Tax Residency and Second Passports: Do I Have to Pay Double Taxes with Two Passports?

Being a citizen of two different countries has a lot of benefits. Having the possibility of legally own properties in both territories, enjoy public services like education or health insurance, and being able to do business as a national resident in the countries where you have your nationalities, are some of the things that attract people into acquiring second citizenship or passport. 

However, one of the main concerns that people have regarding tax residency and second passports is if they must pay taxes in two different countries. Complying with the tax system of one national government is hard enough for contributors, given that it takes a part of the income that they obtained through hard work. So, it is only fair that people might think twice before applying for a second citizenship or looking for a second passport from another country if it requires that applicants have to face tax responsibilities in this territory.

Another concern that people thinking about obtaining a second passport take into consideration is having to report their earnings obtained in one of these territories to the tax authorities in the country from which they might possess the second citizenship, with the risk of even having to pay taxes in said country for the income that they have obtained outside of its borders.

The United States is the only country (along with Eritrea) that requires its citizens to pay taxes in the US, even if they live abroad. Owing taxes in two different countries might be a reason for people to think twice before enrolling in the process of obtaining a second passport, as double taxation is a risk that applicants could face if the countries from which they have citizenships do not have agreements that prevent this problem.

Nonetheless, you must know that, as we briefly mentioned above, there are countries that have agreements between one another that grants its citizen exemptions to prevent them to pay taxes in two different territories if they have citizenship in both of them.

In the process of deciding which second passport better suits your necessities, you should take into consideration if there are active agreements between your country of origin and the ones that you are looking for obtaining a second citizenship. This matter varies immensely depending on the countries that you are looking for as options to have your second passport, so you might need assistance in order to make the decision that fulfills your requirements.

Another category that might be interesting for people to obtain their second citizenships is the “territorial tax countries”. In this group, governments only require its citizens to pay taxes for the income obtained inside the country, so people do not have to report their earnings from outside its borders.

This kind of tax system is attractive for people that look to enjoy their earnings outside their country of birth without having to comply with the taxes of another country, or just wanting to enjoy their savings without having any worries. Some countries with these programs, like Vanuatu, do not even have an income tax, while others like Nevis have a territorial system. Malta, for example, grants a special non-dom status to CBI holders so they only pay taxes on their local income. Thus, generally, if you choose wisely, this will not be an issue for you.

As you can see, knowing the tax system of each country is an important matter that individuals have to consider in order to make the best decision regarding the tax residency and second passports that they wish to obtain. Tax-free countries, regions with just territorial taxes, or countries that have agreements regarding double taxation are some of the best choices for applying for second citizenship, as it will not affect your income or your savings.

Our panel of experts is formed by many immigration lawyers who can help you obtain citizenship and tax residency in places such as Panama, Malta, Montenegro, and others. Contact our experts through our contact form below.