Asset Protection BLOG - Mark Nestmann

For sale in Thailand: Girls, Guns,…and Fake Passports

If you've got the money, and know where to look, just about anything you want—legal or illegal—is available in Bangkok.

In recent years, Thai police have cracked down against trade in drugs, prostitution, and weapons.  But one of the most profitable industries—the manufacture of fake passports—remained relatively unmolested, until now.

On April 26, authorities in Thailand arrested Mohammed Karim, a Bangladeshi man living in Bangkok, along with more than 1,000 finished and unfinished Malaysian, Singapore, Japanese, and U.S. passports—all of them fake.  This amounts to the largest confiscation of fake passports in at least five years. 

Karim allegedly sold the passports to middlemen who in turn sold them to gangs engaged in prostitution, terrorism, and smuggling.  The price was as low as US$95 per passport.

Thailand has a long history of passport fraud.  In 2005, authorities shut down much smaller fake passport ring and confiscated over 100 counterfeit documents.  And now this.  It makes you wonder why the U.S. Government printing Office chose Thailand, of all places, as its chosen location to assemble its supposedly state-of-the-art, ultra-secure electronic passports.  (I wrote about this decision here.) 

Fortunately, none of the faked U.S. passports were of the new electronic variety.  But given the fact that the company that developed key aspects of the new passports has accused the Chinese government of stealing its patented technology, it may just be a matter of time.

In the meantime, if you look in the right place, you may be offered the opportunity to purchase a fake passport.  Should you receive such an offer, don't take it.  If you're caught with a fraudulent passport, you could face not only loss of that document, but fines and imprisonment.

Fortunately, you have several options to obtain a legitimate second passport.  If you don't qualify on the basis of extended residence, ancestry, or marriage for a second passport, you can purchase a legitimate passport in exchange for an investment.  The Commonwealth of Dominica and the Federation of St. Kitts & Nevis are the only two countries that provide a legal mechanism for you to apply for economic citizenship, and, upon qualifying, make an investment in return for a passport.  (Click here to read more about these programs).

I'll be discussing economic citizenship programs at The Sovereign Society’s upcoming Total Wealth Symposium in Panama.  Mark your calendar for May 14-17, 2008.  For more information on this event, click here.

Hope to see you there!

Copyright © 2008 by Mark Nestmann

Now Take That: Feds Put Billionaire Expat on No-Fly List

Each year, a few hundred Americans give up their U.S. nationality and passport.  It's a radical step, not to be taken lightly.  Most of those that do so have foreign-sounding names, as indicated by the list of expatriates published quarterly in the Federal Register.  Many in this group are presumably individuals who by circumstances of birth or parentage unintentionally became U.S. citizens.

It's not surprising that someone with no significant ties to the United States might wish to give up their U.S. nationality.  Among other responsibilities, U.S. citizenship brings about a legal obligation to comply with U.S. tax laws, filing an annual U.S. tax return, and paying U.S. tax on all income, anywhere in the world. 

But not expatriating Americans are accidental U.S. citizens.  Indeed, some very prominent Americans have given up their citizenship, including Sir John Templeton, chairman of The Templeton Group; Michael Dingman, chairman of Abex and a Ford Motor Co. director; Campbell Soup heir John Dorrance III; former Star-Kist Foods Chairman Joseph Bogdanovich; and Kenneth Dart, an heir to Dart Container and the US$1 billion Dart family fortune.

Why would a wealthy American give up U.S. citizenship?  For such Americans, the price of citizenship may require not only millions of dollars annually in tax payments, but also lost business and investment opportunities from the increasing number of individuals and institutions globally who refuse to do business with U.S. citizens or residents.  Laws like the USA PATRIOT Act, the Treasury Department's "qualified intermediary" rules" and the long arm of the Securities and Exchange Commission all contribute to this result.

However, expatriation is politically unpopular.  The image of former U.S. citizens living tax-free in some tropical paradise is an irresistible populist target.  As a result, anti-expatriation rules penalizing U.S. citizens and long-term residents who give up their citizenship or residence for tax avoidance reasons have been in effect for decades.  First imposed in the 1960s, the rules were tightened in 1996 and again in 2004.

These rules impose an alternative tax regime on expatriates' income and estate for 10 years after they give up U.S. citizenship if their income and/or past income tax liability at the time of expatriation meet certain thresholds.  Currently, the rules come into effect for expatriates with an estate larger than US$2 million or who paid more than an average of US$136,000 in income tax for the five-year period preceding expatriation.  They apply to the net combined amount of U.S. source income and income "effectively connected" with a U.S. trade or business, along with several other sources of income.

Various proposals before Congress would tighten these rules, most notably by imposing an "exit tax" on the unrealized gains of an expatriate's worldwide estate, including assets in retirement and pension plans.  (Click here to learn more about this Draconian proposal.)

While careful planning is essential, it's relatively easy to avoid U.S. taxes for the 10 years after giving up U.S. citizenship, should you be subject to the alternative tax regime.  The most important precaution is to avoid U.S. source income—although U.S. source income under the anti-expatriation regime has a wider scope than elsewhere in the Tax Code.  It's also possible to avoid tax on gains from certain types of U.S. assets by postponing their sale until after the 10-year period has elapsed. 

Without careful planning, however, the results can be a catastrophe.  Such was the case of a gentleman I know, a successful entrepreneur with a billion-dollar business, who has lived outside the United States for over a decade.  He recently gave up his U.S. citizenship, and not only wound up paying millions of dollars in unnecessary taxes, but also found himself on the Transportation Safety Authority's (TSA) "no-fly list." 

This individual—a long-time and vocal critic of U.S. economic, political, and military policy—has been a thorn in the side of the US government for decades.  And many such critics have found themselves mysteriously on the no-fly list.  I have no way of proving it, but I suspect that the circumstances surrounding my billionaire acquaintance's expatriation may have upset enough high-level government officials to result in his current classification as a suspected terrorist.

