(Editor’s note: This was originally posted in March. But with the United Kingdom’s Brexit vote on Friday, 24 June, this post suddenly became relevant for British expats looking for a second citizenship in order to continue working in the European Union. Terry Boyd also contributed to this post.)
Want to be a European citizen, or at least enjoy a long-term residency with all the benefits of a European Union passport? Take out your checkbook.
Call it by its official terms – “Golden Residence Permit program” say, or “Investment Visa” – or call it by its more slangy term (“citizenship for sale”), it’s gaining momentum in Europe. Allowing wealthy foreigners to buy permanent residency is increasingly popular in a number of Europe’s smaller, cash-strapped countries. Take, for example, Portugal. According to PricewaterhouseCoopers, Portugal is a good place to do business because of its “secure society, a highly skilled and English fluent labour force and an excellent quality of life.
“Portugal offers a favourable investment climate,” says an obviously British PwC report. “The country is investing in becoming a premium tourism and real estate location.”
In Portugal, where a 500,000 euro investment in property (currently about $560,000) will gain you citizenship, the program has generated nearly 500 million euros in revenues since it began in 2012. That’s not escaping the attention of other European countries, who are getting in on the act as well. So Portugal is not your only choice. The country has joined a few other European countries, including Spain and Greece, in aggressively offering the benefits of citizenship – or, to be more accurate, aggressively selling their citizenships.
Interestingly, according to a 2015 Bloomberg post, this trend is largely the product of one man, a Swiss attorney named Christian Kalin. From the Bloomberg post:
“The bottom line”—it’s a phrase Kalin uses often—“is that more states are open to making citizenship rights available through investment,” he says. “And it makes a lot of sense. Why not give citizenship to people who contribute a lot to the country?”
Kalin’s firm, Henley & Partners, has helped dozens of governments raise more than $4.5 billion in direct investment through citizenship or residency programs, according to its website. (Interestingly, Henley & Partners itself is headquartered on the Bailiwick of Jersey, a British dependency off the coast of France that is one of the world’s great tax havens.)
Portugal offers attractive individual tax packages and corporate incentives for expatriates looking to create new businesses there. “The special tax regime for non-habitual tax residents shows the Portuguese commitment to attract the best international talent, as well as wealthy individuals and their families,” states PwC.
Portugal entices expats with many other benefits, too, such as a 20 percent flat rate for certain Portuguese sources of income, an exemption for almost all foreign source income, tax exemptions on inheritances, no dividend taxes and beneficial tax treatment for pensions and other life insurance products. But not just any expat. The country has identified, as beneficiaries of its citizenship and taxation program, “high value-added activities of a scientific, artistic or technical nature.” It has created special tax programs for engineers and medical doctors, and also singles out architects, dentists, teachers, psychologists, technicians, investors, directors and managers and – of course – IT professionals.
“Portugal has become one of the leading EU countries for R&D and new technologies,” PwC reports.
The program also provides for tax exemptions for foreign source income, provided certain conditions are met. It is not a surprise that Portugal is becoming a top choice for other countries’ “UHNWI” (ultra and high net worth individuals), the Chinese in particular. The vast majority of those signing up for the Portuguese program have come from China.
Andrew Coutts, Henley & Partners managing partner, told The Financial Times the Chinese “account for 70 percent of the world’s residency/citizenship visa market, and Portugal is seeing its fair share, particularly for new-build developments around Lisbon’s 1998 Expo park, the city’s answer to London’s Docklands.”
Spain’s Golden Visa program for non-EU residents also requires a minimum 500,000 euro investment, but, unlike Portugal, insists investors spend at least 183 days a year within its borders.
Though the total purchase price is at least 500,000 euros, the investments may be spread over several properties. Spanish residence visas may be issued to the immediate family, including spouse or non-married partners and to children up to 18 years, economically dependent adult children and economically dependent parents. The act also includes children over 18 years old who, due to health issues, are not objectively capable of looking after themselves.
The Spanish visa does not need to be renewed within five years. And a minimum stay is not necessary to be a tax resident. Permanent residence will be granted after five years if applicants have followed the rules.
