Second Citizenship, Offshore Investing & Expat Money Strategies for High Net Worth Canadians

For high-net-worth Canadians, the idea of obtaining a second passport isn’t just about escaping winter or avoiding long immigration lines, it’s about financial flexibility, risk management, and strategic wealth preservation.

Reasonable people can argue over the proper taxation level for various income and wealth levels in society, but the reality on the ground is that a growing number of Canadians feel that their interests would be better served by becoming an expat resident abroad – if not an expat citizen – of another country. After all, you can always come back home (you won’t lose your Canadian citizenship just because you have a second citizenship) so there is really no risk to giving yourself more options.

Whether it’s mitigating tax exposure, securing visa-free travel, or ensuring a more business-friendly environment for your corporation, second citizenship is an increasingly popular tool for those looking to diversify their tax residency and assets internationally.

High net worth Canadians have a variety of options when looking at diversification of their assets, and tax optimization for the long-term. These include:

• Becoming a permanent resident of another country through an investment visa, retirement visa, or a more niche country-specific, long-term visa that allows them to live in a country for more than a year. (The HNW individual can then open bank accounts in that country and begin to move their assets over if they wish.)
• Obtaining citizenship in another country (often through an investing visa that eventually leads to a secondary citizenship – aka: secondary passport). This is more difficult in a lot of cases, but obviously gives you the right to remain a resident in your new “home country” for as long as you want, since you are now a citizen.
• If HNW Canadians opt to continue to live in Canada, then using offshore banking doesn’t really help them, as Canadian tax residents are legally responsible for reporting all of their worldwide income. However, if a person moves to a country that has territorial taxation policies, then sourcing their income from assets located outside the country they now reside in, can result in optimal tax efficiency.

Benefits of Obtaining a Second Passport

There are many advantages to having a second citizenship. 

They all stem from the same basic principle: Freedom

A second passport (you can always keep your Canadian one) opens up more options for where you can live, work, and invest – without being tied to Canada’s tax system. Benefits include:

Lower Tax Burdens: Many Canadians move to countries with no capital gains tax or more favorable income tax structures. See this article about how taxation works for Canadian expats.

Visa-Free Travel: Some passports offer access to over 150 countries without the hassle of visas. For HNW retirees from Canada, places like Portugal and Cyprus offer access to the EU’s Schengen Zone without the 90-day restriction that the rest of us have to deal with.

Enhanced Asset Protection: A second citizenship can allow for more robust legal and financial protections. See this article about the best countries for Canadians to retire at.

Greater Investment Opportunities: Many countries offer special investment visas that open the door to real estate, business ownership, and tax-efficient wealth structures.

Top Countries Offering Citizenship by Investment

For Canadians looking to get a second passport through investment, these are some of the most attractive programs:

St. Kitts & Nevis: The oldest and one of the most well-known citizenship-by-investment programs. A one-time donation of $250,000 (or an investment in real estate) grants citizenship in just a few months.

Portugal: The Golden Visa program offers a pathway to citizenship with a real estate investment of roughly €500,000. This program has changed a lot over the years and it could be discontinued relatively shortly.

Malta: Requires a €600,000 donation and a year of residency but grants one of the most powerful passports in the world.

Turkey: Citizenship through real estate investment of $400,000 or more.

Dominica: One of the more cost-effective programs, requiring just a $100,000 donation.

Step-by-Step Guide to Applying for a Second Citizenship (which is likely to require a multi-year commitment):

• Determine Your Goals: Are you looking for tax benefits, travel freedom, or an exit strategy?
• Select a Country: Research programs that align with your needs.
• Meet Financial Requirements: This could be a donation, real estate purchase, or business investment.
• Pass Due Diligence Checks: Governments will require background checks to ensure applicants have no criminal history.
• Complete Residency (If Required): Some countries mandate a minimum stay before granting citizenship.
• Receive Your Passport: Once processed, you’ll have legal dual nationality.

Tax Residency vs Secondary Citizenship

For high-net-worth individuals (HNWIs) in Canada, international tax planning often involves two major considerations: changing tax residency and acquiring a second citizenship. While both strategies can provide financial and lifestyle benefits, they serve different purposes and come with distinct legal, tax, and logistical implications.

