The German passport is considered one of the strongest passports in the world – and yet more and more wealthy individuals and entrepreneurs are opting for a second citizenship. The question of how to obtain a second passport as a German citizen becomes increasingly relevant. The reasons for this are manifold: The removal tax according to § 6 AStG, the extended limited income tax liability, the ten-year inheritance and gift tax liability as well as the political debate about a possible taxation according to nationality make the German passport for internationally active entrepreneurs increasingly a tax burden. Since the modernization of the Nationality Act in June 2024, German citizens are allowed to hold several nationalities for the first time without a retention permit. In this article, we explain which tax and extra-tax reasons speak for a second passport, which investment volumes are incurred in the current citizenship-by-investment programs and what German entrepreneurs have to pay attention to when applying.

1. Second passport for German citizens – Introduction

The decision to acquire a second citizenship was for a long time associated with considerable legal hurdles for German citizens. Anyone who wanted to hold a second passport as a German had to apply for a so-called retention permit under the law applicable until June 2024, the granting of which was at the discretion of the authorities and was often rejected in practice. Since the entry into force of the Nationality Act reform on 27. On 1 June 2024, this legal situation has fundamentally changed: German citizens are now allowed to hold a second, third or fourth nationality without having to obtain prior approval.

This liberalisation meets an increasing need for international flexibility – especially among entrepreneurs who are also considering moving abroad as part of their tax and succession planning. From a tax point of view, the German passport entails a number of disadvantages that depend solely on nationality and can make emigration more difficult for tax purposes. In this constellation, a second passport opens up the option of returning the German passport later and thus permanently leaving the access area of certain German tax incidents.

In the following, we consider the tax disadvantages of the German passport, the legal framework for a second passport, the citizenship-by-investment programs available on the market and the practical aspects of the application. The article is aimed in particular at wealthy individuals and entrepreneurs who deal with the question of a second passport as a strategic option for their succession planning.

2. Tax disadvantages of the German passport

The German passport triggers a tax liability in various constellations, which continues after a move abroad. These connecting points are based partly on nationality and partly on a previously justified unlimited tax liability. For entrepreneurs with an international perspective, four regulatory areas in particular are important.

2.1.Exit tax according to § 6 AStG

Exit tax according to § 6 Foreign Tax Act (AStG) covers natural persons who hold at least one percent of a share capital company and who move their place of residence or habitual residence abroad from Germany. At this moment, the German Treasury fabricates a sale of the shares at common value and taxes the resulting fictitious capital gain. Using the simplified income method, this can lead to tax burdens that move quickly in the six- or seven-digit range – even though the entrepreneur has actually not realised a liquidity inflow.

The exit tax is linked to the unlimited tax liability in Germany, which is typically based on the residence or habitual residence. Exit tax is not directly linked to nationality; However, it is a central reason why many entrepreneurs have to plan their emigration in the long term. More on this topic can be found in our article Avoiding Exit Tax.

2.2. Extended limited income tax liability

Significantly more strongly linked to nationality is the extended limited income tax obligation according to § 2 AStG. This provision covers German nationals who have been subject to unlimited taxation for at least five years in the last ten years before leaving and who move to a so-called low-tax country. According to the current legal situation, a low-tax country is present if the income tax burden there falls below that of Germany by more than a third.

If the conditions are met, the emigrant remains subject to income tax for a period of ten years after leaving Germany with his so-called extended domestic income. This also includes income that would not be subject to a limited tax liability for an ordinary foreigner. In practice, this means that German citizens remain tax-bound to Germany for more than a decade when they move to the United Arab Emirates or other low-tax areas. This legal consequence occurs irrespective of whether the taxpayer maintains a further residence in Germany or not.

Inheritance and gift tax after departure

Another burden resulting solely from German nationality is the continuing unrestricted inheritance and gift tax obligation according to § 2 (1) no. 1 letter b of the Inheritance Tax and Gift Tax Act (ErbStG). German nationals are then still considered nationals within the meaning of the ErbStG for a period of five years after their departure and will thus continue to be subject to German inheritance tax. The tax base here is the worldwide assets of the decedent or donor, not only the assets located in Germany.

When moving to the United States, this period is extended to ten years due to a special arrangement. The practical consequence: If an emigrated German citizen transfers assets to his children or other relatives within the specified period, gift tax is incurred in Germany – with all related notification and declaration obligations. This regulation applies regardless of whether the German citizen still has a residence in Germany.

2.4. Possible taxation by nationality

Politically discussed – and has long been a reality in the US – is the model of taxation by nationality. If implemented consistently, German citizens worldwide would be subject to German income tax with their entire income, regardless of residence or habitual residence. A link to nationality in the context of an inheritance or property tax is also conceivable.

