Obtaining a second passport for tax purposes is a popular option among wealthy individuals in countries where taxes are deemed to be very high.
Bloomberg reported early this year that about 1,780 expatriate Americans renounced their US citizenship in 2011 compared to 235 in 2008. The US tax system has a long reach and Americans who reside in other countries are still subject to tax on their earnings, regardless of their current address.
Only this year, the co-founder of Facebook, Eduardo Saverin, obtained a Singapore passport and renounced his US citizenship. The move is seen as way for the young billionaire to save on taxes, although his spokesman maintained there were other reasons that led to that decision. Singapore has zero tax on capital gains, while its income tax rate is lower than in the US.
Not too long ago, chess champion Bobby Fischer gave up his American passport to become a citizen of Iceland. In the 1960s, investor John Templeton relinquished his US citizenship in favour of Bahamian and British passports, reportedly to save over $100 million in income taxes.
Financial experts, however, warn that such a move can have some serious repercussions. Americans, for example, who choose to give up their birth passport can’t reclaim their citizenship back and may encounter some problems should they decide to re-visit their previous home country.
“It is highly unlikely that a US applicant who also renounces their US citizenship is ever going to be granted visa access to the US,” warns Paul Hymers, financial director at Atlas Corporate Services.
