Perhaps someone is bent on revenge and has threatened to kill you.  Perhaps you’re caught in an impossible personal or financial situation and you feel that “going underground” is the only way out.  Or perhaps like Snowden, you find yourself an enemy of the state.

If you’re in such a situation, privacy may be a matter of life or death.  You need to be prepared to act quickly, and when the time comes, not to hesitate.

When that time comes, first, throw away your cell phone.  A cell phone may be bugged so that its location can be tracked even if the phone is switched off.  When you turn it on, if the person after you has access to the cellular network—and it’s not difficult for a hacker to gain such access—your cell phone may betray your location.

Replace your existing cell phone with several anonymous prepaid cell phones, if you live in a country where you can buy one.  You can still buy such phones in the United States.  Buy phones with wi-fi cards so that you can connect to the Internet.  Be prepared to throw away your anonymous cell phone—potentially, after just a single call.  Also, purchase prepaid calling and prepaid Internet access.  Pay in cash.  Activate your phone at a pay phone—not with a phone connected to you in any way.  Don’t give out your real phone number when you activate the phone.

Pack a suitcase with anything you need to exist for the next few months, including your new cell phone and a laptop configured with a virtual private network (VPN) like Cryptohippie (http://www.cryptohippie.com).  Travel as lightly as you can.

Keep several thousand dollars in cash (or equivalent local currency) on hand at home, stored in a secure location.  Don’t use an ATM unless you have no alternative.  Using an ATM will reveal your location to your pursuers.  If you must use an ATM, withdraw as much cash as you can, and don’t use an ATM again as long as you’re on the run.  From that point forward, use cash only.

Don’t use credit or debit cards, unless they’re not in your name and drawn on an account that only you know about.  They can also betray your location.

Once you’ve left home, get as far away as you can.  That means leaving your city, your state, and ideally, your country.  You can drive your car, but an adversary with access to automatic license plate recognition networks can instantaneously match your license plate to your location.  It’s better to travel by bus or train, unless you think your adversary might be waiting at the station.  In public places like bus stations and railway stations, wear a hat and sunglasses.  If you’re a male, don’t shave.  To avoid CCTV face recognition technology, look up from the floor only to find your way to the correct bus or train.  Don’t leave by air—if your stalker can gain access to flight logs, he might arrange a “welcome reception” when you land.  If you’re crossing a U.S. border, keep in mind that persons walking across the border are subject to less surveillance than those crossing it in a vehicle or a plane.

Once you arrive in whatever destination you’ve decided to use as a temporary refuge, stay in hostels or small family-run hotels that accept payment in cash and don’t require proof of identity.  For longer term stays, look for a resort community where strangers aren’t out of place.  Ideally, find a short-term furnished rental, including utilities, offered by an individual.  Pay cash in advance for the rental term to avoid a credit check.  If your adversary has access to credit reports, a credit check will lead straight to your new address.

Your landlord will want to know your name and may insist on seeing government identification.  If you’re in another country and have a second passport, this might be an appropriate time to use it.  Again, if you pay in advance, the landlord may not be inclined to ask many questions.  Keep in mind that many countries require that merchants report large cash transactions.  For instance, in the United States, if the total cost of your stay exceeds $10,000/year, your landlord must file a currency transaction report (CTR) with the U.S. Treasury.  A pursuer with law enforcement connections may have access to these forms and use them to track you to your new location.  CTR filings are dangerous, since any law enforcement official in the United States—and many other countries—can view them.

Your adversary will also try to find you through the electronic trail you leave.  To keep your prepaid cell phones anonymous, insert the battery and turn one of them on only when you’re making or expecting a call.  Dial whatever sequence of numbers that applies in your country before you dial a phone number to defeat (some) caller ID (*67 in the United States).

Don’t use your cell phones to communicate with anyone you know.  Use them exclusively to establish your new existence.  If you must call someone whom your adversary might be watching, send that person one of your anonymous cell phones.  Include a black-and-white photocopy of a printed note with instructions to wait for a call at a certain time.  Using a photocopier may defeat invisible watermarks or other identifiers surreptitiously placed on documents by many printers and color copiers.

The wi-fi card in your cell phone lets you connect anonymously to the Internet anywhere you can find an unencrypted wi-fi signal.  But be careful.  Anyone can pinpoint your physical location and monitor your activity on an unencrypted network.  In the United States, monitoring an unencrypted network is perfectly legal, because wiretapping laws don’t prohibit monitoring an electronic communications system that’s “readily available to the general public.”  To protect yourself, always use a VPN to connect to the Internet.

Don’t try to catch up on e-mail or the latest postings from your friends on Facebook.  Your adversary may be monitoring these accounts.  Instead, set up new, anonymous, e-mail and social networking accounts.  Do NOT post face pictures.  Face recognition software can instantly tie you to your new account.  Again, use these accounts only to establish your new existence.  Your adversary will be monitoring any effort you make to contact your friends or family.

Keep your new location a secret, especially when you first go on the run.  Once you manage to establish yourself somewhere, you can turn to the problem of communication with friends and family.  The first consideration is trust.  If you aren’t 100% sure you can trust someone after you’ve disappeared, don’t re-establish contact.

