Tax Residency vs. Citizenship: Understanding Global Tax Obligations for HNWIs

Published: 4 June 2025

If you’re a high-net-worth individual (HNWI) with assets or interests across multiple countries, chances are you’ve heard the terms citizenship and tax residency thrown around a lot. They sound similar, but they mean very different things—especially when it comes to your tax obligations.

Understanding the difference between the two could help you avoid double taxation, manage your global income more efficiently, and make smarter decisions about where you live and invest.

Let’s break it down.

Citizenship vs. Tax Residency: What’s the Difference?

Citizenship is your legal bond to a country. It gives you rights like voting, the ability to apply for a passport, and consular support abroad. You can acquire citizenship by birth, descent, naturalisation—or increasingly through Citizenship by Investment (CBI) programmes.

However, citizenship doesn’t always determine your tax status.

Tax residency, on the other hand, decides where you’re liable to pay tax. Most countries determine tax residency based on:

• How many days you spend in a country (e.g., the common 183-day rule),

• Where your main home or “centre of life” is, or

• Where your income is sourced.

Here’s the key: you can be a citizen of one country and a tax resident in another. Or in some cases, both at once.

Different Countries, Different Tax Models

Not all countries tax their residents and citizens in the same way.

Citizenship-Based Taxation

Only two countries tax based on citizenship:

• The United States, and

• Eritrea.

If you’re a U.S. citizen, you must file taxes on your worldwide income—even if you haven’t lived there for years. While there are exclusions and credits to help offset double taxation (like the Foreign Earned Income Exclusion), it’s still a major consideration for Americans abroad.

Residency-Based Taxation

Most countries tax people based on where they live. For example:

• The UK uses the Statutory Residence Test to determine tax status.

• Portugal offers the Non-Habitual Residency (NHR) regime, which gives new residents favourable tax treatment on certain foreign income.

• The UAE is a popular option for those looking for a tax-friendly jurisdiction, with no income tax for residents.

Planning with Investment Migration

Many HNWIs use investment migration to gain flexibility over both citizenship and residency.

Citizenship by Investment (CBI)

CBI programmes let you acquire a second passport by investing in a country. Some popular options include:

• St. Kitts and Nevis

• Grenada

• Dominica

These programmes often provide visa-free access to dozens of countries and can be tax-neutral—meaning getting a second passport doesn’t always mean new tax obligations. But be careful: regulators are watching for misuse, and it’s essential to ensure genuine ties.

Residence by Investment (RBI)

Unlike CBI, RBI gives you the right to live, not just hold a passport. These are great tools for tax planning:

• Portugal’s Golden Visa offers access to the EU and favourable NHR 2.0 tax treatment.

• Greece also has an attractive RBI scheme.

Many HNWIs use RBI as a way to shift their tax residency without necessarily changing citizenship.

Avoiding Double Taxation

One of the biggest headaches for international earners is double taxation—paying tax on the same income in two countries.

This is where Double Taxation Agreements (DTAs) come in. These treaties allow countries to share taxing rights fairly and usually provide:

• Tax credits for foreign tax paid,

• Exemptions on certain types of income, or

• Rules to determine which country has taxing priority.

If you live or invest abroad, check whether your countries of citizenship and residence have a DTA in place.

Compliance: Stay on the Right Side of the Law

Global transparency has come a long way. Today, banks and governments routinely share information through systems like the Common Reporting Standard (CRS). This OECD initiative allows more than 100 countries to automatically exchange financial account data.

In short: if you hold accounts, property, or income in multiple jurisdictions, assume your tax authorities know about it.

There’s also increasing scrutiny on investment migration programmes. Authorities want to see real presence—not just a passport or residence card. That means:

• Spending actual time in the country,

• Establishing local ties, and

• Avoiding artificial tax arrangements.

Real-World Scenarios

Let’s look at how this plays out:

• A U.S. tech entrepreneur in Dubai: Still has to file U.S. taxes, even if earning tax-free income in the UAE.

• A UK non-dom living in London: Can claim the remittance basis for foreign income, but this changes after 15 years of UK residence.

• An investor with CBI from St. Kitts: Gains global mobility but still needs to declare income in their country of residence.

So, What Should You Do?

If you’re a HNWI juggling multiple passports, properties, and income streams, it’s essential to:

• Know where you’re tax resident (and why),

• Use investment migration programmes strategically, not just for travel,

• Take advantage of tax treaties and special regimes, and

• Work with trusted cross-border advisers to stay compliant and efficient.

Final Thoughts

Citizenship is about who you are. Tax residency is about where you live and earn. Getting them confused can be expensive.

With careful planning, you can enjoy global mobility, maintain compliance, and optimise your tax exposure. But it’s never one-size-fits-all—especially when each country plays by its own rules.

Thinking of acquiring a second residency or passport? Make sure your tax strategy is part of the conversation.