Malta allows individuals to acquire permanent nonresident status if they can show income in excess of $25,000 a year. Residents pay a 15 percent tax on income brought into the country, but there is no tax on outside income or assets. Malta has a double- taxation treaty with more than 30 countries.

Monaco is a popular choice for wealthy individuals seeking tax relief. The small European principality has no income taxes, and according to Christian Kalin, of Henley & Partners, an international residency advisory firm in Zurich, residency requirements are not as strict as commonly thought. An individual must be able to afford Monaco’s lifestyle, particularly the high rent, and must also spend at least 183 days in the country each year.

In Latin America, Panama offers fast-track residency status to “financially independent persons” or investors. The country only taxes locally sourced income. Permanent residents need not spend time in Panama.

The Bahamas also offers permanent residence with the advantage of no income, capital gains or inheritance taxes. According to Kalin, investors or owners of residences valued at more than $500,000 receive accelerated consideration for residence permits.

“One of the reasons people consider expatriation and a second citizenship is that they want to have arrows in their quiver,” says David Lesperance, a Canadian attorney. Three-quarters of his clients are U.S. citizens inquiring about expatriation. Some, he says, are Americans who have lived their lives in Canada and feel no emotional ties to the United States but still pay taxes. Others are attracted to the fact that Canada has no estate tax. “My clients tend to be the millionaire-next-door types who have generally made their own money, and it irks them that a great chunk of their wealth will be spent imprudently by their government.”

The Canadian press gleefully reports that since the reelection of President Bush, there has been a threefold increase in the number of Americans applying for Canadian citizenship. In Canada, these individuals will find some of the world’s best opportunities for those who may want to give up their citizenship and pursue tax-free living. Section 94 of Canada’s income tax code was created to give qualified immigrants—typically wealthy individuals or entrepreneurs—a complete personal income tax moratorium for the first five years of residence. After five years of living tax-free, new citizens can then move to a no-tax country and pay no income or estate taxes. The catch is that they have to give up their U.S. citizenship, and even then, they may be responsible for paying taxes to the IRS for 10 years, especially if they fall under the taxpatriate guidelines.

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