Your ‘Plan B’ in Times of Instability: Acquire a Second Passport and Protect Your Assets Offshore

Lack of stability has become normal in the modern world. Economic crises conditioned by the consequences of the COVID-19 pandemic affect people’s financial security. Political conflicts and the rise of extremist movements also increase financial risks. Such global challenges as climate change and frequent natural disasters contribute to destabilization making people more nervous.  

In such conditions, many of them start thinking about a ‘Plan B’ as an alternative asset protection strategy. Acquiring a second passport and transferring capital offshore can be efficient instruments for achieving the goal.

Let us discuss what a second passport is and how offshore jurisdictions can help you protect your assets. We briefly dwell on efficient asset protection strategies that you can use in unstable times. We hope that the information below will let you learn about the available opportunities and help you make balanced decisions. Even in difficult times, you can increase the level of your financial security.

A second passport and its advantages

A second passport is an identification document issued to you by the authorities of a country that is different from the country of your citizenship. With a second passport, you can have second citizenship or dual citizenship. These notions are different as they bring different scopes of authority.

Second citizenship

A person can be a citizen of two countries at a time while neither of the countries officially recognizes the status. For example, a Ukrainian citizen can obtain citizenship of Canada while keeping citizenship of Ukraine. In this situation, each of the countries considers the person its citizen while simply ignoring the fact that he/ she is a citizen of another country too. This means that the person has to abide by the laws of both countries including the payment of taxes and military service in some cases.

Dual citizenship

Dual citizenship is a status recognized by both countries. This means that there is an agreement between them that gives their citizens legal opportunities to enjoy the rights and privileges offered by both countries. For example, France and Italy have such an agreement so any French or Italian person can be a citizen of two countries at a time. The authorities of both countries coordinate their activities related to the holders of dual citizenship.

Differences	Second citizenship	Dual citizenship
Status recognition	No official recognition.	The status is officially recognized by both countries.
Legal obligations	Must abide by the laws of both countries.	The countries coordinate their treatment of dual citizenship holders.
Confidentiality	Second citizenship can be concealed unless it is prohibited by law.	The status is transparent to the authorities of both countries.

Advantages that a second passport brings

A second passport does not only enhance freedom of movement but it also gives access to more comfortable living conditions and opens new business opportunities. The main advantages that a second passport brings include the following ones:

• The right to live and work in the country whose passport the person holds. Entering the country does not require any additional documents.
• Visa-free travel to a large number of countries. For example, citizens of Caribbean countries are eligible to enter the Schengen zone (as well as many other territories) without visas while a few countries in the region have citizenship-by-investment programs. 
• Tax burden reduction. Taxes in the person’s second home country may be lower than they are in his/ her first home country, which allows saving some money.
• Personal and financial security. If some sort of crisis hits the first country, the holder of two passports can quickly escape to the second country and live there in safety.
• A person holding two passports has additional business prospects as he/ she can do business in different geographical regions.

The methods of acquiring a second passport

You can obtain a second passport on several legal grounds. In each case, certain bureaucratic procedures are involved. The timeframes of acquiring a second passport vary between a couple of months and several years.

Naturalization

If you live in a foreign country on legal grounds for an extended period, you can become its citizen by naturalization. The process normally takes between 3 and 7 years depending on the country. You have to be a permanent resident of Canada, for instance, for at least 3 years out of the last five years to become a citizen of the country. In most cases, you have to pass a language and a history test to become a naturalized citizen of a foreign country.

Investment

Some countries offer citizenship-by-investment opportunities. That is, you can become their citizen in exchange for a contribution to their economies. The lowest amount of the contribution is US$ 100,000. Some Caribbean countries such as St Kitts and Nevis or Dominica, for instance, will grant citizenship to those foreigners who invest into real property or a business venture on their territories. The Vanuatu citizenship-by-investment program also has some attractive properties.  

As far as Europe is concerned, Malta remains the only country in the region that ‘sells’ its passports to foreigners. The required investment amount starts at 700,000 euros and the process takes between 1 and 3 years. Besides, you can acquire citizenship of Turkey by investment if you buy real property in the country for at least 400,000 euros. There are additional requirements that you have to meet to become a citizen of Turkey.