It's a sad commentary on the United States when it stoops to such petty means to punish someone whose only "crime" was to take perfectly legal steps to end his permanent obligation to pay U.S. tax.  And it will be sadder still when the exit tax, which enjoys overwhelming support in both the House and Senate, effectively slams the door shut for those considering following his example.

(Click here for more information on expatriation, and how you might be able to benefit from it.)

Copyright © 2008 by Mark Nestmann

Did the USA Outsource Passports to Terrorists?

It's almost unbelievable, but it's true.  The U.S. government outsources key aspects of the production of its supposedly ultra-secure electronic passports, to numerous foreign countries.  Key aspects of the technology used to protect the security of e-passports have been stolen. Osama bin Laden and his terrorist friends may have access it, along with Chinese intelligence agencies.

Under U.S. law, the Government Printing Office (GPO) is the U.S. government's official printer.  That includes the printing of passports.  Unfortunately, the GPO outsourced passport production, in several cases choosing foreign companies to produce newly developed, supposedly state-of-the-art, electronic U.S. passports.

An internal audit by the GPO last October revealed that the agency uses companies in the Netherlands and Thailand for critical parts of passport production. 

First, it ships blank passports the Dutch company (often using unsecured FedEx shipments for this purpose).  The Dutch company inserts a radio frequency identification (RFID) chip in the passport cover.

Once that's done, the Dutch company ships the blank passports to Thailand.  There, passports are fitted with a wire antenna that transmits data to electronic scanners at U.S. border entry points.  The Thai company ships the assembled blank passports back to the United States.

These procedures--particularly the use of unsecured FedEx shipments--make the blank passports vulnerable to theft or counterfeiting.  And, it turns out, that may have already occurred. 

The Dutch company that produces the RFID chips alleged in a lawsuit last October that China had stolen its patented technology for e-passport chips.   It's possible that Chinese intelligence agencies—and anyone else to whom China provides the technology—will use it to produce state-of-the-art counterfeit passports. 

Involving Thailand in the production process raises its own security concerns.  In recent years, anti-government groups in Thailand, backed by Islamic fundamentalists, have carried out attacks in southern Thailand.  It's hardly implausible that one or more terrorists found employment at the Thai company.  Al Qaeda and its ilk may now now also have access to the America's supposedly secure e-passport technology.

What a mess!  If you headed up a foreign intelligence service or international terrorist group, wouldn't you like to send your operatives around the world masquerading as U.S. citizens?  Thanks to this outsourcing scandal, that's precisely the threat that American may now face.

Copyright © 2008 by Mark Nestmann

Leave America, Pay an Exit Tax?

While Republicans and Democrats in the U.S. Congress disagree on almost everything else, there's virtual unanimity on one issue: the "need" to punish anyone who wants to permanently disconnect from the U.S. tax system. 

Citizens of every major nation, save the United States, can simply leave their own country for an extended period, and permanently end the requirement to pay income or capital gains taxes.  But U.S. citizens are subject to all U.S. federal taxes wherever they live, no longer how long ago they left the United States. 

Even "accidental" U.S. citizens--e.g., people born in the United States to non-U.S. parents, but never again lived in the United States--are subject to these rules.  Non-U.S. citizens who have lived in the United States for at least eight of the 15 years are also subject to these rules.

The only way out for U.S. citizens who wish to legally free themselves from the oppressive U.S. tax system is to acquire a passport from another country, and subsequently, give up their U.S. citizenship and passport.  Yes, it's a radical step…but it's the only way to accomplish what a citizen of almost any other country can accomplish simply by an extended period of non-residence.

And that's not all.  If you actually have the gumption to give up your U.S. citizenship—or long-term U.S. residence—the Tax Code has a zinger for you.  It applies if you have a net worth exceeding US$2 million or an average income tax liability exceeding US$136,000 for the five-year period before you expatriate.

Should you meet either of these tests, U.S. law imposes an "alternative tax regime" for a period of 10 years after expatriation.  Generally, expatriates covered by these regulations must pay income tax for the 10-year period at rates applicable to U.S. citizens.  However, because the rules apply mainly to U.S.-source income, it's relatively easy to avoid U.S. taxes for the 10 years after giving up U.S. citizenship. 

Congress now wants to change that with an outrageous law that would impose the first-ever exit tax on former U.S. citizens or long-term residents.  Last year, both houses of Congress approved legislation that would require expatriates who are subject to the alternative tax regime to additionally pay a tax on all unrealized gains of their worldwide estate that exceed US$600,000.  The tax would be due within 90 days of expatriation.

This bill also imposes a draconian 30% withholding tax on unrealized gains in an expatriate's IRA or other pension plan.  And don't think about gifting assets to family members or friends still living in the United States: a separate 30% tax applies to such gifts or bequests.

Don’t want to pay the tax?  If you fail to do so, or defer the tax by posting a bond with the U.S. Treasury, the bill would forever bar you from returning to the United States. 

I don't know when this legislation will be reintroduced, but support is virtually unanimous for it on both sides of the aisle.  It's not a question of whether the exit tax will become law—only when.  My sources in Washington, D.C. tell me that sometime before the 2008 election, it's a near-certainty that the exit tax will become law. 

I'll be tracking the progress of this deplorable proposal once it's reintroduced this year.  I've also prepared a special report on expatriation and the implications an exit tax will have on Americans considering expatriation.  To learn more about this report, click here.

Copyright © 2008 by Mark Nestmann

Kellogg Brown & Root Saves Taxes Offshore…and so Can You

Tax havens are once again in the news.

Revelations have surfaced that the nation's largest Iraq war contractor "evaded" hundreds of millions of dollars in federal Medicare and Social Security taxes.  The company in question, Kellogg Brown & Root (KB&R), avoided these taxes by hiring workers through companies based in the Cayman Islands.