Tax residency determines where you owe taxes based on physical presence, financial ties, and economic interests. Second citizenship, on the other hand, is a legal status that grants additional rights (such as visa-free travel) but does not necessarily impact where you pay taxes. In some cases, combining both strategies can optimize global wealth management and tax efficiency.

In plainspeak: Just getting a second citizenship may not actually give you any tax benefits if you continue to live in Canada! On the other hand, you don’t need a second passport (or “second citizenship”) if all you want is tax optimization. Tax optimization is more closely tied to your tax residency – and then where your investments are located.

Defining Tax Residency for Canadians

Canada taxes individuals on a worldwide income basis if they are deemed tax residents. The Canada Revenue Agency (CRA) determines tax residency using the following criteria:

• Primary Ties: Owning a home, having a spouse, or dependents in Canada.
• Secondary Ties: Owning a driver’s license, maintaining bank accounts, or memberships in Canadian organizations.
• Physical Presence Test: Spending 183+ days in Canada in a given tax year automatically triggers Canadian tax residency.

To sever tax residency and avoid worldwide taxation, you must demonstrate significant breaks in financial, social, and economic ties.

Canada’s Exit Tax

For high-net-worth Canadians considering severing their tax residency and moving to a new country (we’ll get to the best no tax countries in just a second) one of the most critical financial considerations is the Canadian Departure Tax, often referred to as the “exit tax.” This tax is triggered when an individual ceases to be a tax resident of Canada, and it can have significant financial implications.

The exit tax is a deemed disposition tax applied to a taxpayer’s worldwide assets when they cease Canadian tax residency. Under Section 128.1 of the Income Tax Act (ITA), the Canada Revenue Agency (CRA) treats a departing resident as if they have sold their capital assets at fair market value (FMV) immediately before leaving Canada. Any unrealized capital gains on these assets become taxable.

Thoroughly understanding the departure tax is essential if you plan on avoiding further complications with the CRA, and/or keeping as much of your net worth intact as possible as you move outside of the Canadian tax net. 

When exiting Canadian tax residency, you will be subject to departure tax (deemed disposition on capital gains). Capital gains on worldwide assets are taxed as if sold the day before departure. There are some exemptions that apply to Canadian real estate, registered accounts (RRSPs, TFSAs), and pensions. Paying for professional help with access to recent precedent-establishing tax rulings is definitely a smart investment at this point.

Taxable assets that the CRA will assess for capital gains include:

• Stocks, bonds, ETFs, and mutual funds
• Private business shares
• Real estate located outside of Canada
• Partnership interests
• Intellectual property (patents, copyrights, trademarks, etc.)
• Precious metals, artwork, and collectibles

In many cases the departure tax hit can be upwards of 27% on these assets (which is half of the top tax bracket – the tax rate that pertains to capital gains in Canada at the moment). Of course this amount would go up if the recent Liberal Government’s capital gains proposals get made into law.

Additionally, if you continue to hold assets in Canada, they are likely to be subject to a withholding tax. This includes dividend payments, pension payments, CPP payments, and OAS payments. The ongoing withholding tax will be 25%.

It’s important to understand that severing tax residency is a very technical legal move, and that moving to a country with low-taxation and no tax treaty with Canada (such as the UAE or Panama) is quite likely to lead to a CRA audit. You should make sure that you enlist professional help to file Form T1161 (List of Properties at Departure) and Form T1243 (Deemed Disposition) correctly.

Best Retirement Countries for Territorial Taxation

Now that we understand the difference between a secondary citizenship and tax residency in another country, the concept of combining territorial taxation principles with offshore banking needs to be clarified in order to maximize benefits.

Territorial taxation is a system where a country taxes only the income earned within its borders, exempting income earned in other countries from taxation. This differs from the worldwide taxation system used by Canada and the U.S. (as well as most other developed countries) where citizens and tax residents must report all global income to their home country.

Consequently, if you move to a country with territorial taxation, and then use offshore investments to generate your income, you can essentially create a tax-free (or very low-tax) life for yourself. It’s worth reiterating that it will take some serious planning to get to this point, and that the considerable departure tax has to be weighted against this outcome.

