Citizenship by Investment Programmes – How to Upgrade Your Citizenship

Investors are flocking to some key countries for the best places to reside and park their dollars – this is how Citizenship by Investment Programmes work

Nov 06, 2018 | By Joe Lim

Citizenship by Investment Programmes (CIPs) really kicked off in the 1980’s and since 2016 programmes are available in more than 57 countries with the numbers still growing. That’s more than 50 per cent growth since the turn of the century. If the world economy starts to dip back towards recession territory, then it can be safe to say that even more countries will offer accessible citizenship through investment programmes.

Valetta seafront, Malta

According to Dominic Volek Head of Henley & Partners, Southeast Asia, “On the supply side, the second half of 2018 will see the launch of two very exciting and affordable new European Citizenship by Investment Programmes, in Moldova and Montenegro, both of which offer strong travel freedom and citizenship in stable, fast-growing European countries”. As for demand, Dominic stated, “We expect that demand for CIPs will grow in equal measure, as the public becomes more informed about their investment migration options and about the benefits of obtaining a second citizenship in general”.

There are many reasons why one would want to change their citizenship. The two primary reasons tend to be freedom of travel and hedging against political and economic risk. Many countries offering programmes provide the opportunity for more visa-free travel than the investor’s home country.

Each year, Henley & Partners publishes a report on the countries with passports that allow them to travel visa-free to the greatest number of countries. The information attained for the report is provided by the International Air Transport Association. In 2018, Singapore and Japan ranked number one with their citizens allowed access to 189 countries with Germany coming in a close second with access to 188. Other European countries such as Austria came in fourth with visa-free travel to 186 countries. That ties it with the United Kingdom and the United States. If you’re from somewhere like China which ranks 69th with visa-free access to only 72 countries, having citizenship elsewhere can prove extremely useful.

The Caribbean is not all cruise ship goers and honeymooners, it’s also rapidly becoming an investors paradise. The island nations may offer some of the most beautiful scenery in the world, however, they also offer some of the most sought-after Citizenship by Investment Programmes currently available. The countries of Grenada, Antigua and Barbuda, St. Lucia, and St. Kitts and Nevis all provide investors with fast and efficient pathways to a secondary citizenship. Citizenship in Grenada can be attained for USD 150,000 for a single applicant and USD 200,000 for a family of four. This requires that a nonrefundable investment is made into the National Economic Fund. The other option to citizenship includes a real estate purchase with a minimum value of USD 350,000. Grenada gets even more interesting due to the fact they
have an E2 treaty with the United States, which if you’re final plan is to head to America, will greatly speed up the process. An investor also does not need to travel to or reside in Grenada for any period of time. Staying in the Caribbean, Antigua and Barbuda offers citizenship options starting from as little as USD 100,000. Antigua and Barbuda investors must invest in a National Development Fund, which is non-refundable. They also have the option to invest in real estate valued at least USD 200,000 and a couple other higher-priced investment options. You must also stay for five days over a five-year period.

Limassol Marina in Cyprus

The latest country to launch a Citizenship by Investment Programme with Henley & Partners is The Republic of Moldova. The relatively new country, which gained its independence in 1991, offers fairly-accessible opportunities for individuals looking to invest in the nation of 4 million. Like many other nations, investors must contribute to a government fund, however, Moldova’s scheme is reasonable, with prices starting at EUR 100,000 (USD 116,000) and going up to EUR 155,000 (USD 180,000) for larger families. Moldova’s passport offers access to 121 countries visa-free and allows for parents aged 55 and up as well as dependents up to the age of 29 years to be included in an application. Also new is Montenegro, which when launched will offer CIPs starting from EUR 250,000 (USD 291,000), plus an EUR 100,000 (USD 116,000) fee charged by the government per application. Only 2,000 applicants will be accepted, meaning this small country will have a very exclusive programme. Although offering visa-free access to 123 countries, it may very well be worth the investment.

If you’re interested in settlement in the European Union, then things get a bit pricier. Malta, which is the crown jewel of European citizenship by investment requires a contribution of approximately EUR 1 million (USD 1.16 million). This can be attained through the following three steps and you must partake in several investments. The first being an investment of EUR 650,000 (USD 756,000) in the National Development and Social Fund. The second enables a little more leeway. Property can be purchased at a minimum of EUR 350,000 (USD 407,000) and held for five years or a residential lease of a minimum value of EUR 16,000 (USD 18,600) per annum may be attained. The final step is a non-property option in the form of an EUR 150,000 (USD 174,000) investment in an approved financial instrument, which must also be held for five years. Investment into the island of Cyprus starts at EUR 2 million (USD 2.3 million) plus property transaction costs and several fees. Introduced in 2013, their Citizenship by Investment Programme has become one of the most popular in Europe. The EUR 2 million (USD 2.3 million) can be invested into a real estate, development, or infrastructure project. There is also the option to invest in Cypriot businesses and certain types of Cypriot funds.

Frigate Bay, Saint Kitts and Nevis

As more and more options become available for ways to spend, several new cryptocurrencies and Citizenship by Investment Programmes can be added to the list. That’s not all you can do with the technology behind the digital currency. Volek opines, “There are also a number of independent tech companies and NGOs exploring how blockchain technology can be used to protect and digitise identity, which would have important implications for both HNWI and refugee populations, and which could really advance the cause of global citizenship in coming years”. If you’re looking to become a citizen of a new country, with so many options available, there’s never been a better time.

Dominic Volek – Managing Partner H&P

Due diligence Our industry upholds some of the most stringent and advanced due diligence standards in the world, with all the major programmes implementing not one background check but a series of intensive “know your customer” and anti-money laundering checks that are designed to select only the most suitable candidates, and with countries such as Malta holding a rejection rate as high as 24 per cent.

The concept of economic-based citizenship has been around since as farback as Roman times, and it was also a prominent feature of 18th- and 19thcentury Europe: in the 1700s, for example, an investment of GBP 83 in the Royal Bank of Scotland allowed a foreign citizen to become a citizen of Scotland.

EU citizenship
Although Citizenship by Investment Programmes (CIPs) have recently come under scrutiny in Europe, the fact is that in the EU, over 900,000 citizenships are granted through regular naturalisations each year, while only 700 or so naturalisations — less than 0.1 per cent of the total — are granted through CIPs with every single CIP naturalisation being subject to intensive due diligence checks, which is not necessarily the case for regular naturalisations.

Societal benefits
While the media focus is often on the benefits to individuals, CIPs are in fact only feasible and sustainable because of the enormous socio-economic benefits they bring to host countries: countries such as Malta, Cyprus, and St. Kitts and Nevis have all been seen to achieve an economic turnaround through the funds generated by their CIPs.

Industry size
Investment migration is a far larger industry than most people realise: the Citizenship By Investment sector currently contributes about USD 3 billion a year, and the related Residence By Investment sector contributes about USD 15 billion a year, which puts the total industry size at roughly USD 18 billion per annum.

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