Insights
Aside from gaining a second passport, one of the main reasons to acquire citizenship by investment is for the purposes of tax optimization. Many CBI countries offer extremely attractive tax regimes, and by taking advantage of this it’s possible to minimize one’s tax expenditure to a great degree. When it comes to growing wealth, then, there’s nothing quite like citizenship by investment programs.
There are a number of tax strategies that can be employed to grow one’s wealth more efficiently via CBI. During the course of this article, we plan to examine five facets of CBI programs that can ensure the best tax optimization for you or your businesses.
One of the most compelling arguments in favour of citizenship by investment is the tax-free (or virtually tax-free) status of many countries offering it. When you compare the amount of money you’ll be saving by not paying taxes in your original home country, it’s not hard to see that you’ll be making substantial savings pretty much as soon as you become a citizen. In fact, you’ll recoup any costs associated with your CBI application in as little as 2-3 years.
Let’s take a look at personal income in the various CBI countries.
Of the Caribbean island nations with CBI programs, Saint Kitts & Nevis and Antigua & Barbuda are the only two that are completely tax-free. You will not pay income tax on any income, whether it’s earned in the country or outside of it. This means you can move to either of these two countries and, as a citizen, pay no tax at all even if working there.
Dominica, Grenada and Saint Lucia all have income taxes, but only Dominica taxes global income, and none of them tax income if you’re not a tax resident. As you can be a citizen of these countries without residing there, it’s possible to be a citizen but not a tax resident.
In Saint Lucia, income tax is payable only on income generated within the country. It’s a progressive tax that scales with how much you earn in the country, starting at 10% and capping at 30%. Similarly, Grenada only taxes income generated within the country, and taxes 10% on income up to ECT $24,000, and 28% on any income after that.
Finally, Dominica is perhaps the least attractive Caribbean option for tax optimization, as they tax income globally rather than locally. The tax brackets start at 15% and go up to 25% and 35% depending on how much is earned. Do remember, however, that you can obtain Dominican citizenship and avoid becoming a resident, which obviates the need to pay tax entirely.
It’s worth noting that no Caribbean country charges any other form of tax, so there will be no capital gains, inheritance, or corporate taxes payable.
Vanuatu, meanwhile, charges no income tax whatsoever, making it a fantastic choice for those who wish to lighten their tax burden. The only tax you’ll pay in Vanuatu at all is an annual flat rate of $300. No other forms of tax apply at all.
Malta, meanwhile, has quite a high income tax, but only on residents, and only for income generated within Malta. As residing in Malta is a requirement of becoming a citizen, however, it’s impossible to avoid these taxes in the same way as you can in the Caribbean. Income tax rates range from 0% to 35%.
Finally, Türkiye taxes residents on global income – but only residents, meaning that citizens who are not resident in the country are only subject to income within Türkiye. If you obtain Turkish citizenship and continue to live and work outside the country, then, you will effectively not be taxed.
As far as income tax goes, it can be quite easy to reduce your tax burden by applying for citizenship by investment, protecting your personal wealth from being siphoned away by the government. But what about when it comes to businesses?
International Business Companies, commonly abbreviated to IBCs, are one of the most popular types of company registered in Caribbean countries. Any company that is registered or controlled from a Caribbean country is considered a resident, and is taxed accordingly.
Business income is globally taxed in most Caribbean countries, and is generally speaking 25% of global income (though this varies – Saint Kitts & Nevis, for instance, taxes 33% of global income). There is also a VAT rate of between 12.5-17% depending on the country. Salaries are also subject to taxation, of between 4-7%.
There are a few special exemptions in one or two of the countries. In Antigua & Barbuda, IBCs are exempt from paying tax on interest, dividends and income for foreign-earned income for 50 years, making it an excellent choice for a company that wants to register there but that will generate most of its profits abroad. Similarly, Saint Lucia’s tax only applies to income generated within the country, meaning that this is also a great place to base your business if your earnings are largely or wholly generated abroad.