That's led career politicians like former presidential candidate Sen. John Kerry (D-Mass.) to attack the practice.  Kerry accuses KB&R and other U.S. companies operating overseas businesses through offshore subsidiaries of "corporate greed."  Kerry (along with presidential candidate Barrack Obama) has introduced legislation to close this "loophole."

Excuse me, Senator.  This is no loophole.  Virtually every other country in the world has the same policy. They quite properly and logically exempt businesses operating outside their borders, using employees working outside their borders, from withholding taxes on the income of their employees. 

It escapes me why it outrages anyone that a company doing business outside the United States can legally avoid paying U.S. tax.  What's wrong with KB&R organizing its affairs in such a way as to avoid paying U.S. taxes on its non-U.S. operations?  If there's greed involved, it's in the minds of career politicians like Sen. Kerry.

Under current U.S. law, even a one-person company can pull off the same strategy as KK&R.  All you need to do is live and work outside the United States, form an offshore company, and pay yourself a salary from that country.

Here's how it works. Companies that are chartered by any U.S. state must generally withhold federal Medicare and Social Security taxes on their employees, anywhere in the world.  The exceptions exist by virtue of "totalization agreements" the United States has signed with about 20 countries—you can read about them here.

But if a U.S. taxpayer forms a non-U.S. company and pay wages to employees outside the United States, there's no obligation to withhold any U.S. tax to the employees.  That's true even if the employees are U.S. citizens. 

This only makes sense, because the foreign company will usually be required to withhold tax payments in the foreign countries in which it's operating.  It's only fair that the U.S. Treasury maintains a hands-off attitude.

An added bonus: under the "foreign earned income exclusion," the first US$85,700 in wages you pay yourself are legally exempt from U.S. income tax.  If you're married, and your spouse accompanies you offshore, both of you enjoy this exclusion.  That\s a total of US$171,400/year in wages, completely free of all U.S. tax obligations.

My book The Lifeboat Strategy covers this completely legal tax avoidance tactic in depth.  Click here to learn more about it.

Copyright © 2008 by Mark Nestmann

A EU Passport Through the Back Door

The Netherlands Antilles—a group of five islands in the eastern Caribbean—is one of the best-kept secrets in the world of alternative residence and second passports.

These tropical islands, which form an autonomous part of the Kingdom of the Netherlands, aren't well known in the United States.  But if you qualify for and maintain legal residence on one of these islands, there's a big payoff after five years: you're eligible to apply for citizenship and a passport from the Netherlands, a member of the European Union. 

With a Dutch passport, you have visa-free access to more than 120 countries including Canada, Mexico, and the USA.  You can live or work anywhere in the EU.  And unless you choose to live in the Netherlands, you won't be subject to Dutch taxes.  For U.S. citizens or long-term residence considering expatriation, a Dutch passport provides a first-class alternative travel document that can be used virtually anywhere in the world.

The Netherlands Antilles consists of two groups of islands:

• Curaçao and Bonaire, off the Venezuelan coast, and
• St Eustatius,  Saba and St. Maarten, located southeast of the Virgin Islands.

Aruba, also off the Venezuelan coast, while still part of the Kingdom of the Netherlands, is no longer part of the Netherlands Antilles.  And indeed, the Netherlands Antilles confederation is slated to dissolve as a unified political entity on December 15, 2008.  At that time, the five islands are scheduled to attain new constitutional status within the Kingdom of the Netherlands.  This is a positive development, as it will eliminate what has been seen as an increasingly redundant and unnecessary layer of bureaucracy between the Netherlands and each constituent island.

Each one of these islands has its own character: from bustling St. Maarten to sleepy Saba.  On some of the islands, Dutch is widely spoken; on others, English as well as a regional language called Papiamento are more commonly heard. 

To qualify for residence in the Netherlands Antilles, you must demonstrate that you're in good health, of good moral character, and provide evidence of financial self-sufficiency.  Since the permitting process is arduous (for starters, most forms are in Dutch ), it's extremely helpful to have the assistance of an intermediary. 

Representatives of The Nestmann Group have experience obtaining these types of permits, so we can assist with this process.  We can also provide guidance as to choosing the most appropriate island for residence, depending on your unique requirements. 

For more information on obtaining residence in the Netherlands Antilles, contact The Nestmann Group, Ltd. at info@nestmann.com. 

Copyright © 2008 by Mark Nestmann

How to Spot a Passport Scam [Part II]

In yesterday's blog entry, I described Internet scams offering allegedly legitimate "instant passports" from nearly a dozen countries, including members of the European Union and Switzerland.

These documents are all fakes.  And if you get caught with a fake passport, you'll have serious problems!

The world's governments don't like it when scammers sell stolen or otherwise fraudulent passports.  This practice cheapens the value of legitimate documents, and often leads to retaliatory measures by other countries, primarily in beefed-up visa requirements.

For instance, it was once possible for passport-holders from the Dominican Republic to travel to Italy without obtaining a visa.  No longer.  And once one country begins requiring visas, others rapidly follow.  As a result, most European governments now require that Dominican Republic passport-holders obtain a visa  as a condition to entry.

As a result, efforts continue in many countries to crack down on passport fraud.  The government of Guyana has issued warnings against Web sites issuing fraudulent Guayanese passports.  Suriname recently initiated a registration requirement for as many as 15,000 "illegal foreigners," many of whom entered the country using false Suriname passports.

However, my all-time favorite passport scheme is still up and running: the Dominion of Melchizedek.  This is a completely non-existent country existing only on the Internet.  Melchizedek also charters banks, registers companies, and offers offshore trust.  The price is right, too: you can obtain a passport from the Dominion of Melchizedek for a mere donation of your choice.  Just don't try to use this "travel document" for anything other than a coffee table ornament.