The first card is issued for two years, but carried over for another five years if the investment is held. Applicants will have the right to live and work in Spain from the first day. Spanish citizenship will be given after an additional five years of permanent residency, though the applicant must be able to prove having traveled to Spain at least once in the first two years, and once more in the three subsequent years.
As an article on the Greek/Cypriate/Turkish news site ekathimerini.com (part of the International New York Times) puts it, “Buy a big house, become a citizen.”
“Investors who spend at least 250,000 euros on property will not only get residence permits but passports too,” stated the article. In an improved package to make Greece more attractive to people from countries outside the European Union, investors who spent at least 250,000 euros on property in Greece are entitled to a five-year residence permit that will then be renewed after the first five years have expired. They will also be able to get Greek citizenship after living in this country for seven consecutive years.
The ekathimerini.com article states, “Despite a few shortcomings, the residence permit program is seen to have been successful so far. Invest-in-Greece chief executive Stefanos Isaias said that 392 permits have been issued in the last five months, with another 83 pending.”
The Maltese citizenship-by-investment plan, called the Malta Individual Investor Programme (IIP), is aimed at high and ultra-high net worth individuals.
Before applicants can be admitted for Maltese citizenship by investment, they are required to invest at least 150,000 euros in government-approved financial instruments (bonds, stocks, and debentures that benefit the nation) and must commit to keeping the investment for at least five years. Applicants must also commit to retaining an immovable residence in Malta for a minimum time period of five years, either by spending at least 350,000 euros to buy a property in Malta and maintaining ownership for five-plus years; or by leasing a property for five-plus years with a minimum annual rent of 16,000 euros.
All individuals and families applying to the program must make a significant non-refundable contribution to the National Development and Social Fund set up by the Government of Malta and run by a board of trustees. The fund, which is on the same level as the central bank, finances projects in the country linked to public health, education, job creation, social improvement and innovation.
Within four months of being issued a Malta IIP Letter of Approval in Principle, the main applicant must contribute 650,000 euros and his/her spouse 25,000 euros. Contributions of 25,000 euros are required for each minor child; 50,000 euros for each unmarried child between 18 and 26; 50,000 euros for each dependent parent and grandparent; and 50,000 euros each for any adult child who is physically or mentally challenged.
Introduced at the beginning of 2014, Malta’s citizenship-by-investment plan grants successful candidates citizenship by a “Certificate of Naturalization,” which can also be extended to include their families. The Malta deal is attractive because it includes EU citizenship … which includes the right of establishment in all 28 EU countries and Switzerland.
Candidates also have the potential permission to set up business in Malta, and can get a Malta passport enabling them to enjoy visa-free travel to more than 160 countries across the world, including the United States.
BUT, the Maltese program has some of the strictest due-diligence of any immigrant investor program in the world. There is a four-tier assessment process carried out directly by the government that includes extensive criminal checks with INTERPOL, the International Criminal Court, and various other sources and authorities. As part of the due diligence process, applicants must also provide a police certificate before they will be approved for European citizenship.
As of May 2015, IIP had received over 585 Malta passport applications on behalf of investors from more than 40 different countries. However, the program is firmly capped at 1,800 participants.
Cyprus is the other EU nation to offer a direct citizenship-by-investment route. The cost of the program was slashed to 2 million euros last year, partially in an effort to placate mostly Russian investors who lost money when Cyprus was forced to accept a strict European Union bailout.
The previous investment level of 5 million euros in real estate or banks, is still required for individuals; the new 2 million euros level applies when one invests as part of a larger group whose collective investments total more than 12.5 million euros.
At this writing, there are more than a dozen countries that offer citizenship for investment from Antigua to Bulgaria, and many more taking good, long looks at creating their own programs including Albania, Croatia, Montenegro and Slovenia. Not all countries offer outright citizenship for purchase, but many do offer residence permits to wealthy individuals that can eventually lead to citizenship. Those countries include Australia, Belgium, the U.K., Singapore and – yes – the United States.
The U.S. allows foreigners to obtain a green card under the EB-5 visa if they invest $500,000 in a “targeted employment area” and create 10 jobs. Since 1990, foreigners have invested more than $6.8 billion, and the U.S. has given out 29,000 visas through the EB-5 program, although there is a yearly cap of 10,000.