The toughest challenge, the thing about living on an island is, well, living on an island. You have to obey someone else's rules in order to leave, to go anywhere else. In the early days of sailing, privateering, and exploration, there was always easy access out of a country. It didn't matter; if your boat was seaworthy, you could come and go as you pleased. Some still do - slipping away, or onto shore, in the darkness of the deed.

And if you showed up on someone else's shore for a few months, years, or forever, it didn't matter - much either. Who would know? Paper resembling today's passport proof of identification was in scant evidence, although very early in civilization travellers carried 'letters of safe passage' from one ruler to another.

Fast becoming the second biggest challenge in living on an island is dealing with multiple nationalities and citizenships. Since everyone, yes everyone here, came to Bermuda from somewhere else, it is certainty that a relatively large component of the local population has at least two nationalities; some have three, four, and even more. Multiple nationalities create mutually conflicting allegiances in families, citizenships, residency, domicile, taxation, legal, regulatory and financial planning now in our hyper mobility world.

What constitutes citizenship? Can you buy it; do you acquire it from a long-term residency; are you born to it; or can it be passed down from the matriarch, or patriarch of the family. Citizenship is said to have originated in Greece, the creators of the concept of democracy. Greek citizenship, though, was strict, granted by birth together with a double affirmation, one by the mother, the other by a Greek Assembly member. If the member opposed the citizenship, the infant was killed, an incredibly morbid procedure to settle who belongs where. Notice that the father of the child appeared to have no input in this horrific decision process.

The answer is that it depends. A child physically born in the United States has a constitutional right to United States citizenship, guaranteed under the 14th amendment to the US Constitution. A child born in Bermuda, well, the answer to that is a maybe.

Generally, a citizen of a country is granted certain individual rights (the right to vote, freedom of speech etc) and in return, is expected to honor certain obligations as a taxpayer, paying a fare tax share to the government.

In general, residency (and domicile) are more complex, different, but may part of, the same story. Why should we care whether we might be considered a temporary resident of another country? Simple: if you, or your assets are considered resident (or domiciled) or sited in a country, state, city, or municipality, the revenue authorities can assert the right to assess taxation on your assets - regardless of whether you are a citizen. The rules defining the responsibilities for each of those three words, citizenship, resident, or domiciliary are very often different for every form of taxation, income, transfer, gift, estate, stamp, excise and for every country on the globe.

Day counting.

The one constant refrain that runs through almost every country's immigration and revenue taxing authority regulations is a calendar-counter formula for the delineation between a non-resident and a resident. One hundred eighty three days is the magic number for many countries to transform you like a pumpkin from a non-resident into a resident. The formula varies by country: the United States uses a three-year weighted formula; Ireland is two years; Spain is less than 183 days, the UK is even more limited. Overstay your welcome and you're a resident for income tax (and possibly other tax) purposes on your worldwide income, with none of the privileges and rights of a 'real' citizen of the country. Own real property or have the unfortunate luck to pass away in another country can set up a dual estate filing process that is so distressful to the surviving spouse and family.

Ownership of intangibles in other jurisdictions even though the Non-Resident Alien (NRA) has never physically resided there can create a taxable situation. An electronic securities account owned by an NRA established through a broker in another jurisdiction can be considered a US situs asset, depending upon the demographics of the underlying securities. Entities that have been used to provide estate tax protection may now be considered pass-through vehicles by US Internal Revenue Service, depending on various benefit criteria.

Every taxman wants their fare share.

The rules of the taxation, legal and regulatory game are changing, rapidly and without notice. Regulatory, legal and tax alerts on new regulations are being issued every day, while existing regulations are being clarified for compliance. The general advice disseminated for years amongst domestic service providers for investing, visiting, residing, and doing business in another country may have been adequate for then, but today, may be obsolete, incorrect, or inappropriate for your individual situation. Before making any cross border changes in your financial life, you should seek the services of international qualified professionals that specialize in planning for the tax and regulatory of both domestic and foreign country environments.

What's the best solution? Never marry anyone except your own nationality; never leave Bermuda; never let your children leave; and never invest in anything except Bermuda dollars, Bermuda securities, Bermuda real estate. You might feel a tad confined, but no worries. But who is going to do that?

Sources: The Origin of Citizenship www.library.thinkquest.org

United States Constitution

US IRS Tax Code

Martha Harris Myron, CPA, CFP(US) TEP(UK) JP- Bermuda is an international Certified Financial Planner™ practitioner in private wealth management. She specialises in independent fee-only cross border investment, tax, estate, and strategic retirement planning services for Bermuda residents with cross-border and multi-national connections, internationally mobile people and US citizens living abroad. For more information, contact martha.myron@gmail.com or 296 3528 at Patterson Partners Ltd.