How to Obtain a Legitimate Second Citizenship and Passport

The most important precaution to take if you purchase a second passport is to make certain that the document you receive is officially sanctioned in law.  Currently, the only countries with officially sanctioned economic citizenship programs are Austria, the Commonwealth of Dominica, and the Federation of St. Kitts/Nevis.  (It's easy to confuse the Dominican Republic with the Commonwealth of Dominica, but they are two separate countries.

Of these, only the Dominican and St. Kitts/Nevis programs offer a realistic path to a second passport and citizenship.  The Austrian program requires investing millions of euros in an Austrian business, with no guarantee that a passport will be forthcoming.  It's also politically controversial. 

In contrast, when you apply for a second passport in either Dominica or St. Kitts/Nevis, you make the necessary investment only after you receive approval for your application. 

That means anyone offering you an instant passport from The Bahamas, Belize, Burkino Faso, the Cayman Islands, the Dominican Republic, Guyana, Lithuania, Nicaragua, Panama, Switzerland, or any other country is selling fraudulent documents.  Avoid them all! 

For more information on legitimate economic citizenship programs, see http://nestmann.com/passport.html, or contact The Nestmann Group at info@nestmann.com. 

Copyright © 2008 by Mark Nestmann

How to Spot a Passport Scam

Looking on the Internet, you'd think the world is your oyster if you want to purchase a second passport.

Just a cursory search using Scroogle (www.scroogle.org, a private alternative to Google!) reveals "instant passport" deals from numerous countries, including The Bahamas, Belize, Burkino Faso, the Cayman Islands, the Dominican Republic, Guyana, Lithuania, Nicaragua, Panama, Switzerland, and at least two unnamed members of the European Union. 

The price is right, too.  One Web site offers a passport from an unnamed EU member in Central Europe for only US$9,900.  There's even a "family plan" in which you receive a 50% discount for a second applicant.  And that's not all!  You also receive (drum roll, please) a new birth certificate. 

Want to avoid those inconvenient border formalities?  I found a Web site with just the ticket: a "diplomatic passport."  With one of these babies, you can cross international frontiers without having your luggage inspected.  And while you might think that diplomatic passports are issued to, well, diplomats, according to the promotional text, sometimes merely "giving the right amount of money to the right people" can result in diplomatic status.

Hint: These are All Scams!

Every one of these programs is a scam.  Let's start with the "instant passports" from the unnamed EU countries.

The fact that you're offered a birth certificate "proving" you were born in the EU country is one virtually infallible indicator of fraud.  Think about it.  The new birth certificate is fraudulent in itself.  It only follows that the passport based upon the fraudulent birth certificate is fraudulent as well. 

What you're receiving, without exception, are documents that have been lost or stolen, obtained through bribery, or procured fraudulently.  In all cases, the resulting passports are subject to cancellation and confiscation.  Worse, if you use them, you may face fines and even imprisonment for possession of illegal travel documents.  For instance, under U.K. law, entering the country on a fake or stolen passport carries a sentence of 10 years imprisonment.

That's not to say there's a shortage of false passports:

• About 60,000 valid Finnish passports are missing, many of them believed to be stolen
• An estimated 10,000 British passports were issued after fraudulent applications in the space of a year.
• An armed gang stole 9,000 blank French passports in Paris
• More than 2,500 blank Mexican passports were taken from a contract courier service in Mexico City
• About 2,500 Russian passports have been reported missing by the Ministry of the Interior.
• In Thailand, authorities have seized more than 1,000 fake passports.

In tomorrow's blog entry, I'll tell you how fake passports lead to government scandals…and why that means big trouble for anyone unfortunate enough to get caught with one.  I'll also tell you how you can acquire a legitimate second passport. 

Copyright © 2008 by Mark Nestmann

Instant Panamanian Passport—NOT!

At least once or twice a month, a reader contacts me to ask about an "instant passport" program from Panama.

My response has always been the same.  Panama does NOT have a legally sanctioned economic citizenship/passport program.  However, there are several possibilities for residence in exchange for investment.

Recently, though, a company in Panama contacted me telling me that I was wrong.  For a mere US$5,000 in legal fees, plus an investment in CDs at the Bank of Panama sufficient to generate US$750/month in interest, I could acquire a Panamanian travel document.  The company also claimed that, ""You can travel with it anywhere in the world as your sole passport."

This claim is highly misleading, according to attorneys I've contacted in both the United States and Panama.  Here are the facts:

CD-for-visa programs that lead to immediate residence status do exist in Panama.  In the program this company is promoting, you also receive a travel document.  That travel document is similar to a normal Panamanian passport, but it does NOT indicate Panamanian citizenship. 

You can use this travel document to enter or leave Panama.  However, other nations do NOT recognize it as a normal Panamanian citizen's passport.  If you present the travel document at a border crossing at any country other than Panama, it will likely NOT be accepted. 

This travel document is also about to be discontinued.  A well-connected Panamanian attorney has informed me that within the next few weeks, it will no longer be issued.  That decision is already final.

That attorney also told me, in reference to this particular CD-for-visa program:

"I have never recommended this program, and none of my clients have opted for it after having it explained how it works.  It always seemed foolish to me to put around US$200,000 with the National Bank of Panama, virtually forever, since the five-year fixed term deposits need to be continually renewed to preserve residence status."

Avoid this program.  It does NOT result in a normal Panamanian citizen's passport, and there are better ways to obtain a Panamanian residence visa. 

Click here to learn about citizenship-by-investment programs that result in the issuance of a legitimate passport.

Copyright © 2008 by Mark Nestmann

More Passport Scams

Alternative passport and citizenship scams are alive and well. 

I recently discovered a Web site offering second passports from several countries, including Switzerland, Belize, The Bahamas, and Panama. 