Should the German legislature follow this path, the German passport would lead to a lifetime tax liability – regardless of where the taxpayer actually lives or operates economically. The only legally secure way out would then be a return of German citizenship. Since such a return is only possible if the person concerned has previously acquired another nationality, the preventive acquisition of a second passport in this constellation acquires a special strategic importance.

3. Legal basis: Reform of the Nationality Act 2024

Until the reform of the Nationality Act (StAG), the principle of avoiding multi-statehood applied in Germany. Anyone who wanted to acquire another nationality as a German citizen had to apply for a so-called retention permit according to § 25 StAG a.F. This was only granted if the task of German citizenship was unreasonable for the person concerned and threatened considerable disadvantages. In practice, such requests were often rejected; The acquisition of a second nationality usually led to the automatic loss of German citizenship.

With the law on the modernisation of citizenship law, which came into force on 27 June 2024, the legislature abandoned this principle. Multinationalism is now the rule of law. German citizens can acquire one or more other nationalities without this having an impact on the existence of their German citizenship. The requirement for a maintenance permit has been waived.

The practical significance of this reform for the tax and succession planning of German entrepreneurs is considerable. For the first time, they can acquire a second passport without first having to go through an official approval procedure, the outcome of which would be uncertain. This means that the instrument of second citizenship is now also open to German clients without special personal connections – for example through birth, descent or long-term stay abroad.

4. Extra-tax reasons for a second passport

In addition to the tax motives presented, a number of extra-tax aspects speak for the acquisition of a second nationality. In consulting practice, the focus is less on the question of the “strength” of the German passport than on the need for options and independence from the legislation of an individual state. Entrepreneurs who operate internationally are increasingly thinking in scenarios: What happens in a geopolitical crisis, in capital controls or in a restriction of freedom to travel?

A practical example from the recent past illustrates these risks: Ukrainian citizens who were abroad at the beginning of the Russian war of aggression were in many cases unable to renew their expired passport at the Ukrainian mission abroad. Those who returned to a country like the United Arab Emirates to continue their life there had partially no access to their bank accounts without a valid passport; Ukrainian banks link account access to a valid passport. Those who had a second passport in this situation were able to continue their economic activities without restriction.

Even independent of extreme scenarios, a second pass offers practical advantages. For example, the second nationality can facilitate the opening of bank accounts abroad, extend the visa exemption for certain countries or simply act as “physical insurance” for the family. From the point of view of consultancy practice, the second passport is thus less a tax design instrument in the narrow sense of the word and more a component of a comprehensive asset and succession strategy.

5. Citizenship-by-investment programs at a glance

The state-regulated citizenship-by-investment programs (CBI) allow applicants to acquire citizenship against a specified investment. The programs are set up by the respective governments, legally permitted and can be viewed completely transparently in their terms on the official websites of the offering states. Currently, around a dozen such programs exist worldwide, with the price and reputation of the respective passports differing significantly.

5.1. Caribbean States

The five classic Caribbean CBI states – St Kitts and Nevis, Dominica, Antigua and Barbuda, Grenada and St Lucia – offer the most established programs. St. Kitts and Nevis is considered a pioneer of the industry; The programme has been in existence since 1984. The investment amounts are between about 200,000 and 250,000 US dollars as a donation to the respective state. Caribbean passports provide visa-free access to around 150 countries – about 73 percent of all countries worldwide – including the entire Schengen area, Switzerland and Norway. This makes these passports also suitable for people who want to return their German passport in the long term and still need a high degree of freedom to travel.

5.2. Other programs outside the Caribbean

Outside the Caribbean, there are programmes in Vanuatu, Egypt, Turkey, Jordan and São Tomé and Príncipe, among others. The investment amounts vary considerably: while São Tomé and Príncipe are among the cheapest programs with a donation of around 90,000 US dollars, Egypt is about 250,000 euros. The travel freedom of these passports is lower – typically around 100 visa-free destinations. The EU-Schengen area is usually not included. For clients who hold a second passport primarily as a “vehicle” for opening foreign accounts, starting companies abroad or as a pure Plan B, these programs are a cost-effective alternative.

5.3. New programmes from 2026

In 2026, two more CBI programs are expected to come on the market: Argentina and Botswana. Botswana in particular is of interest to clients with economic or private ties to southern Africa. The specific investment amounts and requirements of these new programmes will be published by the respective governments at the time of their official introduction.

6. Investment routes: donation vs. real estate investment

In the case of the Caribbean programmes, two investment routes are regularly available to applicants. The first and most common variant is the so-called donation route (non-refundable contribution). In doing so, the applicant makes a one-off contribution to a state fund of the respective country. The funds go to infrastructure projects such as building roads and bridges, creating jobs or promoting tourism. the donation is non-recoverable; the investment volume thus corresponds to the actual cost of the passport.

The second route is real estate investment. Here, the applicant acquires shares in state-approved real estate projects, typically hotel shares in international hotel chains. These units must be held for at least five years and may be disposed of after that period. During the holding period, dividends typically flow between one and three percent annually. The total investment on the real estate route is usually around $90,000 to $130,000 above the amount of the donation route.