Vanuatu’s flat $300 per annum charge applies to businesses as well as individuals, and there is also a $150 registration fee. Aside from that, however, there is no tax payable at all. This makes it a very attractive proposition for those who’d like to lighten their business tax burden.
An IBC in Vanuatu must either have an office or an official representative based in the country. It is not allowed to own any real estate in the country.
In Malta, companies are considered eligible for taxation if it’s either registered in Malta, or operated from there. Corporate tax is a flat 35% on global income, but it’s possible to get tax refunds if the income is subject to a double taxation treaty, if it comes from passive income such as royalties, if it comes from trading activities, and/or it comes from the shares of a foreign company owned by a Maltese business.
There is also a VAT of 18%, and salaries are subject to a social contribution tax of 10%.
In Türkiye, meanwhile, a company is considered taxable if it’s registered in the country, or it’s operated from there (even if it doesn’t have a registered address in Türkiye). The current corporate tax rate is 23%, and may be subject to further changes in the future.
VAT is 18% in Türkiye. Social contributions amount to 20.5% of an employer’s salary, and 10% of an employee’s.
Once you’ve acquired a second citizenship, it’s often a good idea to diversify one’s financial portfolio by opening a bank account in your new country. This will allow you to begin the process of transferring your wealth over to your new country.
Holding an offshore bank account (‘offshore’ here referring to the place of your second citizenship) means that you’re less at risk of losing money from political or financial instability in your original home country.
It also makes it harder for you to lose that wealth should you be subject to bank account freezes or any kind of civil legal proceedings back ‘home’. By having your money sitting in a Caribbean bank account, you make it much harder for people in other jurisdictions to claim a slice of the pie.
Something else to consider is interest rates. One of the best options for offshore banking is Türkiye, where some banks will offer up to 17.5% interest on the money you deposit. If you’re planning on depositing a large amount of cash in a new bank account, then, Türkiye might be a good bet.
Something else to consider when diversifying one’s financial portfolio is investing in real estate in your new home. Many CBI countries offer real estate investment as a way to obtain citizenship through investment, but these should generally be considered merely as paths to obtaining citizenship rather than a way to genuinely grow one’s wealth. This is because the real estate must typically be government-approved, and as a result may not be optimal for turning a profit.
Any real estate should therefore be bought after you’ve completed the CBI process. As with any real-estate investment, you’d be well advised to do your homework and make sure that the property you’re buying is a solid investment that’s likely to appreciate in value. The same local partners or agencies that you engaged with in order to get your second citizenship may be able to assist in this.
One of the biggest benefits of buying real estate in a country in which you hold citizenship is that you will be exempt from a lot of fees that foreign investors will need to pay. In Saint Kitts & Nevis, for instance, a Land Holding Licence is required for foreign nationals buying real estate – but if you’re a citizen, you won’t need to pay this.
Real estate investment, then, can be an excellent method of growing wealth – provided you do your homework, and you do it after you’ve gotten your second citizenship.
As we’ve seen, through judicious use of tax optimization strategies, canny investments and careful use of offshore bank accounts, you can quite easily ensure optimal wealth management and the expeditious and efficient growth of your wealth. As always, however, it pays to exercise due diligence and to thoroughly research all your options before committing to anything.
As we’ve seen, through judicious use of tax optimization strategies, canny investments and careful use of offshore bank accounts, you can quite easily ensure optimal wealth management and the expeditious and efficient growth of your wealth. As always, however, it pays to exercise due diligence and to thoroughly research all your options before committing to anything.
As we’ve seen, through judicious use of tax optimization strategies, canny investments and careful use of offshore bank accounts, you can quite easily ensure optimal wealth management and the expeditious and efficient growth of your wealth. As always, however, it pays to exercise due diligence and to thoroughly research all your options before committing to anything.
Get in touch to discuss how we can help you with your citizenship or residency by investment goals. One of our investment migration experts will contact you to discuss your case. With over 16 years of combined experience our team has helped hundreds of families achieve freedom.