For people you know you can trust, the safest way to communicate is via first-class mail.  Don’t mail anything that might be postmarked in your new location.  Instead, send the letters to a mail receiving service in another state—or even another country—to be re-mailed with a local postmark.  Put the mail receiving service’s return address on the letters.  Avoid FedEx or other private carriers that keep a record of your shipments.

In the envelope, include instructions on how to log on to an anonymous e-mail account you’ve set up for each contact.  Each contact can respond from that account to one of your anonymous e-mail addresses.

And if you don’t need to disappear?  You can still lower your profile to theft, lawsuits, and the government by using common sense, remarkably simple, often inexpensive, and perfectly legal techniques.  As privacy becomes more engrained in your thought process, you’ll no doubt discover other ways to limit disclosure of data that might reveal more about “you” than you’d prefer others to know.

It isn’t easy to achieve privacy in an age of global surveillance.  But with diligence and forethought, you can live a lower-profile life, and reduce, if not eliminate, everyday threats to privacy and property.

I’ve spent nearly 30 years refining these techniques.  If you’d like to learn more about them, I recommend that you consider purchasing my book The Lifeboat Strategy—or sign up for a personal consultation.  You can learn more about The Lifeboat Strategy here.  Contact me at info@nestmann.com if you’re interested in a personal consultation.

Copyright © 2013 by Mark Nestmann

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Snowden’s last known location was a hotel in Hong Kong.  He’s now in an undisclosed location, but presumably remains in Hong Kong.

U.S. authorities have several options to retrieve the 29-year-old Snowden to face trial in the United States for unauthorized release of data, and possibly, for violations of the Espionage Act.  The two options that the media has highlighted are extradition or a revocation of his U.S. passport.  Both options would require U.S. authorities to first file criminal charges against Snowden and secure the cooperation of Hong Kong officials.

Another option would be for the United States to kidnap Snowden.  The Supreme Court has upheld the practice of kidnapping individuals from foreign countries and bringing them against their will to the United States to stand trial.  I view this as a less likely option due to the “clout” of Hong Kong’s political master, the People’s Republic of China.

In an interview with The Guardian newspaper, Snowden says that he will fight extradition from Hong Kong.  However, Hong Kong has an extradition treaty with the United States and tends to comply with U.S. extradition requests.  Snowden is apparently counting on clauses in the extradition treaty giving Hong Kong the right to refuse to extradite a criminal suspect under certain conditions.

One exception is if the crime or crimes for which Snowden is eventually charged as criminal conduct aren’t considered criminal conduct in Hong Kong.  This “dual criminality” provision appears in almost all extradition treaties.  In addition, the U.S.-Hong Kong treaty, along with most other extradition agreements, contains an exemption for crimes considered political crimes.  Some examples of political crimes are treason, espionage, disclosing classified material, failing to register as a foreign agent and violating sanctions and embargoes.

Two cases come to mind under this exemption: Phillip Agee, a former CIA agent who disclosed the identity of other agents in the 1970s, and Bobby Fischer, the chess champion who violated sanctions against former Yugoslavia by playing a chess match there in 1992.  The United States ultimately failed to extradite Agee from the Netherlands (and several other countries), or Fischer from Iceland, based on the political crimes exception to the relevant extradition treaties.

I believe Snowden’s case would likely fall under the political crime statute of the U.S.-Hong Kong extradition treaty.  Any extradition request would be difficult, complicated, and probably ultimately unsuccessful.

However, if Snowden succeeds in fighting extradition from Hong Kong, the United States can revoke his passport.  It’s also possible that because of the likely difficulty of extradition, U.S. authorities will simply revoke Snowden’s passport and demand his return, and bypass the extradition option entirely.  The most likely procedure would be for the Justice Department to issue a criminal complaint and present it to the State Department along with a request to revoke Snowden’s passport.  Notice of the revocation, meaning that the suspect would then be illegally in the country, would be sent to Hong Kong authorities who could then deport Snowden back to the United States.

There are numerous other circumstances under which U.S. authorities can revoke your passport, or refuse to renew it:

• If a federal or state court has ordered you not to leave the United States
• If another country has requested your extradition
• If you owe more than $2,500 in delinquent child support payments
• If doubts arise about the legitimacy of your birthplace or naturalization as a U.S. citizen.

Even if none of these criteria apply, the list of reasons for the United States to confiscate or non-renew your passport may increase in the years ahead:

• In 2011, the State Department proposed a new “Biographical Questionnaire” that, if approved, you might have to complete to receive or renew your U.S. passport.  Among numerous other intrusive questions, the State Department wanted to know “if there were any religious or institutional recoding of your birth or event occurring around the time of birth (Example: baptism, circumcision, confirmation or other religious ceremony).”
• The 2012 Highway Funding Bill eventually signed by President Obama originally contained a provision, later removed, that would confiscate the passport of anyone with a “seriously delinquent tax debt.
• Are you “engaging in, or purposefully or materially supporting, hostilities” against the United States?”  If you are, a law proposed in 2011 would revoke both your U.S. passport—and your U.S. citizenship as well.  The proposal would eliminate the requirement that U.S. citizens can lose their U.S. citizenship only if they demonstrate their intent to do so.

