenship from just one country in the European Union it could give them access to all 26 countries in the area.
Why Dual Citizenship? Taxes!
One of the benefits of operating out of other countries is taxes.
Experts say that you can significantly reduce your tax burden by having dual citizenship. It’s not just the United States that favors investment. Most countries have a lower tax rate for portfolio income than for ordinary income. Most governments want their citizens to invest, so they give them an incentive to invest—special tax rates for portfolio income.
Wherever I travel in the world, the people I deal with primarily are employees of their own corporations. In theory, they own nothing and really don’t exist as private citizens. They exist as officers of their rich corporations, but as private citizens they own nothing. And wherever I go in the world, I meet people who tell me, “You can’t do that in this country. It’s against the law.”
Little do most people realize that most countries’ laws in the Western world are similar. They may use different words, but in principle their laws are pretty much the same.
Andrew Henderson, a recent guest on the Rich Dad Radio Show says, “Although dual citizenship doesn’t automatically lower your tax bill, it can be an important part of your overall tax strategy – especially if you’re a US citizen. Under US tax law, all citizens are obligated to pay tax on their worldwide income – even if their primary residence is abroad. Citizenship-based taxation forces all US passport holders to pay tax every year by virtue of being a US citizen.”
Simon Black says, “By moving overseas, US citizens can take advantage of the Foreign Earned Income Exclusion (FEIE), a special provision in the US tax code that allows US citizens living abroad who file Form 2555 along with their tax return to earn up to $107,600 per year (and growing) tax-free.”
Now, of course, I’m not the expert and I recommend that you first speak to an expert in dual citizenships to ensure that you are following all appropriate laws. And more importantly, setting up business operations offshore (i.e., not in your home country) can be a bit challenging. I can’t stress enough how easy it is to mess up structuring a foreign business. You’ll want to have great advisors, including an attorney, a tax advisor, and a banker who understand the laws of both your home country and the country where you want to set up business.
Mistakes People Make
Just as reducing taxes is a huge benefit of dual citizenship, they can also be one of the biggest mistakes people make.
I’m not talking about taking loads of cash and hiding from the IRS. When considering dual citizenship you need to be transparent and do it legally.
For example, if you already owe back taxes in the U.S. you may not qualify for the right to leave the country. In 2015, the US Congress passed a wide-ranging infrastructure bill called the “FAST Act” and in that bill was a new clause–“Revocation or Denial of Passport in Case of Certain Tax Delinquencies”–meaning Americans who owe substantial back taxes cannot obtain or renew their US passports.
Start by Getting One Passport
Just as people make excuses for not starting a business, or investing in real estate, people often make excuses for not travelling outside the United States.
They say things like, “Oh I’m married and my spouse would never live abroad.” or “I have kids now, I could never do that.” But the truth is, anyone can, and should experience what the world has to offer.
I do believe that Americans have been brainwashed to believe there’s no place like home, and I was shocked to find out that almost 40% of Americans don’t have a passport—which is required to travel outside of the United States, even to Canada or Mexico.
But I don’t think many people can honestly look around what’s happening in the U.S. and think that this is all the world has to offer.
My friend Peter Schiff said, “…more and more people are willing to jump through hoops to escape the American tax man.” He’s even relocated one of his companies to Puerto Rico to reduce its tax burden.
The key here is living or doing business or investing in other countries can be tricky, but anyone can do it. Talk to your tax advisor and see if dual citizenship is right for your wealth goals.
Editor, Rich Dad Poor Dad Daily