Descent

Some countries allow acquiring their citizenship by descent. For instance, Hungary, Romania, Italy, and some other countries will grant citizenship for descendants of their deceased citizens. If you have ancestors who were citizens of a foreign country, you may be able to apply for citizenship by descent. The process of acquiring a second passport can take about 1 year or more.

Marriage

You can obtain second citizenship if you marry a foreign person. The naturalization process will be shorter in this case but you cannot obtain foreign citizenship instantly anyway. For example, foreign spouses of U.S. citizens can apply for citizenship of the USA only after living in the country in marriage for 3 years.

Exceptional services

Outstanding achievements in science, sports, arts, or other areas can also bring you a second passport. Some countries will grant citizenship to those foreigners who have made important contributions to their economies or cultures. National Governments normally initiate the process.

You can achieve the following important goals when you acquire a second passport:

• Improve the quality of your life;
• Protect your assets;
• Enhance your global mobility.

Asset protection in offshore jurisdictions

If your assets are under potential threat in your home country, you can transfer them to an offshore jurisdiction. Offshore countries offer beneficial legal and fiscal conditions that allow avoiding risks associated with economic crises, political conflicts, high taxes, and lawsuits.

Advantages of transferring your assets to an offshore jurisdiction:

• Anonymity and confidentiality. Some offshore jurisdictions such as Belize, Seychelles, or Nevis, for example, protect personal information with high efficiency. The name of the asset owner can be concealed from the public.
• Legal protection. Such offshore structures as trusts and foundations provide legal protection from lawsuits and creditors’ claims. The local legislation makes it impossible or extremely difficult to expropriate the assets.
• Tax benefits. Offshores charge low or zero taxes on income, dividends, inheritance, and so on. This allows reducing the costs and keeping a larger portion of your wealth.
• Flexibility in asset management. The asset owner is free to set the conditions for the asset use and management. He/ she can adapt asset management to his/ her needs.
• Risk diversification. If problems arise in one country, the assets kept in another country are not going to be affected.

Asset protection instruments in offshore jurisdictions

Offshores are especially efficient when it comes to protecting your assets in an unstable situation. They allow keeping your assets in a safe place and making use of all available legal instruments.

Trusts

Offshore trusts serve as capital protection instruments. One of the main advantages that trusts boast is a high level of information confidentiality. In such jurisdictions as Nevis or the Cook Islands, trust settlors’ personal information is concealed, which significantly reduces the risk of infringement by third parties. The legal mechanisms used in these countries make assets kept in trust practically invulnerable to claims including court decisions. Another advantage that trusts bring is tax benefits.

Offshore companies

Companies registered in offshore jurisdictions have to pay little in taxes and do little reporting. The company owner can manage the business anonymously in some countries (such as Nevis or Seychelles, for example). Offshore companies are used for international business operations, trade, and investments. They help reduce the fiscal obligations and protect the capital from risks. In some countries such as Serbia, for instance, company formation serves as a legal ground for obtaining a residence permit.

Bank accounts

Opening an account with an offshore bank allows protecting and diversifying your assets. Financial institutions of the Cayman Islands, Nevis, Switzerland, Singapore, and other jurisdictions offer various financial products and services including:

• Multi-currency accounts;
• Investment opportunities;
• Safe deposit boxes;
• Trust services.

Foundations

An offshore foundation is one more asset protection instrument that allows tax optimization and confidentiality enhancement. A foundation can act as a shareholder of a corporation thus concealing the name of the beneficial owner. An additional advantage is the possibility to transfer assets via gift and charity schemes thus making the transfer tax-exempt.  

Conclusion

Establishing an offshore trust, a company, or a foundation, and opening an offshore bank account helps protect your assets from various sorts of risks. Because both second citizenship opportunities and asset protection strategies are quite diverse, you have to do serious research before you can find the best options. Please do not hesitate to contact our experts for advice. They will gladly help you find the options that suit your personal needs in the most efficient way. With their professional assistance, you will be able to make well-grounded decisions.