The only way that Snowden or any other U.S. citizen facing passport revocation and involuntary relocation to the United States can prevent that outcome is with a valid citizenship and passport from another country.  This is how Phillip Agee and Bobby Fischer ultimately avoided extradition and deportation to face politically motivated criminal charges in the United States.

I don’t know if Snowden has a second passport, or not.  I certainly hope so, because I regard his actions to reveal the extent of U.S. surveillance to the world to be nothing less than heroic.

Since the United States uses passport non-renewal as a weapon against political enemies, it only makes sense to obtain a second nationality and passport, “just in case.”

If you don’t qualify for a second passport by virtue of your ancestry, marital status, religious background, or naturalization, you can obtain “economic citizenship” in a matter of months from a selected number of countries in exchange for a contribution or investment.  Total expenses for this option range from $130,000 to more than $3 million.  The Nestmann Group, Ltd. can assist individuals seeking a second passport in this manner in the Commonwealth of Dominica, St. Kitts & Nevis, and in selected EU countries.  Please contact us for more information.

Copyright © 2013 by The Nestmann Group, Ltd.

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By way of background, Nevis is an island located 225 miles southeast of Puerto Rico.  It’s part of the Federation of Saint Kitts & Nevis that achieved independence from Great Britain in 1983.

The Nevis LLC ordinance came into existence in 1995. Today, it is undoubtedly the most popular non-U.S. LLC in the world for reasons I’ll describe in a moment.

In common with an LLC formed in a U.S. state, a Nevis LLC comes into existence upon the filing by a local agent. (One of The Nestmann Group’s affiliate companies is a local agent in Nevis.)  The owners of a Nevis LLC are called “members.” If the Nevis LLC carries out its business outside the Federation of St. Kitts & Nevis, its income isn’t subject to local tax, although it may be taxed in the residence country of its members.

Any LLC—including a Nevis LLC—protects its assets and operations from creditor claims against a member by limiting the remedy available to creditors to a legal concept called the “charging order.” Under the charging order concept, creditors of members of the LLC don’t generally have the right to force the business to liquidate, or to seize the interests of the liable member or members. Creditors only have the right to receive future distributions made from the business to the liable member.

In theory, even with a charging order in place, an LLC can carry on its business and even enter into new ven­tures and business activities without being hindered by a creditor.  Non-liable members can receive monies from the LLC as advances, loans, or other benefits not classified as a distri­bution.  Liable members can receive these benefits as well, although a creditor may be able to attach them.

The problem is that with LLCs formed in a U.S. state, results-oriented judges have found ways to bypass charging order protection and attach the membership interest of LLCs. This problem is particularly acute in single-member LLCs, or when the liable member declares bankruptcy.

Nevis LLCs don’t suffer from these problems. Under the laws of Nevis:

• Judgments outside Nevis against Nevis LLCs or their members or managers aren’t automatically enforced.  To enforce the judgment in Nevis, the creditor must first retain a Nevis attorney, who under local rules may not work on a contingency basis. That means the creditor is paying legal fees from day 1. The creditor must also post a cash bond with the local court to cover any damages or court costs incurred as the result of any counter claim the debtor may be awarded. Nevis is also a “loser-pays” jurisdiction; the prevailing party in litigation is generally entitled to have its legal fees reimbursed by the loser.

• The “charging order” is the exclusive creditor action permitted against a Nevis LLC or its members. Creditors only have the right to receive future distributions made from the business to the liable member. They have no right to interfere in the business or to foreclose on the ownership interest of the liable member. Indeed, Nevis has no winding-up mechanism for LLCs, making the charging order truly the only way creditor can recover assets from a Nevis LLC.

• Only the LLC may be named as a defendant in any suit.  A lawsuit against a Nevis LLC that also names its members or managers as defendants may be dismissed.  This procedural requirement makes the process required to attach the interest of a member significantly more difficult.

• Proof of receipt of membership interest defeats a fraudulent conveyance claim.  Under Nevis law, the transfer of assets to an LLC is not considered a fraudulent conveyance as long as the transferor receives a corresponding equivalent membership interest in the LLC.  This doctrine holds true to defeat all creditors even if the creditor’s attack is based upon the LLC’s status as a single-member LLC.

• An enhanced burden of proof is required to prevail in a fraudulent conveyance action against a Nevis LLC. Local law requires proof “beyond a reasonable doubt” that a transfer was fraudulent for a creditor to prevail in a fraudulent conveyance claim.

• Procedural rules discourage frivolous litigation. In the unlikely event that a Nevis court finds your transfer of money or property to a Nevis LLC fraudulent, it will be set aside only to the extent necessary to satisfy actual damages (not punitive damages) suffered by a particular creditor. Moreover, each creditor must bring a separate action in the local court.

I could go on, but hopefully you get the idea. The Nevis LLC truly is a state-of-the-art asset protection entity.

What about taxation? A Nevis LLC is what is known in the tax world as an eligible entity for U.S. entity classification purposes. Eligible entities are able to choose how they will be treated by the U.S. for tax purposes. This gives U.S. members in a Nevis LLC an enormous degree of flexibility on how they choose to have its income taxed.

