The benefits of dual citizenship include less restricted travel between countries and the ability to access social services and engage in foreign political events. However, dual citizenship can also have some disadvantages depending on the countries in question, which is why it’s important to know the ins and outs before obtaining a second citizenship.
The United States is known for being a cultural melting pot and accepting people from all different backgrounds. But for some first-generation American citizens, living in a cultural melting pot isn’t enough. In this case, a U.S. citizen may apply for dual citizenship in another country.
However, while dual nationality can come with multiple benefits, it also comes with several disadvantages. Without acknowledging both sides of this process, you may not understand how to complete the process or how difficult it can be in some countries versus others. In this article, we’ll discuss the advantages and disadvantages of dual citizenship as well as what may be necessary to apply for it.
What is dual citizenship?
Dual citizenship means being a citizen of two countries at the same time. Each country sets its own criteria for citizenship, including what it entails to be a citizen and how to attain citizenship.
A person holding dual citizenship is entitled to certain rights that come with being a citizen of that country. These rights include the right to a passport, vote, own property, work, etc. There are also certain obligations tied to being a citizen of a specific country, such as a potential obligation for national service or taxation.
Benefits of dual citizenship
Even if you don’t travel much, there are multiple advantages to dual citizenship. Not only can you access social services from both countries, but you also have travel benefits and even the possibility to reduce taxes.
One of the forefront advantages of being a dual citizen is the ability to possess two passports. Dual citizens don’t need a visa in order to live, study, or work in a country where they have citizenship. By having a passport for a country, you don’t need a long-stay visa and you won’t be questioned extensively about the purposes of your trip during the customs process.
If you hold dual citizenship, you are able to access the social service privileges of two countries. For instance, you can travel to receive medical services, which might be of better quality or cheaper than your other country of citizenship. You can also receive an education at the same cost as domestic students.
As a dual citizen, you can fully participate in the political life of the countries where you have foreign citizenship. This means you can vote, stand in elections, and even make donations to political candidates.
As a dual citizen, you can own property in both countries. Some other countries only allow land ownership to citizens, and as a legal citizen of two countries, you can own land in both.
Those who travel often between their two countries of residence may find this particularly helpful as it allows them to have homes in both countries.
Potential to reduce taxes
Under United States tax laws, all U.S. citizens are required to pay taxes on their worldwide income. However, individuals looking to reduce their U.S. tax obligations can move abroad and claim Foreign Earned Income Exclusion (FEIE), which exempts a portion of their income from U.S. taxes. To completely rid yourself of United States taxes, you’ll need to renounce your U.S. citizenship entirely.
Regardless of which option you choose, becoming a dual citizen is an important step along the way. Whether you are claiming FEIE or renouncing citizenship entirely, you need a second passport so that you can spend unlimited time outside of the U.S. and find a residence in this new country.
Opportunities for business and investment
With a second passport, you can more easily access new markets and business opportunities. You can invest with ease in countries you have citizenship in and may also have an easier time investing in neighboring countries. Many investors consider obtaining dual citizenship in order to get early access to an emerging market.
Besides the financial and travel benefits, dual citizenship allows you to completely immerse yourself in the cultures of two different countries. Not only can this provide a more nuanced understanding of the world, but this process may also provide you the opportunity to learn a new language, which can open many doors professionally.
Disadvantages of dual citizenship
While there are many upsides to dual citizenship, there can also be some downsides depending on the country you’re looking to obtain citizenship from. As a dual citizen, you may have to meet certain citizenship obligations — such as taxation and military service — for both countries, which can be both time-consuming and expensive.
However, these downsides of dual citizenship are primarily preceded by poor planning. As long as you are aware of the risks and how to avoid them, you’re in good shape.
If you’re a dual citizen of the United States and another country, remember that the U.S. imposes taxes on income earned by its citizens anywhere in the world. Therefore, if you’re living in your country of dual citizenship that isn’t the United States, you’ll owe taxes to both the U.S. government and to the country where the income was earned.
Double taxation is a problem especially for those with American citizenship, as the U.S. is one of only two developed countries in the world (the other being Eritrea) that has its tax laws based on nationality. That being said, there are tax treaties between the U.S. and many countries that eliminate or reduce a person’s tax liability.
“The most common way to avoid double taxation on the same income is through Foreign Tax Credits. To put it simply, this enables you to pay taxes in the country where you reside and then use that same amount of money to decrease the taxes you owe to the U.S.,” says IRS Enrolled Agent and U.S. tax expert Kasia Strzelczyk at 1040 Abroad.