I'm also aware of a Web site offering second passports from two unnamed countries in the European Union.  One clue that these passports are fraudulent comes in the promotional text, which claims that the price of a travel document from either of these EU countries includes a birth certificate. 

Passports from Guyana, Suriname, Nicaragua, and even diplomatic passports are also available.  Several Web sites also sell Dominican Republic passports. 

NONE of these countries have officially sanctioned citizenship-by-investment programs.  In all such cases, the resulting passports are subject to cancellation and confiscation at any time.  Worse, the persons using them could face fines and even imprisonment.

(However, some of Panama's immediate residence programs (including the pensionado program) offer a document called a cedilla to foreigners.  This is NOT a passport, and is only good for entry and exit from Panama.  The cedilla can't be used to cross other national borders.) 

When you purchase a second passport, be sure that the document you receive is officially sanctioned in law.  Currently, the only countries with officially sanctioned economic citizenship programs are Austria, the Commonwealth of Dominica, and the Federation of St. Kitts/Nevis.

Of these, only the Dominican and St. Kitts/Nevis programs offer a realistic path to a second passport and citizenship.  The Austrian program requires investing millions of euros in an Austrian business, with no guarantee that a passport will be forthcoming.  It's also politically controversial. 

In contrast, when you apply for a second passport in either Dominica or St. Kitts/Nevis, you make the necessary investment only after you receive approval for your application. 

Incidentally, if you have a handwritten Dominican passport, it's no longer valid.  You must renew it with a machine-readable document.  This is true regardless of the passport's expiration date.

For more information on legitimate economic citizenship programs, contact The Nestmann Group, Ltd. at info@nestmann.com. 

Copyright © 2008 by Mark Nestmann

"Exit Tax" on Hold Until 2008

Thanks to volunteer firefighters, wealthy Americans who give up their U.S. citizenship or long-term residence won't be subject to an exit tax—at least not this year.

In a blog entry earlier this week, I wrote that it seemed virtually certain that Congress would impose an exit tax on the unrealized gains of U.S. citizens and long-term permanent residents who expatriate.  Although both houses of Congress have approved the measure, it's part of a larger bill for military tax relief (H.R. 3997).  And, the Senate objected to the House version of that bill because it contains a US$565 million outlay for volunteer firefighters.

The happy result for prospective expatriates: the two chambers will now have to wait until next year to resolve their differences.

Despite the delay, it appears certain that 2008 will bring about an "exit tax" on expatriating Americans.  If you're considering expatriation, you should start your planning immediately to avoid the impact of this tax.

Copyright © 2007 by Mark Nestmann

Want to Leave the USA? Now, You'll Pay an "Exit Tax" for the Privilege

Should you have to pay an "exit tax" if you want to permanently depart your country?

Nazi Germany and the Soviet Union are two examples of countries that imposed crushing exit taxes.  And now, the United States is about to join them.

On December 12, the U.S. Senate unanimously approved a military tax relief bill (H.R. 3997) that would impose an exit tax on U.S. citizens and long-term residents who expatriate (permanently depart) from the United States. 

The House of Representatives approved similar provisions earlier this year in bills to amend the alternative minimum tax relief (H.R. 3996) and to end the IRS’s private debt collection program (H.R. 3056).

The exit tax therefore appears to be a "done deal" unless the House fails to insert it in its version of the military tax relief bill, or President Bush vetoes the measure.  Neither appears likely.

In most countries, all that's necessary to "expatriate" is to permanently depart.  After a prolonged period of non-residence (generally one year or more), you're no longer subject to tax in your former country.  And once you establish a domicile (a permanent home) outside your former country, you can avoid whatever inheritance tax to which you might otherwise be subjected. 

It's much more difficult for Americans, because Congress, in its infinite wisdom, imposes tax liability based not only on U.S. residence, but also on U.S. citizenship.  To permanently disconnect from the U.S. tax system, you must not only leave the United States, but also give up U.S. citizenship.

It is this type of departure that the exit tax bill targets.  The provision will require anyone who gives up U.S. citizenship or long-term residence (eight of the preceding 15 years) to pay a tax on all unrealized gains of their worldwide estate.  The gains will be assessed based on the fair market value of the assets and the tax due within 90 days of expatriation.

Gains smaller than US$600,000, adjusted for inflation annually, would be exempt.

The proposal would also create an onerous tax regime for most pensions and deferred compensation plans, as well as penalize gifts and bequests made by expatriates to U.S. persons.

The image of a former "fat cat" American living tax-free in some tropical paradise is an irresistible populist target.  And while only a few hundred people, many of whom are not wealthy, permanently give up their U.S. citizenship annually, I've long warned that some form of exit tax is inevitable.

And now, it appears to be fait accompli. 

The most obvious way to deal with the exit tax is to sell appreciated property and pay the 15% tax on long-term capital gains before you expatriate.  Other strategies may also be possible, as discussed in a report I've prepared on this draconian proposal.  Click here to learn more.

You'll also need to obtain a passport from another country, if you don't already have one.  Click here to learn how you can obtain "instant" citizenship in exchange for an investment or contribution.

Copyright © 2007 by Mark Nestmann

How to Buy a Second Passport…and Why You Might Want to

In yesterday's blog, I described a program for "economic citizenship" from Lithuania, that, according to the Lithuanian embassy, has no legal basis.  For that reason, I recommend avoiding it. 

However, two countries—the Commonwealth of Dominica and the Federation of St. Kitts and Nevis—have "citizenship by investment" programs fully authorized in law. 

Dominica, sometimes called the "nature island of the Caribbean," is located approximately 300 miles southeast of Puerto Rico.  Not to be confused with the Dominican Republic, it's an amazing island with mountains rising nearly 5,000 feet out of the ocean, a boiling lake, and the last original settlement of native Americans in the Caribbean.  A former British colony, Dominica has been independent since 1978.