For instance, if you’re looking to protect a portfolio of passive assets within a Nevis LLC, you’ll probably want to choose to have it taxed as what the IRS calls a “disregarded entity” (if the LLC has only one member) or a “partnership” (if it has more than one member). On the other hand, if you’re a business owner operating a business outside the United States, you may choose to have your Nevis LLC taxed as a “foreign corporation.” This allows you to defer paying tax on your non-U.S. business profits.

The Nestmann Group, Ltd. charges $2,500 to create a Nevis LLC, complete with articles of organization, a customized operating agreement, and a 30-minute consultation with a one of our partners to select the appropriate choice for how the entity will be taxed. This payment covers all government fees for one year along with the right to consult our partners to answer questions relating to the proper use and operation of the entity.

For the month of June, we’re reducing this fee to $1,950. This is an outstanding opportunity for anyone whose personal or business activities could benefit through the use of a state-of-the-art offshore business entity. To get started, please contact us at +1-602-604-1524 or at info@nestmann.com.

Copyright © 2013 by Mark Nestmann

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Consider the recent case of Sumner Redstone, the Viacom chairman who failed to report a taxable gift to his children (this due to a disagreement in classification—Redstone maintains the gift was an “ordinary business transaction”). This happened in 1972, and nobody looked twice at it for 40 years. Then, just a few months ago, the IRS decided he owed $1.1 million in penalties and interest. All for an old error that everyone except the IRS had forgotten about.

The omissions don’t have to be deliberate. They can be as simple as missing certain forms (or filing the wrong ones), miscategorizing transactions (according to you-know-who’s standards), or misplacing a decimal point along a string of zeroes. Taxpayers with international interests have even more to worry about, thanks to the 2010 FATCA law, which expands requirements for foreign financial assets, and ensures that failure to do so subjects your return to an unlimited statute of limitations—meaning the IRS could come back to haunt you with an audit anytime they way, even decades later.

In short, any number of loopholes now leave the statute open-ended for the IRS. It’s how they write themselves a blank check with your money. And it makes amending old returns (with professional help) more important than ever.

In our business, I’ve heard plenty of people say they don’t want to go back and fix old errors, that omissions from five years ago are safely in the past. But it’s not just Sumner Redstone paying for the IRS’s new tenacity. According to recent reports, IRS investigations were up 9% from 2011 to 2012, and filings of indictments and other charges were up 13%. Even now, the IRS may be taking a good, hard look at your past. I recommend that you do the same.

The post No Statute of Limitations for Failing to File U.S. Tax Returns appeared first on The Nestmann Group, Ltd..

If this link doesn’t come through, you can always download the latest updates to this book by going to our home page at http://www.nestmann.com and clicking on the image of The Lifeboat Strategy. That will take you directly to the updates.

Even if you haven’t purchased The Lifeboat Strategy, I think you’ll find the updates a helpful summary of recent developments in civil liberties, loss of privacy, offshore developments, etc. As always, I welcome your comments.

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The United States is one of only two countries that taxes citizens or permanent residents wherever they reside, including an estimated six million Americans living outside the country. (The other country, incidentally, is Eritrea, a single-party dictatorship.)

Citizens or permanent residents of every other country end their obligation to pay income tax after a sustained period of non-residence from that country, generally one year or longer. This won’t work for those with U.S. nationality. To end U.S. tax liability on their worldwide income, they must not only leave the United States permanently, but also give up their U.S. citizenship and passport. In most cases, simply leaving the United States also doesn’t relieve long-term U.S. residents from worldwide taxation—they must formally give up their green cards.

Did expatriation really increase by more than a factor of 12 over the first three months of 2013? Not likely. What’s more likely is that the IRS forgot to publish the names of some of 2012’s expatriates, so it simply moved them to 2013.

Wild variations in the official numbers of expatriations the IRS publishes are nothing new. Official expatriations dropped by more than half from 2005 to 2006, and then more than doubled from 2009 to 2010. Quarter-by-quarter variations are even more extreme. For 2012, first-quarter expatriations totaled 460, verses just 45 in the last quarter.

Given these extremes, it seems reasonable that the official statistics compiled by the IRS don’t reflect the actual totals of Americans giving up their citizenship or long-term residence. Indeed, they appear to be much higher.

• According to the FBI, 4,385 Americans renounced citizenship in 2012. That number only counts persons renouncing U.S. citizenship. That’s one option for giving up U.S. citizenship, but you can also relinquish U.S. citizenship. The FBI statistics also don’t include abandoning long-term U.S. residence.
• A news article in the South Korean media states that 2,158 of their citizens gave up U.S. passports or green cards in 2011. If these statistics are accurate, then more people expatriated from a single country in 2011 than appear on the official IRS list for the entire world for that year.
• The Swiss news media reports that for the first three quarters of 2012, a total of 411 individuals expatriated at the U.S. consulate in Berne, Switzerland. If reconciled with the official IRS statistics, this would mean that Switzerland alone accounted for over 40% of the total expatriations in 2012.
• Numerous public figures never appear on the official IRS list. They include Ukraine’s former first lady Kateryna Yushchenko (2007); Jamaican politicians Daryl Vaz (2008), Michael Stern (2009), and Danville Walker (2011); Hong Kong actors Jaycee Chan (2009) and Erica Yuen (2012); and Korean actors Yoo Gun (2011) and Yoo Seung-chan, among other examples.

