While most people live out their lives quite happily in the country in which they were born, there are several reasons why some people might want to consider obtaining a second citizenship: your assets may be at risk of litigation; your home country enforces strict currency controls; your freedom to work, invest and buy property at home is restricted; political instability in your home country, makes it very difficult, if not impossible, to obtain visas for travel; and, worse still, your current passport marks you out as a potential target for terrorists or kidnappers.
Another reason might be because the tax burden in your home country is unnecessarily high, and taking out a second citizenship may be the only way to shake off your country of origin’s claim to your worldwide assets.
Jurisdictions which tax income on a territorial basis, i.e. income derived only from sources within their borders, are becoming few and far between and most countries, especially high-tax countries in the West, tax income on a worldwide basis. However, it is often not enough to merely live abroad for a certain amount of time to escape the tax net in the land of your birth. Some countries, the United Kingdom being a notable example, also attach the concept of domicile, as well as residence, to an individual’s existence for inheritance tax purposes. This requires a much more serious break in the link between yourself and your home country, to the point that you have virtually no economic or social ties there at all.
US citizens are probably in the worst position of all in this respect because the Internal Revenue Service (IRS) taxes on the basis of a person’s nationality. This means that Americans are in the uniquely horrible situation of suffering double taxation virtually wherever they go and pretty much the only thing they can do about it is to renounce their citizenship, something an increasing number of Americans seem willing to do; according to Treasury Department statistics published in the Federal Register in February 2015, a record 3,415 US taxpayers gave up their passports or their green cards in 2014 – 14 percent more than the previous record of 2,999 in 2013 (although if certain members of Congress have their way, the IRS would still have a claim to tax such expatriates).
More and more countries it seems are destined to go down the American route; France, for example, is giving it serious consideration. But in response, an increasing number of mobile entrepreneurs will up sticks from these countries and set up shop in low-tax jurisdictions.
So, taking all of the above into account, not only could a second passport prove useful in terms of making your life easier and protecting your assets, but if you come from a high-risk country, it could even save your life!