Residency vs. Citizenship - Caleb Jones

There’s a lot of confusion regarding the difference between getting residency in a foreign land and actually getting citizenship. These are two very different things. More importantly, there is a huge difference in difficulty in getting these two things. It’s important to understand the difference.

Residency means you are allowed to stay in a country for the indefinite future without having to leave at a certain time and without having to screw around with some kind of visitor’s visa. It means you can come and go from that country as you please, and stay there, even live there, for as long as you like. The worst thing you’ll have to mess around with is to renew your residency (perhaps once every ten years), but this is usually a very easy thing to do and pretty painless.

Residency does not mean you are a citizen of a country. It also doesn’t mean you get a passport from that country, because you don’t. You are a resident of the country but you are not a citizen. The USA equivalent would be someone who has a green card (a residency card) but is not a citizen.

Citizenship is very different from residency. This means you are actually issued a passport for that nation and are considered a full-fledged citizen. You are able to come, go, and stay with no limits, ever. You are allowed to vote in elections, receive welfare services, and all other benefits of citizens, just as if you were born there. On the downside, you are also now subject to that nation’s tax laws and tax collection.

Citizenship, as I’ve discussed in many articles here before, is quite complicated to get if you weren’t born in that nation. It usually requires years of screwing around, paperwork, banking, financial cost, and travel.

Residency, on the other hand, is pretty easy for lots of nations. Here are a few examples:

  • Many Balkan countries (Serbia, Montenegro, Albania and Turkey) just require you to buy any real estate of any value, even if it’s just $3,000 US, and boom, you’re a resident.
  • Just about anyone can become a de-facto resident of Cambodia for just $250 for a forever-renewable one-year business visa (even if you don’t own a business).
  • In some South American counties, like Panama and Paraguay where I’m headed back to next month, you can get residency in just a few months as long as you go through a certain legal and banking procedure.
  • And so on.

Remember, that’s getting residency in these countries, not a passport.

To get your passport (citizenship), pretty much all countries will require you to get residency first, wait several years, then you might get a passport (though there are no guarantees, and the more third-world the country is, the more that’s true).

Exceptions to this are citizenship by investment countries, like many in the Caribbean, where you can essentially buy a passport if you’re willing to shell out around $200,000 or more. That’s the only way you can get around being a resident before being a citizen (with rare exception).

How Residency Ties Into Five Flags

As a quick review, five flags means you “live” in four or five counties:

Country A – Where you live but are not a citizen.

Country B – Where you have your passport, but don’t live and don’t have any assets.

Country C – Where you base your business entity.

Country D – Where you invest.

(Optional) Country E – Where you buy your stuff.

This means that residency is for your Country A and citizenship is for your Country B. Get a passport in a country, but don’t live there, and live in a country where you don’t have a passport, but possibly have residency.

I said “possibly” in there because if you are willing to be a little more mobile and travel a little more, you don’t need residency to live in a country. You’ll just have to leave there more often. Lots of guys live in places like Thailand on a three-month visa, and just go on an international trip every 89 days and return a little later with a new visa, effectively living in the country without ever getting residency.

Since one of the goals of five flags is to legally minimize taxes, taxation is also an issue. For example, in New Zealand most Westerners can easily get a six-month visitor’s visa (which is pretty easy to renew). You can then “live” in New Zealand by leaving the country every once in a while. However, if you stay in the country for more than 183 days in any 365 day period, New Zealand will tax your income even if it’s coming from outside the country. This is fine if you make sure you stay out of NZ for more than 183 days a year.

But what if you want residency there? You can get it, but you’ll have to stay in the country for many years and not leave very often while you do this. That means you’ll get dinged with their taxes. You’ll effectively pay a hunk of taxes as “payment” for your residency.

Since many other (mostly non-Western) nations don’t require this kind of thing, getting residency in a place like New Zealand probably isn’t worth it if your goal is to minimize your taxes (though one could certainly think of odd exceptions to this).

This is the kind of thing you need to think through in terms of your Country A (where you decide to live long-term); residency, citizenship, visa lengths, and taxes.