Why are the IRS numbers so low? I don’t know, but just based on the FBI statistics, I think a more realistic number of individuals expatriating is probably at least 10 times the figure official IRS statistics report. That would mean close to 10,000 Americans give up citizenship or long-term residence annually. If the South Korean statistics are accurate, the numbers could be even higher–perhaps 50,000 or more annually.

Less important than the number of persons giving up U.S. citizenship or green cards is why they do it. Tax is one factor, but several non-tax factors make it increasingly difficult for U.S. citizens or permanent residents to live outside the United States.

A case in point is the overwhelming compliance burden U.S. taxpayers living overseas face. The information reporting regime they face is complex, overlapping, and constantly evolving. Even minor violations are subject to draconian penalties. Take for instance, the ubiquitous Treasury Form TD F 90-22.1, the “foreign bank account reporting form.” Fail to file this form and you could face a five year prison term and a $500,000 fine. True, sanctions typically are much less severe, but many other mandatory disclosure forms exist, all of them easy to miss, and all with significant penalties for non-compliance.

U.S. laws also force foreign banks and other financial institutions to enforce U.S. tax and reporting rules with respect to their U.S. clients. If the banks fail to do so, they face a 30% withholding tax, starting in 2014, on many types of U.S. source income, and possibly on other capital transfers. In many cases, it’s easier for foreign banks to “fire” U.S. clients than deal with this risk.

The upshot is that many Americans, especially those already living outside the United States, have decided that their U.S. citizenship or permanent residence is more trouble than it’s worth.

Clearly, the decision to turn in your U.S. passport or green card is a big one. It requires that you acquire a second passport, if you don’t already have one. It also requires that you live permanently outside the United States, if you don’t already do so. And, if Senators Bob Casey(D.-Penn.)  and Chuck Schumer (D.-N.Y.) have their way, wealthy expatriates would be banned from ever returning to the United States. Congress declined to pass this proposal in 2012, but you can count on its re-introduction. Expatriates don’t get a lot of sympathy on Capital Hill–or on Main Street, USA.

If you think you’re a possible candidate for expatriation, The Nestmann Group, Ltd. can assist you in every step of the process, as we have for dozens of former U.S. citizens or long-term residents. We can help you acquire a suitable citizenship and passport, choose a country in which to acquire permanent residence, and assist with every phase of your expatriation. And if you’re not ready to expatriate, we can help you take advantage of tax breaks in the Tax Code that apply to U.S. citizens and permanent residents living overseas. Contact us today for more information at info@nestmann.com.

Copyright © 2013 by Mark Nestmann

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The simple and persuasive reason is that this country offers an excellent quality of life as well as a safe and healthy environment. In fact, Austria boasts one of the highest standards of living of any country in the world. The Mercer Consulting group, in particular, has ranked Vienna, as the city with the world’s highest quality of life for the past three years running.

Note that Austrian residency and citizenship bring other, more practical advantages. Austria is one of 25 European states that are part of the “Schengen agreement.” A resident or citizen of one Schengen country enjoys visa-free travel to all other Schengen countries.

In addition, an Austrian passport has a very good global reputation, thanks to its neutral political position and skillful foreign policy in recent decades. After gaining independence in 1955, Austria has maintained friendly relations with both East and West. Together with Switzerland, it has emerged, therefore, as a traditional point of global neutrality. In 1979, the United Nations opened a regional headquarters in Vienna at the “Vienna International Centre.”

In short, Austria is one of the best places in the world to spend time. As a result, it does not need to work to try to attract foreign residents and would be at the top of any list of countries that are very demanding when it comes to granting foreign residency or citizenship.

Immigration is difficult, and the longer you would like to reside in Austria, the more complicated it becomes. It is easier to gain permission to spend only a limited time in Austria for a defined reason. This kind of permit, usually linked to a special purpose, such as studying, working only for a season of the year, or preparing a special project, is called a “sojourn.” On a “sojourn,” you would not be permitted to stay in Austria permanently and would not quality for citizenship.

People who might typically apply for sojourn status include artists, journalists, scientists, au pairs, and students.

Two Paths to Residence

Citizens from most EU countries and Switzerland have the automatic right to take up residence in Austria under the following conditions:

• If employed or self-employed in Austria, or have sufficient means to support themselves and their families without relying on the social assistance system or claiming compensation allowance, or
• The primary purpose of their stay is to complete their studies including vocational training at a legally recognized Austrian university or educational facility.

For persons from non-EU countries, there are only two possibilities to qualify for longer-term residence in Austria:

1.)  Private means. In 2006, Austria brought a new law, the “Niederlassungs-und Aufenthaltsgesetz,” into force. This law has been amended several times since it took effect, which makes it difficult for anyone other than Austrian immigration specialists to keep up.

This option is available to pensioners or people with sufficient means to support themselves living in the country, and who have a clean criminal record. The applicant must file in person with all required personal documents. The process takes approximately six months if all documents are in order and the applicant can meet all other legal requirements.