Dominica's gorgeous scenery, clean water, pure air, and a largely unspoiled environment have made it a popular eco-tourism destination.  But the country’s rugged coastline, lack of sand beaches, and the absence of a large international airport have hindered its growth.  Dominica also is periodically affected by hurricanes, although it's at the southern tip of the Caribbean hurricane belt.  Last summer, it suffered a severe blow from Hurricane Dean, although damage was limited to its agricultural sector and didn't seriously affect business or tourism. 

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A World of Secret Possibilities, Financial Freedom and Excited Luxury Awaits You

The face of America is shifting as the economy weakens.

The days of prosperity and envy are long gone and it's time to make a choice live the life of your dreams or let your retirement and investment portfolio sink when things get worse.

You could be spending your days exploring uncrowded, unspoiled Caribbean hideaways before heading back to your beachfront home or enjoying the crisp morning air as you sip a cup of joe from the balcony of your cottage overlooking the Alps...

But you don't need to expatriate to save yourself and your family I have an easier and more affordable way...

Click here to learn more.

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With a price starting at only US$75,000 for a single applicant (US$100,000 for a family), the cost of Dominican economic citizenship and passport is relatively low.  Legal and due diligence fees add approximately US$25,000 to these costs.  To qualify, you need to pass a background check, have a genuine interest in Dominica, and speak English fluently. 

With a Dominican passport, you can travel visa-free to about 50 countries and enter another 40 or so by obtaining a visa upon entry or with minimal formalities.  The passport provides a substantially expanded ability to live or work in any of Caribbean Community (CARICOM) countries, which in addition to Dominica are Antigua & Barbuda, The Bahamas, Barbados, Belize, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint Kitts & Nevis, Saint Lucia, Saint Vincent & the Grenadines, Suriname, and Trinidad & Tobago. 

Like Dominica, St. Kitts & Nevis are beautiful islands.  The mountains aren't quite as tall, but the scenery remains breathtaking.  Former colonies of Great Britain, these two sister islands form a federation that has been independent since 1983. A bit further north than Dominica, St. Kitts & Nevis is also subject to hurricanes.  In 1998, Hurricane Georges caused more than US$400 million in damages.

St. Kitts & Nevis is somewhat more prosperous and developed than Dominica, and the price of the economic citizenship program is higher.  There are two options: you can purchase qualifying real estate with a value of US$350,000 or more (plus a one-time 10% payment of property tax), or make a contribution of US$200,000.  Application, registration, due diligence, and legal fees add a minimum of US$15,000 to these figures; substantially more if you opt for the qualifying real estate option.

The St. Kitts & Nevis passport provides slightly improved travel options in comparison to Dominica.  Since St. Kitts & Nevis is also a CARICOM member, the benefits of improved access to CARICOM countries apply to both passports.

But perhaps I'm getting ahead of myself.  Why get a second passport at all?

There are many reasons.  A second passport can expand your travel possibilities.  It can also protect your identity, should you ever need to keep your nationality a secret for safety reasons.  It can give you the right to reside in other countries, and give you a way to cross international borders if your primary passport is lost or stolen. 

For U.S. citizens, a second passport has another benefit—it's a necessary prerequisite if you want to legally disconnect, once and for all, from the U.S. tax system.  The only way to eliminate all U.S. tax liability is to cease being a U.S. citizen.  But before you do so, you must obtain citizenship and passport from another country.

The Nestmann Group, Ltd. can provide assistance to qualified individuals seeking second citizenship and alternative residence.  Please contact us for more information at assetpro@nestmann.com. 

Copyright © 2007 by Mark Nestmann

Lithuanian Economic Citizenship--NOT

A passport from a European Union country is one of the most desirable travel documents you can possess.  Most EU members have extensive network of countries to which passport-holders can travel without a visa.  Equally important, a person holding a passport from one EU country can generally travel to, reside in, and work in another EU country, with few formalities necessary.

Unfortunately, few shortcuts are available to obtain a passport from a EU country.  Almost without exception, you must apply for residence in your selected EU country, and live there for an extended period--generally 5-10 years--before you're eligible to apply for passport and citizenship.

It certain cases, you may qualify for citizenship in a EU country by virtue of your ancestry, marital status, or residence in a dependency of that country.  For instance, if you can prove that you have at least one Irish-born grandparent, you can apply for Irish citizenship and passport.  There may also be a shortened period of residence to qualify for citizenship if you're married to a citizen of a EU country.  Finally, if you're a resident of a dependency of a EU country, it may be possible to make expedited application for citizenship in the parent country.

Since it's difficult to obtain citizenship from a EU country, it's not surprising that some shady promoters offer fraudulent shortcuts through this process.  Last May, I exposed one program that that was selling passports from unnamed EU countries for prices as low as US$9,900. 

Now, I've discovered a Web site offering economic citizenship from the EU country of Lithuania.  The Web site claims that:

"The Republic of Lithuania has a specific Citizenship- by-Investment Programme, its legislation provides for the possibility of granting citizenship be [sic] means of naturalisation to people who have achieved particularly good results for the country in their work in science, economics, arts, culture, and sport in the Republic of Lithuania, or who have invested a large sum of money in the Republic of Lithuania which benefited the economy and created jobs in the country. There is no set amount of money that needs to be invested, so success depends upon the economic result and the number of jobs created. The normal requirements, including the renunciation of the applicant's existing citizenship, are not applied."

According to this Web site, prices for Lithuanian citizenship and passport start from EUR 25,000.

This would be a great deal, but the company behind the Web site didn't answer my inquiries about the legal basis of this program.  So, I inquired about it to the Lithuanian embassy in Washington, D.C.  I received the following response from the embassy:

"There is no such law permitting an individual to purchase Lithuanian citizenship and passport for such items are not goods to be sold or bought.  We believe the service that company provides does not have legal basis.. On rare occasions, persons who by some act contributed to the well-being of Lithuania and its citizens can get Lithuanian citizenship by a special presidential decree."

