Tax Implications of Citizenship by Investment: What Investors Need to Know

Published: 17 April 2025

Citizenship by Investment (CBI) has become a popular route for high-net-worth individuals looking for greater global mobility, lifestyle upgrades, or long-term security.

With a qualifying investment—often in real estate, government bonds, or a national fund—you can gain citizenship in countries like St. Kitts and Nevis, Antigua and Barbuda, or Malta.

But while second passports offer freedom, they can also raise questions—especially around taxes. What exactly are the tax consequences of becoming a citizen elsewhere? And how do you avoid surprises after you’ve already made the leap?

Let’s break it down.

Citizenship vs. Tax Residency: Not the Same Thing

First, it’s important to understand that citizenship and tax residency are two different things.

Citizenship gives you a legal identity in a country. It usually includes a passport, the right to vote, and access to certain government services.
Tax residency, on the other hand, is what determines where you pay taxes. It’s typically based on how much time you spend in a country, whether you own property there, or where your economic interests lie.

So just because you become a citizen of a country through investment doesn’t mean you automatically owe taxes there.

In fact, many CBI countries don’t require any physical presence at all—meaning you can gain citizenship without becoming a tax resident.

How Countries Tax: Citizenship-Based vs. Residency-Based

Most countries follow a residency-based tax model. If you live there for a significant part of the year (often more than 183 days), you become a tax resident and are taxed on your worldwide income.

However, there’s one major exception: the United States. The U.S. follows citizenship-based taxation, which means Americans must file tax returns and may owe taxes on their global income—regardless of where they live or earn.

If you’re not a U.S. citizen, the picture is usually simpler. You’ll only become liable for worldwide income taxes in a new country if you actually spend enough time there or meet other residency criteria.

Tax-Friendly Citizenship by Investment Jurisdictions

One of the draws of many CBI programmes is their favourable tax environment. Some countries specifically market their low- or zero-tax status as part of their appeal.

Here are a few examples:

St. Kitts and Nevis: No personal income, wealth, inheritance, or capital gains taxes.
Antigua and Barbuda: Also offers tax advantages with no taxation on worldwide income.
Vanuatu: No personal income tax, although its passport has more limited global reach.

These tax-friendly regimes can be great for global entrepreneurs or investors looking to simplify their financial obligations. But keep in mind that not all tax-free countries are treated equally by other governments or international financial institutions.

OECD Scrutiny and Transparency Concerns

The OECD (Organisation for Economic Co-operation and Development) has raised concerns about some CBI and residency-by-investment programmes.

Why? Because they fear such programmes could be used to evade taxes or obscure financial information. The OECD has even published a list of jurisdictions that might pose risks to tax transparency under the Common Reporting Standard (CRS).

As a result, banks and financial institutions are being encouraged to look closely at clients who hold citizenship in these flagged countries—especially if they don’t live there full-time.

So while a second passport can be incredibly useful, it’s important to understand how global tax authorities may view your new citizenship.

Double Taxation and Tax Treaties

If you live in one country, work in another, and hold citizenship in a third, your tax obligations can get messy. Fortunately, many countries have Double Taxation Agreements (DTAs) to avoid taxing the same income twice.

For example:

The UK has DTAs with over 100 countries, making it easier for investors to manage cross-border income.
The U.S., despite having many tax treaties, still taxes its citizens on worldwide income—so DTAs only offer partial relief.

Before acquiring a second citizenship, it’s wise to check whether your country of residence has a tax treaty with the CBI country. This can significantly reduce or even eliminate your risk of double taxation.

Case Study: U.S. EB-5 Programme

Let’s take a quick look at the EB-5 Immigrant Investor Programme in the U.S. This path offers permanent residency (a green card) in exchange for a qualifying investment.

Once you hold a green card or meet the Substantial Presence Test, you become a U.S. tax resident—meaning you’re liable for taxes on your global income.

You’ll also be expected to report your financial interests using forms like Schedule K-1, and potentially face withholding taxes on certain income. If you’re coming from a tax-free jurisdiction, this could be a major shift.

Smart Planning for Global Investors

If you’re considering a CBI programme, tax planning shouldn’t be an afterthought—it should be part of your overall strategy.

Here are a few smart tips:

Talk to an international tax adviser: Local rules can be complex, and the stakes are high.
Research your destination’s tax laws: Especially if you’re planning to spend significant time there.
Understand the reporting obligations: Whether it’s FATCA, CRS, or local forms, you’ll want to stay compliant.
Review your current and future residency ties: Things like owning property or having family abroad can affect where you’re taxed.

Final Thoughts

Citizenship by Investment opens doors—to better travel, lifestyle, and long-term planning. But with those opportunities come responsibilities, especially when it comes to tax.

Fortunately, with the right advice and a bit of planning, you can enjoy the benefits of second citizenship while keeping your tax profile in check.

Before making any commitments, speak to legal and tax professionals who understand both the local and global picture. That way, you’ll make informed decisions that protect your wealth—and your peace of mind.