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The demand for investment migration services –residency by investment (RBI) and citizenship by investment (CBI) – has soared in recent years. Industry insiders now estimate it to be a $25 billion annual market.

This market is thriving because both the countries with RBI/ CBI programs and the individuals that use them to acquire residency or citizenship benefit.

One of the easiest ways cash-strapped governments can increase revenues is by offering legal residency or citizenship to qualified foreign applicants. For instance, the St. Kitts & Nevis CBI program has helped the country reduce its debt-to-GDP ratio to 63%; down from 175% in 2008. (In contrast, the United States sports a debt-to-GDP ratio of 133%.)

Those acquiring residency or citizenship through investment migration programs also benefit. For instance, a citizen of Sri Lanka can only visit about 40 countries without a visa or visit with minimal visa formalities (e.g., acquiring a visa online or upon arrival). But once they acquire citizenship from St. Kitts & Nevis, their visa-free travel options increase dramatically, to nearly 160 countries.

The COVID-19 pandemic accelerated this trend. Public health measures taken to contain COVID-19 unleashed economic havoc across the world. Governments borrowed heavily to cushion the economic impact of lost jobs, tourist dollars, and export revenues. And even more countries began rolling out the welcome mat to self-sufficient migrants.

A key innovation was the digital nomad visa (DNV). Countries whose economies were dependent on tourism faced financial catastrophe during the COVID lockdown as airlines cut international flights and cruise lines shut down. This reality, along with the fact that the internet facilitates a mobile lifestyle, created the perfect conditions for countries to open their borders to COVID-free, self-sufficient migrants…but only for temporary stays.

The invitation to visit a prominent tourist destination for an extended period, with no or very few strings attached, was understandably very popular. Today, at least 30 countries offer some form of a digital nomad visa.

COVID-19 also underscored the importance of having the “right” citizenships and legal residencies. For example, when the pandemic began in early 2020, US citizens could travel to more than 180 countries visa-free or with minimal formalities. By August 2020, that number had shrunk to 86.

One reason, of course, was that many countries closed their borders completely in an effort to thwart the spread of COVID-19. Still, at that point in time, countries like Albania, Moldova, Serbia, North Macedonia, and even Ukraine offered their citizens a passport with better travel options.

Concurrently, the number of people in search of the “PT” or “perpetual traveler” lifestyle made famous by W.G. Hill’s book of that same title has increased rapidly. The centerpiece of the PT strategy is to create a lifestyle in which you pay little or no tax in any jurisdiction. To achieve this goal, you leave whatever high-tax jurisdiction in which you currently reside and then roam the world, never staying in one country long enough to become subject to any government’s taxing authority.

As you might guess, this strategy is easy to visualize, but much harder to actually achieve. And it’s impossible to accomplish (at least legally) for US citizens, who are taxed wherever they live, as if they never left the United States.

There’s a partial solution available in the form of the foreign earned income exclusion (FEIE), which allows Americans living full-time in a foreign country to legally exclude up to $112,000 of earned income from US tax annually. But the FEIE doesn’t apply to passive income. And you need to have a “tax home” in another country to qualify for it; i.e., another country that can tax your income on the basis of residence or other ties.

The concept of a tax home is also part of an initiative from the Organization for Economic Cooperation and Development (OECD) called the Common Reporting Standard (CRS). The CRS requires financial institutions to identify the tax home of their depositors so that information about their accounts can be shared with tax authorities in that country.

That requirement makes it difficult for citizens of countries that don’t tax on the basis of citizenship to become perpetual travelers. After all, if a country is your tax home, you generally need to spend most of your time there. And that requirement defeats the entire purpose of being a perpetual traveler.

Another problem for prospective PTs is that a growing number of countries apply a “closer connection” test to determine if a former resident has closer ties to another country. Consider a Canadian citizen who spends three months per year in Argentina, Italy, Antigua, and Canada, respectively. Even though they spend less than 183 days per year in Canada – the time ordinarily required to be subject to Canadian tax on their worldwide income – they don’t have a closer connection to any other country. Thus, they’re still considered tax-resident in Canada.

The sweet spot is a tax home in a country that taxes local income, not worldwide income – or that levies no income tax at all. And doesn’t require those who have a tax home in the country to live there most of the year. The Bahamas is such a country, so we anticipate renewed interest in Bahamian residency and its coveted “tax residency certificate.”

We can also visualize other enhancements for digital nomads and PTs. One is health care, which in many parts of the world isn’t up to modern standards. For non-emergency elective procedures, a DNV combined with a suite of services at a private hospital, could be an attractive option, especially for older digital nomads.

At the same time, the PT lifestyle is for many people a temporary one. Most of us eventually want a place we can call “home”; a fixed place of abode. And when we’re ready to make that transition, we can either return to a country where we hold citizenship or legal residency or opt for a new one through a CBI or RBI program.

Finally, while Americans face a unique challenge due to citizenship-based taxation, there’s rarely been a more opportune time for them to venture beyond their borders. The US dollar is trading at a 20-year high, equating to a sharply lower cost of living in almost every other country for those with a stable source of income in dollars.

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