Andrew Henderson with Nomad Capitalist did something extremely useful recently. His staff ranked every passport in the world from best to worst. They ranked them based on several factors, some of which I personally don’t care about. If you’re interested in the list, you can get it free here (and no, I don’t get paid anything to recommend this).
The passports are ranked based on visa free travel, taxes, dual citizenship, country perception around the world, and how free the country is (comparatively anyway, since there are no free countries). These are given different weights to come up with a total ranking as compared to others.
Since I will be following the Five Flags model, I will not be living in the country in which I will get my second passport (other than perhaps a few years just to get the damned thing), which I define as my “Country B.” Therefore, things like how free the country is (as just one example) doesn’t really matter much to me, provided the country isn’t overly authoritarian.
On the flip side, the most important issue to me is taxes, which I would “weigh” very heavily in my own decision making, probably more than Andrew does, since he’s more focused on things like travel, while I’m more focused on tax reduction and personal freedom.
So, to find the best passport for me, I imported the list into a spreadsheet and did some parsing and sorting. In terms of taxes, the passports are rated based on five categories:
1. Citizens are taxed on their worldwide income no matter where they live
2. Citizens may avoid taxation by moving overseas, but with difficulty
3. Citizens may avoid taxation by moving overseas, without much difficulty
4. Citizens are not taxed on foreign source income no matter where they live
5. Citizens are not taxed at all
Obviously, I will require a passport that is either class 4 or 5. A class 3 passport might work, depending on the country, but it’s less likely. My current USA passport is literally the worst kind there is in terms of taxation; I’m taxed on my income no matter where in the world live, even if I move away from the US and never come back. Because, you know, the USA is the Land of the Free™.
I isolated all the countries that were class 5; where citizens literally pay zero taxes, or at least zero income taxes. If you’re curious, they are:
St.Kitts and Nevis
United Arab Emirates
You can probably see the problem; most of these countries are authoritarian, middle eastern nations. Of this list, only the Bahamas, St. Kitts and Nevis, and Vanuatu (a tiny island nation off the coast of Australia) allow any type of dual citizenship. Getting a passport from any of these other nations would be either extremely difficult or impossible, and even if I pulled it off, they would likely require me to immediately renounce my US citizenship. I will do this someday, but I want to do it when I chose, not when my Country B chooses.
Next, I isolated the class 4 countries. These are countries that only tax you if you live there and receive income from other citizens there. Cool, now we’re talking. These are:
Dem. Rep. of Congo
As you can see, a much easier and more workable list. Some definite possibilities there. However, we’re not done. Many of these countries don’t allow dual citizenship, so they don’t count; I’ve marked those countries in italics. Some others don’t allow it, but don’t really give a shit and don’t enforce it. I’ve marked those in bold.
This leaves the following countries that would be the safest Five Flags second passport to get in terms of taxation only:
St. Kitts and Nevis
The ease of getting these passports for a Westerner is a different story. Some of these places are very hard to get passports, others are moderately difficult, and still others are easy if you give them lots of money. Neil Strauss got his St. Kitts and Nevis passport by buying a $250,000 house there. (Today they’ve raised it to $500,000; with more people fleeing their own countries, demand for this stuff has increased, and thus prices have too).
This list isn’t all inclusive either. There are many class 3 countries (citizens may avoid taxation by moving overseas “without much difficulty”) like Uruguay and Argentina that would work fine. Maybe I’ll examine those countries in a future post.
Lastly, this list also shows good prospects for Country A, where I would actually live. I must live somewhere that doesn’t tax international income at all. Some friendly countries are like this. Some other countries only tax international income if you live in the country for longer than six months (like New Zealand, unfortunately). Again, I’ll examine those aspects further in a future post.