There’s no denying that there’s a lot of buzz surrounding crypto these days. People who invested early have made millions, but there’s still a lot of room to grow an investment quickly. So, it’s only natural that more people than ever are considering this kind of investment. 

However, like any investment, there’s the issue of capital gains, and the tax that you pay on it. While it might not be a solution for everyone (and depends on where your primary country of residence is and what the tax laws are) but there might be options to shield your earnings. 

Smart Points

If you want to get a second citizenship in another country that is considered a tax haven, there are a few things you need to consider:

• What your home country’s stance on international earnings is
• Whether the country you want to move to has tax treaties
• Whether the country you want to move to taxes international income
• The costs and benefits of getting a second citizenship

There are several countries that might make your shortlist for tax havens that might be suitable. Be sure to ask these questions about all of them, so that you can narrow the search quickly. 

Which countries are considered a tax haven?

There are many countries that are considered tax havens, and the list changes from time to time as countries change their rules or set up new reporting and tax treaties. Some of the more popular tax havens right now include:

• The Netherlands
• Ireland (although this may change soon!) 
• Bermuda
• Luxembourg
• Cayman Islands
• Singapore
• Channel Islands
• The Isle of Man
• Mauritius
• Monaco
• Switzerland
• Bahamas
• Malta
• British Virgin Islands
• Hong Kong
• Grenada
• Cyprus
• Taiwan
• Gibraltar
• Curacao
• Samoa

There are many other countries that meet the definitions of a tax haven besides these, and the status of countries does change from time to time. Some countries even allow you to pay for citizenship with crypto! So if you are considering using a new country as a tax haven, be sure to check the most up to date information! 

How can I acquire passport of those countries?

The first thing you should now is that it’s not always possible to become a citizen of the countries on this list. In fact, some, like the Netherlands, have very complex and difficult to navigate immigration systems. Some countries focus on immigration by people who have family and ancestral ties, while others recruit people with skills they need for their economy and workforce. 

Some, however, have what is called a “golden visa.” This is also known as immigration by investment, and while the rules may change dramatically from one country to the next, the process is always similar: you invest in property, a business, or a fund, and then you are granted residency. 

Some countries first require you to be a resident for a number of years, while others will grant citizenship without any residency requirements. So again, you need to look into the individual places you want to get second citizenship from before you decide. 

Is it really beneficial to have second passport for tax incentives?

That really depends a lot on where you live now, and what your primary passport is. 

Some countries, like the US, require citizens to pay tax on their global earnings regardless of where they live. In that kind of case, putting money in a tax haven could be tax evasion, which could result in a prison sentence. 

Other countries allow tax avoidance, including having money in offshore locations. Many have different rules and regulations. 

It’s very important to understand that if your home country has laws against this kind of arrangement, you could still get into a lot of trouble. So, it’s always a good idea to speak to a tax attorney or chartered accountant to be completely sure that you what you plan to do is legal. 

Once you have established that your course of action is legal, the next thing you need to do is decide if the cost will justify the benefit. 

There are various costs associated with getting a second citizenship, depending on where you apply. These could be up to $500,000 or more, depending on the country and the immigration program. In some cases, you can get that money back after a prescribed number of years, but in some cases, it’s a non-refundable contribution. 

So, consider how much your crypto investments are likely to earn you over time, and then weigh the return on your investment in a second citizenship. 

Why are crypto investors investing in passport?

Crypto itself is a highly unregulated investment. While you can buy and sell crypto through a variety of investing programs, there are no specific reporting requirements on the currencies themselves. If you aren’t required to report your earnings, and you don’t have to pay tax on them in the country your second passport is from, you can keep most or even all of your profits. 

They can also make people a lot of money from crypto currency, and many want to live the digital nomad lifestyle. Many tax havens also happen to be islands or popular tourist destinations, so the lifestyle is a big factor too. If you can live off the earnings from your crypto investments and spend all your time on the beach, you’ve pretty much cracked the formula for life in paradise. 

Best places for crypto entrepreneurs for tax breaks

If you don’t want to take the time to go through the residency process first, and you want to have a second passport right away, then the best countries to look at are:

• Antigua and Barbuda
• Dominica
• Grenada
• St Kitts and Nevis
• Cyprus
• Bermuda
• Malta

There are some other countries that offer both golden visa programs, and a direct to citizenship program, so you don’t have to be a resident first. Ideally, you should make a shortlist of the countries that offer that kind of program, and then make sure they are also a tax haven before proceeding. 

Also remember that it your home country does have very restrictive laws, you might also have to renounce your citizenship to avoid paying tax there. 

FAQ

Can anyone get a second passport?

No. Most countries will still have some kind of background checks that you need to go through to ensure you’re not a security risk. Some countries also don’t allow dual citizenship – and that includes your home country. So, you will need to be sure that you can have dual citizenship in both countries before you start the process. 

How long does it take to get a second citizenship?

That depends on the country you are applying to. Some can take several months, while others process most applications within as little as 90 days. Be sure to check the current processing times when you apply because those can vary.

Do I have to live in the country I get second citizenship in?

Not usually. Some countries that first have a period of permanent residence will usually require you to be present for a certain amount of time before you can apply for citizenship. But most countries that will give you citizenship without a residency period will not require you to be present for any prescribed amount of time in any year. 

What kind of golden visa programs are there?

Golden visa or citizenship by investment programs vary by country, so it really depends on where you want to go. Some allow you to purchase property above a certain value. Others require an investment in a government approved fund, or in a local business. Some require you to pay a non-refundable fee to the government. Once you know where you might like to make your second home, you can look at their requirements and process in more detail. 

Are tax havens illegal?

Not technically. Tax havens are simply countries that don’t tax their citizens the way some other places do, and that don’t share tax information with other countries. 

Will I avoid all tax?

No. Even countries that are true tax havens usually have some kind of tax – even if it’s just sales tax or import duties. So, if you plan to live in the country, you get a second citizenship in, you will probably still pay some unavoidable tax when you make purchases and so on. You just won’t be taxed on income and earnings. 

What other reasons are there for getting a second citizenship?

Many people also get a second citizenship, so they have somewhere warm and sunny to retire to, or because they want to have somewhere to spend the cold winter! 

Contact us

Smart Citizenship has been helping people from around the world to find second citizenship in a variety of tax havens and other countries. Our team is up to date on the latest rules and requirements, and we’re always happy to offer advice or to help with the process. 

So, if you’re considering applying for a second citizenship for crypto and tax purposes, we can tell you everything you need to know. Contact us if you’re ready to make a move, or just looking at your options.