Top Territorial Taxation Countries for Retirement

• Panama – No tax on foreign-sourced income. Offers a Friendly Nations Visa for easy residency.
• Costa Rica – Only domestic income is taxed; no tax on foreign income.
• Malaysia – No tax on foreign income (though some recent rule changes may apply).
• Singapore – Foreign income is tax-exempt unless remitted into the country.
• Hong Kong – Similar to Singapore, only local income is taxed.
• Paraguay – No tax on foreign earnings; simple and low-cost permanent residency process.
• Georgia – No tax on foreign earnings; simple and low-cost permanent residency process.
• Cyprus – “Non-Residents” which is how most expats would be classified – are only taxed on Cyprus-sourced income.

These countries allow individuals to reside and conduct business globally without paying taxes on non-local income. However, tax laws frequently evolve, so ongoing consultation with an expert is crucial. You’ll notice that several of these countries also appear on our Best Countries to Retire to Abroad list.

Now it’s also worth pointing out that there are some countries out there that don’t have any income tax to worry about (whether it’s worldwide income, or territorial taxation). They tend to be countries that are very expensive to live in (as they attract wealthy people) and/or have climates that aren’t super fun to live in long-term (re: desert). Here’s a shortlist of no-tax countries:

• The Bahamas
• Bermudao 
• Brunei
• Cayman Islands
• Kuwait
• Monaco
• Oman
• Qatar
• Saudi Arabia
• United Arab Emirates

Combining Territorial Taxation with Offshore Investing

Offshore investing is often misunderstood. It’s not about hiding money – it’s about strategically positioning assets to reduce taxes and maximize returns. It’s vitally important to understand that if you continue to live in Canada, Canadian tax laws still apply to global earnings! There is no real loophole here like you see in the movies!

The key to legally investing offshore is compliance. Canadians must report foreign assets exceeding CAD $100,000 to the CRA through Form T1135. Not doing so can lead to hefty fines. Additionally, using tax treaties to structure investments legally is essential.

Establishing an offshore bank account in a tax-friendly jurisdiction provides additional financial advantages:

• Enhanced privacy – Many jurisdictions offer financial secrecy protections.
• Asset protection – Offshore accounts are harder to seize in legal disputes.
• Global access – Diversify your holdings across multiple currencies and banking institutions.
• Tax efficiency – Pairing offshore accounts with a territorial tax system ensures income remains untaxed.

Many HNWIs place investment portfolios, real estate profits, and business earnings in offshore accounts within zero-tax or low-tax jurisdictions such as:

• The Cayman Islands
• Bermuda
• The British Virgin Islands
• Switzerland (depending on residency rules)
• UAE (no income tax, no reporting requirements)

When structured correctly, offshore banking combined with territorial taxation can shield your wealth from taxation while ensuring global access to your assets. The idea is that you have legal tax residency in a country that only taxes you on money earned within that country. Then – you simply source all your money from outside the country, preferably from a country unlike Canada that charges a withholding tax.

Potential Risks of Investment Visas and Tax Residency

The final outcome of having two or more passports, and perhaps living in a tax-friendly country can look very attractive. You combine that with the proper structuring of an offshore investment portfolio and/or an offshore corporation (especially if you run a business online that is location-independent) and you could be looking at a zero-tax lifestyle that saves you millions over the long term.

That’s obviously a very attractive final outcome!

However, there are still many ways to legally reduce your average tax rate within Canada with proper financial planning. HNW retirees that can afford long-term tax planning help can divide, defer, deduct their way to a much lower tax bill that it might initially appear. 

When you combine that reality versus the one-time large hit to your assets that the Canadian departure tax is going to take a chunk out of, it can tip the scales back in favour of staying within Canada for the long-term. While territorial taxation can be a game-changer for preserving wealth, it’s not a simple one-step process. The best approach involves careful planning, legal structuring, and a full understanding of both Canadian tax laws and the rules in your new country of residence.

If you’re serious about making the move, consult with a tax professional who specializes in expatriation, offshore banking, and global tax structuring. This ensures you’re maximizing tax efficiency while staying fully compliant with international tax regulations.