If you want to ride on the international living fast-lane I can not think of more essential knowledge than the concepts of residency and citizen ship. Master this, and its benefits soon will merge themselves into a river of possibilities.
Yet I have come across high paid tax advisers who could not tell the difference.
In short: Citizenship and Residency are NOT the same!
I thought you’d never ask…
A citizen is a person that is recognised under the custom or law of a state. Citizens of one state have the same rights, privileges, and duties (as defined by the state’s law).
Most people obtain their citizenship by birth. But yes, there are also other ways of obtaining citizenship.
Dig up your family tree. Any ancestors from Italy, Spain or Ireland? Because you can obtain citizenship when you are a descendent of one of those nation’s former fortune seekers.
Other ways of obtaining citizenship are marriage and the process of “naturalization”. You can be eligible for naturalization when you have been resident in a place for a certain amount of time (often five years) or “instantaneously” (will take a couple of months at least to process) when you invest a substantial sum in a country. The last option is called economic citizenship and only a few countries offer it.
A citizen of a country can expect protection from the state he is a citizen of and the right for things like welfare. In return a citizen of a state might be liable for taxes or military service.
An individual can hold citizenship of multiple countries, although there are some countries that don’t permit this practise.
Legal residency is when you effectuate your right to live, work, or study in a country. You can do this while holding foreign citizenship.
In that case you will need a residence permit, which is often time-limited and you will have certain obligations to keep the residency valid. Like a minimum number of days you have to stay in the country or to have a job or run a business.
Such restrictions never apply when you are a citizen.
The most important point is that you are liable for taxes, social security contributions (and benefits) there where you have your residency.
And that, dear reader, opens up a whole new world of possibilities…
Want to discover how you can Cut Taxes outrageously by moving abroad?