What is the difference between residency and citizenship?
Most laymen, including even seasoned journalists, frequently use the terms residency and citizenship interchangeably, yet there are distinct differences between the two. In essence, obtaining residency or even permanent residency in another country simply refers to gaining the right to lawfully remain or settle in that country.
Doing so does not give you all the rights, such as access to free public healthcare or voting rights, as would normally be the case for native citizens or individuals whom have obtained those rights either by birth or by regular naturalisation. Gaining residency rights may also not affect your tax residency status unless you spend significant amounts of time living and working in another country.
For many European countries, for example, you’ll need to spend more than 6 months per year in-country before you start being obligated to pay income taxes.
It is not a coincidence that countries like Spain, which allows self-employed foreigners to gain residency by business formation, requires these new residents to spend more than 6 months per year in-country in order to maintain their second residency status.
As a rule of thumb, no country wants new residents or investment citizens to become a financial burden unto the state, hence economic residents are typically required to have comprehensive health insurance in place, both for themselves and for their dependent applicants.
Countries offering direct economic Citizenship By Investment (CBI) programs similarly factor the potential burden of a new citizens into the investment or donation required in order to obtain such status.
As a rule of thumb, applicants seeking the ability to go settle (or potentially settle) in a specific country other than their own will opt for a residency by investment solution. Doing so is generally referred to as “having a Plan B”, and may involve either buying a government approved property in that country (either in terms of a specific development or based on a minimum investment requirement), or through new business formation as the basis for a obtaining second residency status.
Depending on the country and residency program in question, you may be able to either invest in property, create jobs, or make a passive business investment in order to obtain residency status. Depending on the country you choose as your Plan B destination, there may also be minimum stay requirements associated with maintaining your second residency status.
In contrast, many applicants seeking the benefits of enhanced global mobility and visa-free international travel opt for second citizenship by investment programs.
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