Not all passports are created equal. Here’s a list of the most powerful ones

The United Arab Emirates has the strongest passport in the world, according to a new index.

The country jumped from being tied for 32th place on last year’s ranking to the No. 1 spot, according to new index by the tax and immigration consultancy Nomad Capitalist.

The Emirati passport leapt up the list because it has visa-free travel privileges to the most places (181 in total), no income taxes and an ever-increasing presence on the world stage, all of which make it attractive to aspiring global citizens, the company said.

Unlike other rankings that focus solely on visa-free travel privileges, the “Nomad Passport Index 2023” assesses five factors each given different weightings:

Other than visa-free travel, the categories are assessed by scores that vary from 10 to 50, said Jovana Vojinovic, Nomad Capitalist’s director of operations and sales.

For example, she said taxation is based on the long-arm reach of a country’s tax laws, as well as a country’s tax rates:

• Citizen-based tax: where passport holders pay no matter where they live — score of 10
• Resident-based tax: where residents are taxed on worldwide income — score of 20 (if rates exceed 50%) or 30 (if they don’t)
• Territorial tax: where income made within the country is taxed — score 40
• No income tax — score of 50

Countries that score a 10 for taxation include the U.S. and Eritrea, which employ worldwide “citizen-based” tax rules, said Vojinovic.

“You can theoretically live on the moon if you’re a U.S. citizen, and you’ll pay taxes to the U.S.,” she said.

South Africa is “flirting” with adopting the system but probably won’t be able to impose it because it lacks the sway that the U.S. has on the global banking system, which as a condition to work with U.S. citizens requires that they comply with federal IRS rules, Vojinovic said.

Another factor — dual citizenship — applies in two ways, she said — first, if a country allows its citizens to get a second citizenship, and second, whether it allows foreigners to naturalize there as well.

Perception is based on both subjective views and objective data, such as the World Happiness Report and the Human Development Index, said Vojinovic. But the bottom line for this category is: “Will someone bother you at the airport as being a citizen of that country?”

Here is the complete list, from 1 to 199:

The scores on this year’s ranking are generally lower than last year’s, because of a change in the way Nomad Capitalist scored visa-free travel.

This year, visas-on-arrival and e-visas aren’t included, causing many countries to lose ground on this factor, said Vojinovic. For example, last year’s No. 1 passport — Luxembourg — scored 189 in this category; this year it fell to 174.  

Vojinovic called the UAE passport the “winner of the decade.”

The United Arab Emirates “added 106 new visa-free countries in the last decade, which is an amazing number,” she said. “Also, they’re a zero tax country.”

Perception of it improved in the past year because of an influx of rich and famous people who moved there, she said. She said several years ago, clients would say “‘I’m not sure how safe it is’ or ‘we heard some things about their laws,’ referring that’s it’s a dominantly Muslim country.”

Others would mix the UAE with Saudi Arabia, “grouping it all together,” she said.

But slowly people started realizing it has “very liberal visa policies and is very welcome to foreigners, welcome to investments … [it’s] pretty much became a go-to destination for most people that have crypto based businesses.”

It also notched an additional 10 points in the “freedom” category because of a series of reforms, though this is still its lowest category overall.

In 2021, the government announced that Emirati citizenship is attainable for select foreigners, such as investors, doctors, scientists and intellectuals, who meet a rather high bar of requirements.

Still, the UAE passport is often regarded as being one of the most difficult passports to obtain.

“As the law is relatively new, we still have to see its practical implications as the number of requests increases,” said Vojinovic.

Vojinovic said that “more and more people” are moving, and not just “exotic digital nomads” either.

She said more retirees are seeking to move to countries that have better health care and “freedom.”

“Freedom is … going to be highlighted in the next couple of years, especially in this industry, as we see massive, massive immigration waves from certain countries,” she said. “I think Canada is … leading this whole movement.”

Canada regularly tops passport rankings, but its ranking fell this year because of a loss of points in two categories: perception and personal freedoms, caused by incidents such as jailing protestors involved in the “Freedom Convoy” protests, Vojinovic said.

“Canadians are very big on Costa Rica,” she said, “Americans especially like Portugal.”

But Portugal was also popular with many others, said Vojinovic, including wealthy people who wanted a European Union residence permit and digital nomads, retirees and families.

Portugal’s lax entrance policies haven’t been as welcome with residents. An influx of outsiders caused a housing crisis in the country, with soaring rental and purchase prices. Among other measures, the government announced in February that it was ending its “Golden Visa” program to help stabilize real estate costs.  

“The same thing happened” in Costa Rica, she said. “Most people think it’s kind of dirt cheap, okay, we’re saving a bunch of money by going there. But … a lot of foreigners came in the country. Rent prices started jumping.”

Mexico is another location that has proven to be popular, especially during the pandemic, because it “didn’t have any Covid mandates,” while “crypto people” are attracted to El Salvador because Bitcoin is legal tender there, she said.