Four Red Flags to Avoid When Pursuing Second Citizenship
By Parviz Malakouti-Fitzgerald, Esq.
(Red flag means stop and only proceed with caution)
If you’re considering applying for citizenship in a country with one of these red flags, hit the pause button, and talk to a professional.
Getting a second or third citizenship has a number of benefits that can change your life, and the lives of your descendants forever.
But it’s only fun when you don’t walk onto a hidden trap.
What’s far less discussed than the benefits is when you should consider passing on a given second citizenship. Of course, every country has its own specific benefits and drawbacks, but there are certain red flags that present issues that could affect you negatively as a citizen, even if you’re not living in that country. I am constantly on the look-out for these issues (among others) when advising my clients pursuing an additional citizenship.
They are laws that could have you in the mud puddle of a bootcamp, instead of on a white-sand beach chair with a cocktail umbrella. These are the four red flags to keep your eyes peeled for when pursuing second citizenship.
1. Mandatory Military Service
Pursuing dual citizenship is about adding freedom to your life, not coercion.
For some of us from countries such as the United States, Canada, or England, concerns about mandatory military service tend to not be a big issue. The U.S. hasn’t had a mandatory military draft for nearly fifty years since the last man entered the military through the selective service system on June 30th, 1973.
But that’s not how it works in many other countries.
To this day, many countries, such as Israel, Russia, Singapore, South Korea, Iran, and even Switzerland, still regularly impose mandatory military or civil service on their citizens. Even UFC superstar Chan Jung Sun had to bend the knee to mandatory Korean military service obligation. “The Korean Zombie” paused his fighting career at the height of his athletic prime in 2014 to complete a mandatory two year stint in the South Korean military.
(Fan favorite UFC legend, the Korean Zombie - Chan Sung Jung)
For Americans, this issue arises more often when considering citizenship by descent because most citizenships by investment (like the popular St. Kitts program) do not pose mandatory military service.
(Don't count on sightseeing trips with views like this if you're conscripted into a foreign military, even Switzerland's)
In some cases, these military obligations can be paused (e.g. Iran) or even entirely discharged with a payment (e.g. Turkey). In other cases, certain exceptions to service apply. If you’re thinking of applying for citizenship in a country that imposes military service, you should dig deeper to determine the chances the service obligation could affect you or your family. Make sure you talk to a professional who can guide you away from these pitfalls.
2. Citizenship-Based Taxation (Present or Future)
Most countries tax people based on residence in the country or a “territorial-based” based system.
However, the United States is not like that. American “persons” have reporting (and possibly payment) obligations to the IRS, regardless of whether they are resident in the U.S. or outside. This means the United States has a citizenship-based taxation system. Note that U.S. legal permanent residents, i.e. “green card” holders are also considered "United States persons" by the IRS.
(Tax considerations were likely part of the reason facebook co-founder, billionaire, Eduardo Saverin, renounced U.S. citizenship)
Do other countries have citizenship based taxation? Not really, but you may want to keep an eye on political bellwethers. Countries such as Argentina and Canada have entertained discussion of possible future citizenship based taxation.
If politicians in your target country are hot on the trot to tax your whole money pot, even if you’re not resident there, proceed with caution.
3. Prohibition on Renunciation of Citizenship
When thinking about “opting in” to a country by becoming a citizen, paradoxically, you should also consider opting out.
Taking a long view of the effects of citizenship on your family means considering the possibility of a day when you no longer want to be a citizen of that country. Over time, laws, culture and governments change drastically in countries. In thirty years, the country you obtained citizenship in might not be the same country you loved. Devastating societal change can even come overnight, as evidenced by the many revolutions of the last century.
What changes could cause you to want to renounce?
Consider if your country were to enact citizenship-based taxation laws (see above), or its citizens become the target of sanctions, or visa prohibitions as is happening to Russians right now. Perhaps your new country starts rigidly enforcing mandatory military service during a bloody war.
The bottom line is that stepping into a room without an exit door is a risk. If the country you are considering prohibits renunciation of citizenship by law (ex. Argentina), or has made it difficult, hit the pause button. Find out whether the country’s prohibition on renunciation is rigidly enforced, or possibly the subject of imminent change.
Low time preference thinking demands considering whether the “you” in 20 years will have the freedom to opt-out, if necessary.
(Exquisite Argentine steak seen here, for no other reason than because we've mentioned Argentina)
4. Economically Sanctioned Countries
Second citizenship is no fun if you’re sitting in the slammer because you broke sanctions law.
That’s why pursuing citizenship in a country that’s subject to heavy international sanctions is a red flag. This holds true especially for Americans pursuing second citizenship.
At present, the U.S. has sanctions preventing or severely restricting U.S. persons and companies from dealings with Venezuela, Russia, Iran, Syria, Cuba, and North Korea, as well as companies controlled by those countries. The U.S. Department of the Treasury’s Office of Foreign Asset Control (OFAC) publishes a list of banned entities.
Penalties for breaking U.S. sanction laws range from civil penalties to significant prison time. Becoming a citizen of one of these sanctioned countries doesn’t necessarily constitute an OFAC sanction violation, but you could mistakenly take steps in the act of attaining the citizenship that could put you on the wrong side of U.S. sanctions law. Two simple examples could be hiring a firm in that country to assist you in your application, or opening a bank account in that country.
Countries subject to international sanctions are a red flag. Contact a professional and proceed with extreme caution to keep your tuchus off prison concrete slab.
Other Country Specific Considerations
Lastly, if you’re considering becoming a dual citizen, remember there are other issues that might arise in your home country by attaining a second citizenship.
For example, becoming a dual citizen may affect your ability to get a government security clearance, or to run for elected office in your home country. Some countries, like Spain, require their citizens who naturalize abroad to make a declaration that they intend to keep their native citizenship (in Spain’s case, the declaration must be made within three years).
Adding an additional citizenship is only a blessing when you’re not also taking on a hidden liability that could come due in the future. At the Law Office of Parviz Malakouti, we use our years of citizenship and mobility law experience to help entrepreneurs and professionals responsibly acquire second and third citizenship.
The right citizenships for you.
Want to find out how you can also build a passport portfolio? Click here to book a private consultation with us.