What I’m Doing

As I’ve talked about before, I’m getting residency in both Panama and Paraguay very soon; both residencies should be done by the end of this year at the very latest. That means I’ll be able to visit both countries whenever I want and stay there for as long as I want without ever having to leave and without ever having to screw around with a visitor’s visa. Then I will begin the multi-year process of getting citizenship in both countries, but that will take more time.

I’m getting residency mostly because it’s required for citizenship. But! I really like the fact that I will have a permanent flag planted in both countries, and can visit there and even live there if needed any time I want for the rest of my life. Maybe something horrible will happen to the Western world, or Asia, or in my life, causing me to move to Panama or Paraguay, or at least stay there for a few years. Unlikely to be sure, but it’s really nice on an emotional level to have that kind of back-up contingency plan in place. This is especially good in that I really like both Panama and Paraguay immensely (though for very different reasons, since they are two very different countries) and would happily spend time there even if I was never going to be a resident or citizen there.

I could even do something like purchase land, real estate, or even start little businesses in either of these countries (though that would technically violate five flags if I had a passport there since ideally, you don’t want assets in your Country B). It’s nice to have the option, and Alpha Male 2.0 is all about options.

Either way, I’ll have to re-visit both countries around once a year or so for the next several years to remain in compliance for citizenship. If I end up going more often (which is possible) I may even get a small apartment in Paraguay, which is extremely inexpensive.

I’ll spend about three weeks in Panama and Paraguay in late June to finalize my residency paperwork in both nations. I’m going to video document my entire trip to show you exactly what I’m doing and how it all works. Some of this video I’ll post on social media and this blog.

More coming soon on all of this. Much more.

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8 Comments on “Residency vs. Citizenship

  1. How important do you consider it to have more than one passport if I already live in a country different than the passport country and my passport country doesn’t tax me when not resident there?

  2. Still important as a backup plan in case something horrible happens with your country down the road. Which, if it’s located in North America or Europe, it will.

    If the USA didn’t tax worldwide income I would still get a second passport. This is also true if I lived in Canada or anywhere in Europe.

  3. How would you handle healthcare in a 5-flag situation?
    I’m thinking about two cases:

    1) Receiving care as a resident while not being a citizen
    2) if something happens to you while you are traveling internationally

  4. 1) Receiving care as a resident while not being a citizen
    2) if something happens to you while you are traveling internationally

    If you are a resident somewhere officially you either can or perhaps even have to get the normal health insurance package as everyone else living there – whatever that is.

    For travelling internationally it depends how much time you spend in the non residency countries. If its less than certain number of days you can buy some cheap package – around 50 bucks per year that covers you worldwide (maybe you even have that already with your credit card anyway). If its for longer periods youre gonna need some special insurance and its gonna be several hundreds of bucks per year.

  5. Citizenship is very different from residency. This means […] you are also now subject to that nation’s tax laws and tax collection.

    No, unless you’re talking about one of only two very backward countries: Eritrea and United States.
    Tax laws are almost always applied based on residency.

  6. How would you handle healthcare in a 5-flag situation?
    I’m thinking about two cases:

    1) Receiving care as a resident while not being a citizen
    2) if something happens to you while you are traveling internationally

    Google “international health care plans” or “Worldwide healthcare insurance.” Many options.

    I will do an article about international health insurance at some point.

    If you are a resident somewhere officially you either can or perhaps even have to get the normal health insurance package as everyone else living there – whatever that is.

    Yes, and sometimes you can get international options/riders attached to these plans.

    No, unless you’re talking about one of only two very backward countries: Eritrea and United States.
    Tax laws are almost always applied based on residency.

    Incorrect. They are often based on citizenship vs residency and/or the amount of time you spend in the country per 12-month period regardless of residency or citizenship. It’s not just about residency.

    You’re talking about a single tax issue; taxation on worldwide income regardless of where you live. I am not; I’m talking about all possible tax ramifications, not just one law.

  7. Caleb, for us in Canada, you say horrible things are coming.
    In which aspect and how horrible is this catastrophe gonna be?

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