How often does this occur?  Apparently, no such honorary passports have been issued since 2004.  Not exactly a reliable way to obtain a Lithuanian passport!

A company that sells you a passport from a country where there's no legal provision for such sale is likely offering stolen, counterfeited, or illegally issued documents.  In all cases, such illegally-obtained passports are subject to cancellation and confiscation.  Worse, anyone using them may face fines and even imprisonment for possession of illegal travel documents. Avoid such passports at all costs!

Fortunately, there are economic citizenship programs that do have a basis in law, and provide a legitimate means to obtain a second passport.  I'll be discussing these programs at the upcoming Sovereign Society Offshore Advantage Academy in the Bahamas Nov. 7-11, 2007.  For more information, click here. 

Tomorrow, I'll give you a "sneak peak" at my presentation...until then.

Copyright © 2007 by Mark Nestmann

U.S. on Verge of Enacting an "Exit Tax"

Since 1996, there have been at least a dozen efforts by congressional tax-and-spenders to impose an "exit tax" on wealthy Americans who exercise their constitutional right to disconnect from the U.S. tax system through a process called expatriation. I wrote about one of the most recent proposals here. However, President Bush vetoed the legislation containing this provision for other reasons.

In most countries, all that's necessary to expatriate is to become non-resident. But in the United States, you need to also give up U.S. citizenship, because the U.S. Tax Code imposes tax on U.S. citizens living abroad, even if they've never set foot in the United States. Since the United States taxes its citizens and not just its permanent residents, the only way for a U.S. citizen to eliminate U.S. tax liability is to acquire legal residence and citizenship in another country and subsequently give up U.S. citizenship.

Expatriation is politically unpopular. The vision of a pale ex-U.S. citizen-billionaire basking on a beach in a tax haven is too much for many less affluent citizens to bear. As a result, anti-expatriation rules penalizing U.S. citizens who are deemed to have given up their citizenship for tax avoidance reasons have been in effect for decades. First imposed in the 1960s, the rules were tightened in 1996 and again in 2004.

Now, Congress is again on the verge of passing an outrageous law that would impose the first-ever exit tax on former U.S. citizens or long-term residents (persons who have resided in the United States for eight years or more of the previous 15 years). On October 10, the House of Representatives passed the Tax Collection Responsibility Act of 2007 (H.R. 3056). If passed by the Senate, and signed by President Bush, this act will require persons who give up U.S. citizenship or long-term residence to pay a tax on all unrealized gains of their worldwide estate that exceed US$600,000. The gains will be assessed based on the fair market value of the assets and the tax due within 90 days of expatriation.

This bill also imposes a draconian 30% withholding tax on unrealized gains in an expatriate's IRA or other pension plan. And don't think about gifting assets to family members or friends still living in the United States: a separate 30% tax applies to such gifts or bequests.

The conference report on this legislation smugly states that U.S. citizens give up U.S. citizenship, but that the Tax Code shouldn't provide an incentive to do so. Rather, that decision should be, in the report's words, "tax neutral."

Give me a break. Taxing expatriates on a phantom gain that could quite possibly be taxed again by whatever country to which they relocate is hardly "tax neutral." Especially when the only alternative to this "alternative tax regime" is to make an to post a bond and pay an interest charge for the privilege of not paying tax on gains you never realized.

I'll be tracking the progress of this deplorable proposal as it makes its way through the Senate. There's a chance that President Bush would veto the bill, should it pass the Senate, but there's no assurance he would do so, since bashing wealthy expatriates is so popular.

I've also prepared a special report on expatriation and the implications an exit tax will have on Americans considering expatriation. To learn more about this report, click on http://www.nestmann.com/catalog/product_info.php?cPath=21&products_id=43.

Copyright © 2007 by Mark Nestmann

Mail Order Tribal Membership Scam Targets Illegal Immigrants

Finding and publicizing opportunities for investing, living, and doing business outside the United States is the raison d'etre of The Sovereign Society.

But the number of U.S. persons looking for opportunities outside the United States pales in comparison to the number of non-U.S. persons looking for opportunities in the United States. 

Nowhere is this more obvious than in the staggering number of immigrants illegally living in the United States—somewhere between 12 million and 20 million persons, depending on whose statistics you believe.

An ongoing crackdown against illegal immigrants has led to a number of "creative" solutions purported to allow these individuals to legally remain in the United States.  Among the most "creative" are offers from two Native American tribes offering tribal membership to anyone for prices starting at US$50.  Become a member of the tribe, so goes the pitch, and you can stay in the United States as long as you want, regardless of your immigration status.

The pitch is pure hokum.   Immigration authorities insist becoming a tribe member gives no protection against being deported.  Even if it did, neither the U.S. government nor the National Congress of American Indians officially recognizes the tribes offering membership. 

But that hasn't stopped thousands of illegal immigrants from snapping up tribal membership, and subsequently trying to achieve legal immigration status.  Two Mexicans have already been indicted for allegedly trying to get U.S. passports and Social Security cards by claiming to be mail order native Americans. 

While almost every country in the world welcomes qualified immigrants, applicants must go through an extensive legal process to determine their eligibility for residence status.  Immigrants who are healthy, wealthy, and highly educated are most welcome, particularly if they don't need to work in their adopted country. 

A handful of countries even offer citizenship and passport to qualified individuals who are willing to make substantial investments.  The Commonwealth of Dominica and the Federation of St. Kitts & Nevis are the two best-known programs.  Austria has an economic citizenship program as well, but it much more expensive than the programs in Dominica and St. Kitts & Nevis.  The Austrian program is also politically controversial and it's increasingly difficult to obtain citizenship under this option. 

