| When considering investments of any type, the bottom | | | | In the end, however, the only way Americans can |
| line is of course the most important. But one of the | | | | legally unshackle themselves completely from the IRS |
| very attractive advantages of alternative investments | | | | is by renouncing US citizenship. |
| and overseas retirement is that they are not just digits | | | | Many are doing just that. But before taking the drastic |
| on a screen. Frequently, they also carry significant | | | | step of giving up a US passport, another citizenship is |
| fringe benefits that, while not contributing directly to the | | | | required. Millions of US citizens are actually entitled to |
| bottom line, play an important role in the investment | | | | European or other passports based on ancestry, |
| itself and in the investor's longer term strategic planning. | | | | though the bureaucracy involved can be quite lengthy. |
| These fringe benefits may be pure fun, or perhaps | | | | That's why the Caribbean states of Saint Kitts and |
| social status - like inviting friends over to sample the | | | | Nevis and the Commonwealth of Dominica both offer |
| latest vintage from your own winery. But as the | | | | 'economic citizenship' programs, effectively 'selling' |
| traditional financial system remains far from predictable, | | | | citizenships and passports for hundreds of thousands |
| and the outlook for the rest of 2010 remains gloomy, | | | | of dollars. Years ago most of the takers were |
| you might be surprised to learn that savvy investors | | | | Russians, then came the Chinese, but today most of |
| are turning in droves to alternative Latin-American | | | | the buyers are Americans who are renouncing |
| investments as a conservative 'safe haven' for serious | | | | citizenship to become tax exiles. |
| international asset protection purposes. | | | | All this brings me to another big fringe benefit of |
| Longtime international speculator Doug Casey, who | | | | investing in Latin America: most Latin American |
| authored The International Man back in 1976, recently | | | | countries are relatively liberal when it comes to |
| wrote that "a wise man... doesn't allow himself to be | | | | naturalization - the granting of citizenship based on a |
| limited by an accident of birth." Casey predicts that we | | | | period of residence or other 'connection' with the |
| are "heading into a currency crisis for the record | | | | country. 2-5 years is the norm. This already short |
| books, and I think you can plan your life around some | | | | period can often be speeded up even more based, for |
| type of foreign exchange controls. If you don't get | | | | example, on marriage or on birth of a child in-country. |
| significant assets out of your home country now, you | | | | Frequently the processing time on top of the |
| may soon find it costly and very difficult to do so." | | | | officially-designated residence period can be a year or |
| Whether you agree with that prediction or not (I do, by | | | | more - but one has to consider that citizenship via this |
| the way!), there are several very good reasons to | | | | method is almost free. |
| diversify into hard international assets - things like real | | | | Demonstrating some connection with the country is a |
| estate or physical gold bullion. | | | | necessity, but this requirement can be easily fulfilled by |
| For a start, there are the tax benefits. If you are | | | | owning real estate or investing in a local business. So |
| managing an investment portfolio today, chances are | | | | smart second citizenship seekers should be looking for |
| your geographic location is not really that important. | | | | attractive business opportunities in Latin America rather |
| Day-to-day management of your portfolio can be | | | | than investing hundreds of thousands on small, |
| carried out from anywhere there is a laptop and | | | | hurricane-prone islands in the Caribbean. |
| broadband. So more and more investors and | | | | The biggest benefit of going global for me, however, is |
| managers have realized that they just don't need to | | | | intangible. If I had to sum it up in a word, it would have |
| be located in a high tax, high cost country. | | | | to be 'freedom.' Difficult economic times generally see |
| The majority of Latin American countries have | | | | governments resorting to patriotic calls to 'unite' and |
| territorial tax systems - meaning that if you are | | | | 'pull together' - something that usually ends up as 'do |
| officially resident there, you are only taxable on your | | | | as I say not as I do.' The 'strong leadership' demanded |
| local source income. Anything you do outside the | | | | by the majority in these times is bad news for |
| country of residence is tax free as far as they are | | | | entrepreneurs, libertarians, classical liberals, and all those |
| concerned, so you don't even need to bother declaring | | | | who love freedom. |
| it. This contrasts starkly with North America and | | | | Doug Casey suggests that you should at least |
| Europe where the rule of thumb is that your home | | | | consider the possibility of transplanting yourself, or at |
| country taxes you on your worldwide income. | | | | least start by transplanting some assets. "Don't look at |
| By living - even part time - in one country while | | | | it as a negative thing," he says. "The world is your |
| overseeing investments in another, you can therefore | | | | oyster. Make the most of it." |
| legally slash your tax bill at a stroke. Some countries, | | | | Although bureaucracy in Latin America can be |
| like Uruguay and Panama, are particularly attractive in | | | | overwhelming at times, it is relatively easy to cut |
| this regard, having passed business-friendly legislation | | | | through. There is less regulation than in the US in |
| designed specifically to attract this kind of international | | | | particular, and more reliance on common sense and |
| investment management business. They recognize | | | | individual responsibility. People don't sue each other |
| that even though it doesn't produce tax revenue | | | | over the least little thing. |
| directly, it stimulates the local economy and provides | | | | Doug is currently involved in developing a community |
| work for local professionals, banks and businesses. | | | | for like-minded individuals in northern Argentina, not too |
| Other countries like Costa Rica and Belize offer | | | | far from Bolivia and Paraguay. The idea being that with |
| 'pensionado' or 'qualified retired person' programs that | | | | the world in constant commotion, it's good to have a |
| grant specific tax exemptions to retired foreigners | | | | 'Plan B' - a place far from the madding crowd that is |
| taking up residence. If you don't feel ready to retire yet, | | | | entirely self-sufficient in terms of food, water and |
| bear in mind that some of these 'retirees' are much | | | | energy - and even wine! |
| younger than you might expect - qualifying for the | | | | The buyers in such communities, many of whom I |
| programs simply by proving that they have sufficient | | | | have had the pleasure of meeting, are not crazy |
| regular income from abroad to maintain a quality | | | | doomsayers. Most of them are patriotic Americans, |
| lifestyle. 'Retirement' to them might mean waking up to | | | | serious investors and hard-working entrepreneurs, who |
| the sound of the ocean in their beautiful beachfront | | | | hope things will never get that bad - but they sleep |
| properties, logging on to check how much money they | | | | sounder at night knowing they have a bolt-hole |
| made overnight, working on the internet for a few | | | | prepared and assets in place if the worst case |
| hours a day, and travelling a few days a month to | | | | scenario plays out. And, lest we forget, they are hoping |
| oversee their investments in person. | | | | to pocket a healthy profit on their Latin American real |
| Ah, I hear you saying, but there is one big problem with | | | | estate investment over the medium to long term. |
| this strategy - if you happen to be a US citizen. The | | | | As with any investment, due diligence in this area is |
| USA is the only country in the world that taxes its | | | | extremely important. But next time you check out an |
| non-resident citizens. A Brit or Canadian who moves | | | | investment, remember to look around for the hidden |
| his official residence to Belize or Uruguay won't have | | | | fringe benefits as well as the cold, hard figures. Treat it |
| to worry about home country taxes any more, but his | | | | not just as a way to increase the number of dollars in |
| American cousin will. | | | | your bank account, but as a way to diversify, learn |
| But it's not quite as dire as it sounds. There are still | | | | and protect the assets of your family by investing in |
| substantial benefits to Americans living overseas, that | | | | something with a built-in 'insurance policy. |
| a competent international tax lawyer can help you with. | | | | |