Seeking a Second Passport in Uncertain Times? What You Need to Know.

Rules have toughened to get an Italian passport. (Salvatore Laporta / KONTROLAB / Getty Images)

It has become harder to get a second passport in Europe in recent months with several countries—including Italy and Spain—closing avenues to access them.

On the other hand, Trump’s “gold card” for wealthy foreigners who want U.S. visas has given a boost to residency-by-investment programs. Argentina, Hungary and several Caribbean states are opening up more ways for foreigners to get similar second passports in these countries.

Such programs—which grant citizenship or residency after an initial investment in the country—have gained momentum with Americans, who seek plan Bs as political divisions at home push them to look for alternatives abroad.

But while there are benefits to getting a second citizenship, there are also financial pitfalls, particularly for Americans.

Here we look at how to make the best of these visa opportunities, and dissect the financial pros and cons of investing in a second passport.

Second passports, often obtained through family ancestry or by purchasing property or shares in a country, offer a range of benefits, from ease of travel, ease of residency to access to local investments and grants. That’s especially true for European nations, whose passports allow individuals to travel and work in the whole of the European Union.

A second citizenship also opens doors to another’s country’s tax system, which—with the right planning—can result in lower taxes.

“It makes financial sense to have a second passport,” said Adalberto Pucca, head of global mobility at visa consultancy Global Citizen Solutions. People can use second passports to redistribute assets worldwide and diversify a portfolio, but also enjoy the option to relocate abroad if and when they choose to, he said.

“The idea is to mitigate risk. These programs can work as an insurance policy,” he said.

One type of visa that has been in high demand is citizenship-by-ancestry programs. These programs offered by countries such as Italy and Ireland allow for individuals with ancestors born there to directly apply for citizenship. While cost effective, they are time consuming, and require digging through family trees to unearth documents proving those ties, advisors say.

Another popular route is through investments, so-called “golden visas.” While several countries have restricted access to these kinds of programs in recent years, they have remained a favorite for many households looking to secure residency abroad.

The programs have sprouted up in other locations too: Argentina announced a new golden passport this summer, which would grant residency and eventually citizenship after a $500,000 investment in targeted sectors such as agribusiness and tech. Caribbean nations also have similar programs, and at a lower cost, requiring about $250,000 to gain permanent citizenship.

Judi Galst, managing director at immigration consultancy Henley & Partners, said most of her U.S. clients are now considering Caribbean citizenship, while some still seek residence in Europe, via the Italian, Greek and Portuguese residence-by-investment programs.

“Clients need some level of liquidity to pursue these programs, but they also appreciate the benefits of the investment,” she said.

A second citizenship acts as a safeguard against economic instability at home, providing a more stable financial footing, she said. For business owners, it can facilitate global expansion by allowing access to new markets.

But there are also risks tied to second citizenships. One of those is that these programs change often based on shifts in public opinion and governmental decrees.

For people seeking citizenship in Europe, for example, that has meant in some cases spending months and thousands of dollars applying for residency programs—some of which were then abruptly discontinued.

Italy significantly cut its citizenship-by-ancestry program this March to be granted to only those with an Italian parent or grandparent. It used to be open to individuals with Italian ancestry dating back to 1861.

The European Court of Justice deemed the Maltese golden passport illegal this May, and requested it be shut down.

For that reason, programs directly granting citizenship—such as those in the Caribbean—can be more attractive than residency programs in Europe, as citizenship is less likely to be revoked once granted, said Frederic Behrens, partner at New York-based wealth management firm Cerity Partners.

“This may be attractive for retirees planning to stay in a particular country forever,” he said.

But holding two citizenships often comes with additional financial burdens, including complex tax reporting obligations.

U.S. individuals are particularly penalized in that regard, as they are in the unique position of being taxed by the Internal Revenue Service even if they move abroad.

“Unlike almost every other country, the U.S. taxes its citizens no matter where they live,” said Jason Walker, managing partner at Philadelphia-based wealth advisory Cross Border Financial Planning.

This increases the risk of being taxed twice, once by the IRS and once by the new country of residence, he said.

Americans should seek visas or passports in nations that enjoy favorable dual tax treaties with the U.S., and carefully plan their asset allocation to avoid unfavorable regimes, said Walker.

U.S. treaties with the U.K., France and Canada, for instance, minimize levies on pension withdrawals, making them good candidates for retirees.

On the other hand, the U.K. taxes inheritance more punitively than the U.S., potentially hurting succession plans.

Nations like St. Kitts and Nevis and Italy have low-to-no taxes on wealth, making them favorites for those seeking to protect their assets abroad.

“Living, earning, and investing in different countries adds complexity, but with the right planning, it can also create valuable opportunities,” summed up Walker.

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