Once residence has been granted, it must be renewed every year. After five years of residence, the permit will be issued on an unlimited basis. To obtain this unlimited permit, it is necessary to demonstrate some degree of proficiency in German. The law requires fulfillment of level B1 of the European reference guidelines for languages. Most language schools in Austria offer a test to demonstrate proficiency at this level, which represents an intermediate level of fluency.

Individuals unable or unwilling to learn German who have a high school or university diploma can obtain a three-year permit. This means well educated foreigners can now live in Austria without having to prove any language skills in German!

2.) Key Manager. It is possible to obtain residence more quickly than by Private Means by becoming a Key Manager of an Austrian-based company. This permit includes not only the right, but also the duty to work. The estimated time frame for the processing of this application is three months. The application process is similar to that of Private Means. The only real difference is that the public employment service has to make a determination as to whether the applicant is a Key Manager or not.  The renewals process is the same as for the Private Means visa.

Becoming an Austrian “Civis”

Under both options, after 10 years residence, it is possible to apply for Austrian citizenship and subsequently receive an Austrian passport. To qualify, the applicant must pass a simple exam demonstrating German language skills (although this requirement may be waived in some circumstances) and answer basic questions regarding Austria’s history, constitution, and geography.

In addition, the applicant must demonstrate:

• Permanent legal and uninterrupted residence in Austria for a minimum of 10 years, or a minimum of five years with an unlimited residence permit. In exceptional cases (and for EU citizens) only six years of residence is required. In some cases, a permanent stay of 15 or 30 years is necessary.
• Integrity as demonstrated by no judicial condemnation, no pending criminal action (either in Austria or abroad), and no severe administrative offenses
•  Self-sufficiency as demonstrated by proof of one’s own fixed and regular earnings, judicial claim to maintenance, or insurance benefits for the three years preceding the decision to grant citizenship
• Positive attitude towards the Republic of Austria and demonstrate that the applicant poses no danger for the public peace, order, and security of Austria
• No current prohibition of residence (in Austria or any other EU country) or pending process that would terminate residence at the end of the current residence period.
• No eviction order within the last 12 months
• No close relationship to any extremist or terrorist group
• No involuntary loss of previous citizenship
• Finally, the applicant’s acquisition of Austrian citizenship must not significantly affect Austria’s international relations or harm its interests.

The law provides a two-stage assessment according to § 10 StbG (Austrian Citizenship Act):

1.) The meeting of the general conditions as the first step

2.) Right of discretion. This right provides Austria authorities the ability to reject an application even if the requirements of Part 1 have been met. Only after successful completion of both steps will Austrian citizenship be awarded. Austria does not allow dual citizenship, so applicants must give up their current citizenship once they become Austrian.

Immediate Citizenship in Austria

The award of Austrian citizenship in accordance with § 10 Section 6 StbG is a privileged naturalization that waives many of the otherwise necessary conditions for naturalization. For instance, applicants qualifying under this section are not required to have 10 years of continuous residence in Austria.

The Citizenship Act of 1965 stipulates that citizenship should be granted under § 10 Section 6 StbG only if the applicant can demonstrate extraordinary achievements in the interest of the Republic. If the Council of Ministers confirms the achievement, and all other requirements have been met, Austrian citizenship is granted after the applicant swears an oath to the Republic of Austria.

While a period of extended residence is not required under § 10 para 6 StbG, an applicant for citizenship under this section still must satisfy other requirements:

• Integrity as demonstrated by not being condemned to a sentence, not having committed any serious crimes, or having a residence prohibition in Austria;
• The international relations of Austria must not be significantly affected by the applicant’s naturalization
• The applicant is truthful to and of no risk to the public peace, order, and security of Austria.
• The foreigner is not in a relationship with a foreign state that might damage the interests of Austria.

“Extraordinary achievements” is an undefined legal term. In general, though, extraordinary economic, scientific, or artistic efforts as well as extraordinary achievement in sport may qualify. Here are some brief examples of achievements that have qualified the applicant for Austrian citizenship:

• Economic achievement. Saudi Arabian Mohamed Bin Issa Al Jaber invested millions of Euros in Austrian real estate and the national Austrian airline, and created hundreds of new jobs.
• Scientific achievement. In 2006, a well-known Asian stock specialist and internationally known trader was naturalized. His scientific achievements as a journalist and television broadcast were shown to be of an overriding interest to the Republic of Austria.
• Artistic achievement. The Russian opera singer Anna Netrebko became Austrian in 2006.
• Sports achievement. Numerous foreign sportsmen have become Austrian citizens based on this provision, including Hugo Simon, Emese Hunyady, Ivica Vastic, Mirna Jukic, and Kate Allen. An outstanding athlete may be naturalized very quickly, sometimes within only two or three months.

Changes Ahead

The Austrian citizenship law continues to evolve. Currently, the government is considering naturalization of foreigners after six years of residence if they can show a high level of integration. Such a level could be shown by having done charity work, for example.

In conclusion, if you are interested in quality of life above all else, then you should place Austria at the top of your list of places to consider establishing residency and, perhaps, gaining citizenship.