If you live in a country that has a tax treaty with the United States, you can reduce the impact of double taxation by taking advantage of tax reductions, exemptions and other benefits offered by the treaty. For instance, if you live in Canada, the U.S./Canada Tax Treaty clarifies the criteria used to determine your tax residency status in both countries, which helps to avoid disputes over which country has the right to tax your income.”
If you move out of the U.S., make sure you aren’t an “accidental American.” This happens when dual citizens are unaware of their U.S. citizenship, which often results in surprise tax obligations.
For example, if a U.S. citizen moves to another country and starts a family there, their children will have filing obligations to the IRS even if they never set foot in the U.S. In an effort to avoid double taxation, accidental Americans often chose to renounce their U.S. citizenship.
Barriers to employment
Another potential drawback of dual citizenship is the inability to attain some forms of employment. As a dual citizen, you may be overlooked for some U.S. government jobs or jobs that require access to classified information.
This is because having dual citizenship interferes with the security clearance required for government jobs and associated forms of employment. That said, individuals who were born into dual citizenship may encounter fewer problems than those who pursue it.
Potential military service obligation
If you are a citizen of both the U.S. and a country that has mandatory military service, such as Israel, you can potentially lose your U.S. citizenship under specific circumstances. For instance, you will lose U.S. citizenship if you serve as an officer in a foreign military that is engaged in war against the United States.
Though there are ways to serve without losing your U.S. citizenship, make sure to research this issue extensively before your service.
The complicated process of obtaining dual citizenship
Becoming a dual citizen can sometimes be a very lengthy and multi-step process. While it may be easy for some (like if you were born in another country where your parents were not citizens), it can be very complicated for others to go from a foreign national to a foreign citizen.
Here is a list of the benefits and drawbacks to consider.
- Easier to travel between countries
- Access to social services
- Can participate in foreign politics
- Potential to reduce taxes
- Opportunities for business and investment
- Cultural immersion
- Possibility for double taxation
- Barriers to employment
- Potential military service obligation
- Complicated process to get dual citizenship
How to obtain dual citizenship
The process of getting dual citizenship varies depending on the country you are seeking to obtain citizenship from. The shortest path to becoming a dual citizen is through birth, such as by being born in a country with birthright citizenship or by having parents with dual citizenship.
You can also obtain dual citizenship by marrying someone who is a citizen of a different country. Some countries also offer citizenship based on ancestry, requiring you to prove your ancestry through a birth certificate or ancestral records.
Is it worth having dual citizenship?
While there are several dual citizenship advantages, only you can decide whether the process is worth it. After all, obtaining dual citizenship can lead to double taxation or a loss of citizenship, which isn’t something foreign nationals need to worry about. So make sure to spend time looking into the laws surrounding foreign taxation and dual citizenship for both countries before making your decision.
Do dual citizens pay double taxes?
In some cases, dual citizens will need to pay taxes to both countries of citizenship. However, there are many income tax treaties between countries that effectively eliminate or reduce taxes if someone is a dual citizen. Consult a tax attorney for professional advice on how to avoid being taxed in more than one country.
What is the best country to have dual citizenship?
It’s difficult to narrow down a country that is “best” for having dual citizenship, as different countries have different benefits and risks.
However, there are many countries that have a relatively easier barrier to obtaining citizenship. These include St. Kitts and Nevis, Portugal, Grenada, Malta, and New Zealand, none of which require an extensive application process. Instead, you can become a dual citizen by financially investing in the country of choice.
Why do banks ask about dual citizenship?
Financial institutions ask customers about their country of citizenship for security reasons. This helps the U.S. government assess the potential domestic risks that can be associated with a foreign non-resident opening an account.
Can you travel with two passports?
Yes, you can travel with two passports. In fact, it’s advised that dual citizens travel with both passports. U.S. nationals are required to use their United States passport in order to enter and leave the United States.
- Dual citizenship comes with many advantages and disadvantages, which will differ depending on the country in question.
- Some advantages of dual citizenship include accessing social services and engaging in the political system of another country. You can also travel with ease between your two countries of citizenship without a visa.
- Some disadvantages of dual citizenship include possible double taxation, limited employment opportunities, and the potentially lengthy process of becoming a citizen in another country.
- There are many avenues to becoming a citizen in another country. Sometimes it requires living there for a certain amount of years, while other times it requires proving ancestry, marrying a citizen of the country, or just buying property in the country.
View Article Sources
- Dual Nationality — U.S. Department of State
- Foreign Earned Income Exclusion — IRS
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- What Is the Economic System in the United States? — SuperMoney
- Best Credit Cards for Foreign Students and Immigrants in 2023 — SuperMoney
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