In São Tomé and Príncipe as well as in Vanuatu, only the donation route is currently planned. Egypt and Turkey, on the other hand, rely on real estate purchases, in which the investment amount flows 100 percent into real estate. The pure investment amounts include fees for the background check (due diligence), processing fees of the government and the fees of the contracted service providers. In total, this results in a surcharge between 10 and 20 percent on the pure investment volume.

7. Application expiry and typical duration

The process of a citizenship-by-investment process follows a largely standardized pattern. After an initial discussion, in which goals, family constellation and preferred destination country are discussed, the required documents are obtained. The standard documents include birth certificates, marriage certificates, proof of professional career and proof of the origin of the assets used (source-of-funds examination). German clients can usually teach these documents quickly and completely, as they are kept as standard documents in Germany.

Subsequently, the application is physically sent to the so-called Citizenship Unit of the respective government. There, the examination of the application, the due diligence of the applicant and his family members and the final decision are made. For programs such as St. Kitts and Nevis, the processing time is between 70 and 90 days. After a positive decision, it takes another two to three weeks for the physical passport to be delivered. Overall, a total duration of four to twelve months is expected, depending on the selected program.

According to the current legal situation, personal entry into the destination country is not required for any of the programs mentioned. The entire process – including document collection, biometric collection and disbursement of the investment amount – can be organised from home. Also a visit to the respective embassy in Berlin is usually not necessary.

8. Family members and later involvement

A key advantage of citizenship-by-investment programs is the ability to include multiple family members in the application without the investment amount increasing proportionally. In the case of St. Kitts and Nevis, for example, the amount of donations remains irrespective of whether an individual applicant or a family of four acquires nationality. In addition, only due diligence and processing fees are incurred per additional person. The surcharge for a family of four compared to the individual application for St. Kitts and Nevis is around $23,000 ($309,000 compared to $286,000 for the individual application).

the acquired nationality is not temporary; it is valid for life and is also passed on to future descendants according to the respective national legal systems. If more children are born after the acquisition, they can be included in the application in most programs. The same applies to later spouses after a divorce and remarriage. For entrepreneurs who plan an asset and succession structure over several generations, these design possibilities are a central argument.

9. Return of the German passport and reporting obligations

Under current law, the acquisition of a second nationality does not lead to an automatic reporting obligation to the German authorities. There is no institutional exchange of information between the governments of the CBI states and the German registration authorities; the granting of a second nationality is not proactively reported to Germany. There is also no obligation on the German citizen to report the acquisition of another nationality on his own initiative. Only when the German passport is renewed must the corresponding form state whether another nationality exists and by what means it was acquired.

Anyone wishing to return their German citizenship after acquiring a second passport must submit a formal waiver application in accordance with § 26 StAG. This shall be subject to proof of an already acquired other nationality; Return without a second passport would lead to statelessness and is therefore rejected. The waiver must be justified. In certain exceptional cases – for example in the case of defence or existing service obligations – the return can be refused. In consulting practice, most clients initially retain both passports and use the second nationality as a strategic option, which is activated only upon the occurrence of certain conditions – such as a legal introduction of taxation by nationality.

Separately mentioned is the possibility to apply for a second German passport. This is permissible if professional reasons require the parallel use of two passports – for example, for frequent trips to countries with reciprocal visa restrictions (classic example: Iran stamp and USA entry) or for managers with high travel frequencies, whose first passport must be regularly deposited with an embassy for visa procedures. The second German passport is issued for ten years and does not constitute a second passport in the sense of a further nationality.

10. Conclusion: The second passport as a tax and entrepreneurial plan B

The reform of the Nationality Act in June 2024 made it much easier to obtain a second passport for German citizens. From a tax point of view, a second passport gives German entrepreneurs the option to free themselves in the long term from the access area of certain German tax incidents – in particular with regard to the extended limited income tax liability pursuant to § 2 AStG, the continuing inheritance and gift tax liability as well as a possible future taxation according to nationality. A prerequisite for the return of German citizenship is always the prior acquisition of another passport.

Citizenship-by-investment programs available on the market vary considerably in terms of price, travel freedom and reputation. While the Caribbean states offer a high level of travel freedom, including the Schengen area, for investment amounts starting at around $200,000, programs such as São Tomé and Príncipe, starting at around $90,000, are cheaper but offer significantly more limited global mobility. The selection of the appropriate program should always be made in the light of the individual objective – plan B, tax design, succession planning or combination.

In the overall view, the second passport is not an isolated tax design instrument, but a strategic component within a comprehensive asset and succession planning. The decision for or against a second passport should therefore not be made in isolation, but should be assessed in conjunction with other arrangements – such as the family foundation, the transformation into a partnership, the holding structure or a tax-optimized move to Dubai.