Copyright (c) 2013 by The Nestmann Group, Ltd.

(Immediately upon graduation from law school in 1996, Dr. Gabriela Kleeber started working in a law firm specializing in Austrian immigration law. In 2008, she completed post-graduate studies in Austrian citizenship law. Dr. Kleeber specializes in immigration and citizenship matters in Austria and throughout the European Union. She also operates the Vienna representative office for The Nestmann Group, Ltd. and can assist qualified applicants in obtaining legal residence in Austria.

The Nestmann Group, Ltd.
c/o AVENTA Consulting Services Ltd.
Representative Office
Hertha Firnbergstrasse 9/311
1100 Vienna, Austria
Tel.: +(43) 1 587 57 95 60
Fax: +(43) 1 587 57 95 26
E-mail: drkleeber@nestmann.com)

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Thanks to a recent report from the General Accountability Office (GAO) urging the IRS to crack down even harder, this effort will likely soon expand. U.S. citizens or permanent residents with unreported offshore accounts face an increasingly high likelihood of discovery.

By way of background, a U.S. law with the misleading name of the “Bank Secrecy Act” requires all U.S. citizens—no matter where they reside—to report all foreign “bank, securities, or ‘other’ financial accounts” with an aggregate value exceeding $10,000. All U.S. permanent residents (green card holders) must also abide by the same requirements, even those not currently residing in the United States.

You make this report on Form TD F 90-22.1 (the “foreign bank account reporting” or “FBAR” form). Reporting is required even if the accounts contain only precious metals or other non-cash assets, or generate no income. The deadline for filing is June 30 for foreign accounts held the previous year. While this requirement has existed since 1970, only in recent years has the IRS started to enforce it vigorously.

The penalties for non-compliance with the reporting regime can be draconian. You can be fined $10,000 per unreported account for each year you neglect to file the FBAR, although the sanction for a “negligent violation” is only a $500 fine. The IRS may decline to impose a civil penalty if there was reasonable cause for the delay and you later reported the account. An exception may also apply you properly reported all income from the account(s) on your income tax returns.

If you “willfully” fail to file the form, you face a fine up to $500,000, loss of 50% of the value of the highest aggregate value of the accounts, and imprisonment up to five years. This may be easier to prove than you might think. A 2012 federal appeals court concluded that a U.S. person with an unacknowledged offshore account could be found to have willfully failed to declare that account merely by signing a U.S. tax return.

The IRS has long believed that hundreds of thousands and perhaps millions of Americans fail to file FBAR forms. Beginning in 2001, it carried out a series of initiatives to pressure U.S. offshore account holders into reporting these relationships. Simultaneously, it also sought to force offshore banks to disclose financial relationships with U.S. account-holders. For instance, in 2009, Swiss banking giant UBS AG agreed to pay a $780 million fine and turn over account details on thousands of U.S. depositors suspected of holding undeclared assets to the IRS.

At the same time, the IRS held out a “carrot,” if you will, in the form of a series of initiatives that offered reduced penalties and no jail time to U.S. taxpayers who voluntarily disclosed previously unreported offshore accounts. More than 39,000 taxpayers have participated in four such “voluntary disclosure” programs beginning in 2003, and paid more than $5.5 billion to the IRS for the privilege of not facing criminal penalties.

However, a much larger number of what the IRS calls “recalcitrant” account-holders chose another route. Instead of entering a voluntary disclosure program, they simply started reporting their foreign accounts, without paying penalties or interest. Such taxpayers avoid paying any delinquent taxes, interest, or penalties, unless audited. The IRS calls this practice “quiet disclosure.”

Evidence of an explosion in quiet disclosures comes from the fact the number of people filing FBAR forms nearly doubled from 281,000 in 2007 to 516,000 in 2010.  The GAO believes that the IRS may be missing efforts by these taxpayers attempting to circumvent paying the taxes, interest and penalties that would otherwise be owed. The agency has urged the IRS to examine closely these first-time filers for disclosure violations in earlier years. And, the IRS has promised to do just that. You can download the report here.

If you’re in this situation—or if you haven’t made any attempt to comply with these rules—consult with a qualified tax attorney (not an accountant). This arrangement provides attorney-client privilege for your discussions. The tax attorney can then retain an accountant to prepare the necessary returns, and decide whether you should participate in the latest voluntary disclosure initiative.

Copyright © 2013 by Mark Nestmann

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To complicate matters further, the U.K. has suffered from a “brain drain” in recent years, due to tax hikes on high-earners. Many bankers and hedge fund managers formerly living in London have taken up residence in Switzerland, Singapore, and Hong Kong, all countries with significantly lower taxes on high-earners than the U.K.

In response, U.K. immigration authorities have streamlined the rules to favor investors, postgraduates, and highly-skilled workers under a priority ”Tier 1” category in an effort to boost migration to the U.K. and by extension the U.K. economy. The U.K. is pitching for the brightest and best, and the richest, and there are surprising shortcuts to permanent residence for those able to invest sufficient funds. Under Tier 1, a points-based system that includes “graduate entrepreneur” and “exceptional talent” categories, there is also an “Investor” visa for “high- value migrants” which leads to permanent residence.