Finally, despite claims on the Internet to the contrary, no country offers legal status by mail, with no due diligence necessary.  You should assume that all such offers are fraudulent, as they are in virtually every case. 

The Nestmann Group, Ltd. can provide assistance to qualified individuals seeking second citizenship and alternative residence.  Please contact us for more information at assetpro@nestmann.com. 

Copyright © 2007 by Mark Nestmann

Dominican Passport Provides Expanded Travel & Residential Options

The Commonwealth of Dominica is one of only two countries in the world to offer citizenship and passport through investment.  With a price starting at only US$75,000 for a single applicant (US$100,000 for a family), you don’t need to be wealthy to obtain Dominican economic citizenship and passport.  You just need to have a clean background, a genuine interest in Dominica, and the ability to speak English fluently. 

One of the little-known benefits of a passport from Dominica is its membership in the Caribbean Community, or CARICOM.  A longstanding CARICOM initiative is the free movement of goods, services, and people throughout all 16 CARICOM countries.

A Dominican passport provides a substantially expanded ability to live or work in any of these countries, which in addition to Dominica are Antigua & Barbuda, The Bahamas, Barbados, Belize, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint Kitts & Nevis, Saint Lucia, Saint Vincent & the Grenadines, Suriname, and Trinidad & Tobago. 

Another benefit of Dominica—at least for current or former U.S. citizens—is that it's almost totally off the radar screen with respect to the United States.  Indeed, the United States doesn't have an embassy—or even a consulate—in Dominica.  The official U.S. diplomatic mission for Dominica is in Barbados, nearly 200 miles away.

Dominican passports are now fully "machine-readable," making them acceptable for border crossings in nearly 90 countries, including many other members of the British Commonwealth.  (For other countries, you must possess the appropriate visa.)  However, if you have a handwritten Dominican passport issued prior to 2006, you must renew it, even if it is nowhere close to expiration.  The Dominican government recently extended the deadline for renewing handwritten passports from June 30 to Dec. 30, 2007.  After that date, you won't be able to use a handwritten Dominican passport at border crossings anywhere in the world. 

If you'd like to learn more about passport and citizenship in the Commonwealth of Dominica, contact me at assetpro@nestmann.com. 

Copyright © 2007 by Mark Nestmann

Beware: Another EU Passport Scam

I've warned many times that you should avoid any "instant citizenship and passport" program that doesn't have a solid basis in law.

Someone selling you a passport from a country where there's no provision in the law for the issuance of such documents is either offering documents that are stolen, counterfeited, or issued illegally.

In all such cases, the resulting passports are subject to cancellation and confiscation at any time.  Worse, the persons using them could face fines and even imprisonment for possession of illegal travel documents. 

Currently, there are only three countries in the world that have provisions in their domestic law for "economic citizenship:" the Commonwealth of Dominica, the Federation of St. Kitts & Nevis, and Austria.  (And of these three, Austria is no longer a realistic alternative, because its program has been effectively suspended.)

Unfortunately, these facts haven't stopped dozens of Internet promoters from selling fraudulent passports.  I've written about them before, but just yesterday, a colleague forwarded a Web page where passports from two unnamed countries in the European Union were being sold for prices of US$9,900 and US$19,800, respectively. 

One clue that these passports are obviously fraudulent comes in the promotional text, in which it is claimed that the price of a travel document from either of these EU countries includes an optional birth certificate. 

Naturally, the promoter of these documents stipulates that they are 100% genuine documents that haven't been stolen.  Well, of course. 

That's only a small sampling of the passports available from this source.  Passports from Guyana, Suriname, Nicaragua, and even diplomatic passports are also available—again, all supposedly 100% genuine documents that haven't been stolen.

I can only hope that the appropriate law enforcement agencies in the countries in which these documents are being offered shut down this online passport mill.  Otherwise, buyers of the fraudulent documents it's offering could face some very serious consequences if discovered to have them in their possession.

Copyright © 2007 by Mark Nestmann

Expat Tax—Not?

Several weeks ago, I wrote about a proposal in the "Small Business and Work Opportunity Act" to impose an exit tax on U.S. persons for "tax-motivated" reasons. You can read about it here.

In brief, the proposal would require such former U.S. citizens to pay a tax on all unrealized gains of their worldwide estate. The gains will be assessed based on the fair market value of the assets and the tax due within 90 days of expatriation.

There's actually a bit of good news: Congressional wrangling may make this outrageous idea a non-starter.

The quarreling has nothing to do with the expat tax, which is buried deep in the bowels of the legislation. Rather, it has to do with the main revenue-raising provisions of the bill—of which the expat tax isn't one. (Indeed, the total revenue raised by the exit tax was in 2006 estimated to be US$251 million over five years, a pittance in Washington, D.C.)

Last week, the stalemate continued in a House Ways and Means Committee hearing. Chairman Charles Rangel, D-N.Y., indicated that there are no signs of when, or even if, a conference committee between the Senate and House will try to work out a compromise.

The details of the disagreement aren't important for the purposes of this discussion (although you can read about them here). What is important is that it's beginning to look as if the anti-expat provisions might not be enacted into law in 2007. That means if you're seriously considering expatriation, you might be able to rely on the somewhat less severe rules enacted in 2004, which I describe in my Billionaire's Loophole report.

In brief, the 2004 rules require that persons giving up U.S. citizenship or long-term residence after June 3, 2004 are deemed to do so for tax avoidance purposes if they have assets of more than US$2 million or paid more than US$620,000 in federal income taxes over the five years before expatriation.  The primary consequence of a "tax avoidance purpose" is that you're subject to income taxes for 10 years after expatriation, although for the most part, only on U.S.-source income.

We'll see what transpires in Congress. Personally, I hope that they continue their "Rangling."