If you qualify, for the first seven years in which you’re resident in the U.K., you may elect taxation as a “non-domiciled resident.” This means that you pay U.K. tax on your non-U.K. income and gains only on what the Inland Revenue calls a “remittance” basis. In other words, you’ll pay tax on your foreign income and gains only to the extent to which you remit them over to, or receive them in, the U.K. After seven years of U.K. residence, you can still benefit from this system of taxation, but the rules make it much more expensive to do so.

For instance, under Tier 1, if you have £1,000.000 of your own money, or £2,000.000 in personal assets plus a loan of £1,000.000 from an authorised financial institution, and you invest the £1,000.000 in a regulated U.K. financial institution within three months of your arrival in the U.K., you can apply for permanent residence after five years of continuous residence. (This means no more than 180 days spent each year outside the U.K.)

There are significant “continuous residence” discounts under the Tier 1 (Investor) category if you have larger sums available to invest. If you’re prepared to invest £5,000.000, you can apply for permanent residence after only three years, and with £10,000.000, you’re eligible after only two years.

The funds invested must remain under your control in a U.K. financial institution during the qualifying period, but you can redeploy them thereafter—thereby theoretically providing a free pass to U.K. permanent residence status. Dependent family members also qualify for permanent residence. After five years of permanent residence, you and your family may apply for U.K. citizenship and passports.

A U.K. passport provides unparalleled freedom of movement for anyone seeking visa-free travel to European and Commonwealth countries, among many others. Any individual or company interested in a review of immigration or investment possibilities in the U.K. is welcome to contact our London office. Jonathan Chalmers, who heads up this office, is a former U.K. immigration official and is closely linked to the U.K. Visas network.

The Nestmann Group, Ltd.
100 Pall Mall
St James
London SW1Y 5NQ
Tel.: + (44) 20 7321 3771
Fax: + (44) 20 7321 3738
E-mail: london@nestmann.com

Copyright © 2013 by The Nestmann Group, Ltd.

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Customs pre-clearance isn’t a well-known concept, but it’s one you should know about.  I highly recommend this option if you’re visiting or returning to the United States from abroad, and your itinerary permits it.  It’s a much lower hassle way to clear customs than doing so in the United States.  Both U.S. and non-U.S. citizens are eligible to use this facility.

My most recent visit to the United States came in the course of a short trip to Europe, mainly visiting Switzerland and Ireland.  On my way to Europe and back, I transited the United States.  While we have direct flights between the Caribbean region and Europe (Air France, KLM, Virgin Atlantic, British Airways, Air Caribes and Caribbean Airlines all come to mind), I chose to transit the United States in order to see friends and family, as well to take advantage of some free upgrades due to my status with the airlines.  I was fortunate as I received upgrades on every flight except one, including both trans-Atlantic segments.

On my way to the United States from Ireland, I passed through U.S. Customs and Border Protection’s (C&BP ) pre-clearance facility in Dublin.   The C&BP officer swiped my (non-U.S.) passport, asked me a few basic questions, and asked me to identify my bag by a photo on another screen.  Once I did so, she clicked the “cleared” button, stamped my passport, and sent me on my way.  The entire process took no more than three minutes!

The pre-clearance concept is based on a treaty between the United States and the host country.  C&BP officials stationed in a pre-clearance country inspect passengers prior to boarding their flights to the United States to determine admissibility, accept declarations, and ‘even charge duties.   Since they’re stationed on foreign soil, the C&BP officials have very limited (if any) arrest authority and in my experience tend to be far more accommodating than customs officials at a U.S. port-of-entry.

Another benefit of pre-clearance is that it eliminates having to wait in long line-ups when you arrive in the United States.  The flight is considered a U.S. domestic flight for immigration and customs purposes.  That means when you arrive at your destination, you simply walk off the plane, pick up your luggage, and depart the airport, with no customs formalities necessary.

In my case, it worked like a charm.  Upon my arrival in the United States, I disembarked just as I would have for a domestic flight.  After a nice visit with my family, I was on another flight three days later to return to the Caribbean.

I gave up my U.S. citizenship (“expatriation”) more than a decade ago after acquiring citizenship-for-life and a second passport from the Commonwealth of Dominica.  It’s probably the best decision I ever made.  Among other benefits, I’m no longer subject to U.S. taxes on my worldwide income, and no longer have my tax dollars used to support drone attacks and what my colleague Mark Nestmann calls the “War on Everything.”

The Nestmann Group, Ltd. can assist you in every phase of acquiring a second passport from the Commonwealth of Dominica or the Federation of St. Kitts & Nevis, for a total cost beginning at around $130,000.  We can also assist in every phase of your expatriation.  To learn more about these important and potentially life-saving options, please contact info@nestmann.com.

Copyright (c) 2013 by The Nestmann Group, Ltd.

P.S. Don’t forget to tune in to my weekly radio show, “The Second Passport, Residency & Travel Hour,” at http://overseasradio.com.  The show airs every Tuesday live from 3pm-4pm EST.  You can download archives of my shows at http://overseasradio.com/2nd-passports-and-expatriation-report/.

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