02 Jun The wealthy are on the move, but where are they going, and why?
The Knight Frank World Wealth Report 2019 reports the world’s super-wealthy spend over USD 2.4bn on second citizenship each year, with most demand coming from China, the Middle East, and Russia.
Immigration amongst high-net-worth individuals is ‘strong and growing’, the report notes. Indeed, some of the world’s most affluent business people are choosing to migrate to other countries and/or adopt second citizenship.
But why do high-net-worth individuals find second citizenship so attractive? Is citizenship-by-investment really the best use of your money?
Let’s look at the top reasons for wealthy investors choosing second citizenship, and explore the programmes that prove most attractive.
Why do so many high-net-worth individuals opt for second citizenship?
While every investor we talk to is different, everyone shares some common hopes and fears:
Stability, safety and security: Global forced displacement is the highest it’s been for decades. Second citizenship is an insurance policy against this sort of upheaval, allowing those with means to secure a better future for themselves and their family. If you’re one of the many who worry about increasing political and economic turmoil, citizenship-by-investment can offer invaluable peace of mind.
Healthcare: During the Covid-19 international lockdown, only citizens & permanent residents were allowed to return to their “home” countries. What price now can you put on a second or third Permanent Residence card from a country with top quality health care? Having that option in your back pocket, might be the best insurance plan you can ever take out.
Global mobility: Some passports can be very restrictive regarding global mobility, which can be a real hindrance for anyone who enjoys – or relies on – international travel. At the time of writing, the top passport-holders could travel to 160+ countries on visa-free or visa-on-arrival terms.
Global mobility is an issue of personal and professional freedom. Of being able to holiday where you want; take business meetings where you want, without lengthy visa delays and restrictions. Global mobility is an issue of keeping up when we live in increasingly globalised societies; not being able to move freely really can hold you back.
For high-net-worth individuals, citizenship-by-investment offers global mobility that might not otherwise be available – along with genuine personal and professional benefits.
Trade and investment: Restrictions in global mobility often also translate to restrictions in trade and investment, because they both stem from the same thing: global standing.
Countries that enjoy positive standing on the world stage also enjoy an abundance of global treaties and agreements, which grant citizens increased rights. Countries that are more internationally isolated enjoy fewer of these privileges, and citizens bear the burden.
These privileges include freedom to travel easily, and also extend to trade. There can be huge disparity in the number of such agreements countries hold, and from which citizens benefit.
For example, the Democratic Republic of Congo is not the only country in Africa that holds no global goods and services regional trade agreements. Citizens from these countries would have no preferential rights on regional trading which would significantly impact business development.
On the other hand, countries such as Canada, the US, China, and the UK enjoy around 40 regional trade agreements that empower easier trade for their citizens.
Investing in second citizenship can give access to preferential trade agreements and conditions that would be otherwise inaccessible. For wealthy business people, this can deliver significant returns in terms of trade within new territories.
Tax relief: Another major reason high-net-worth individuals choose second citizenship is what the Knight Frank report calls the ‘ever-growing demand from the wealthy to move their money into safe havens’.
Many wealthy individuals are realising second citizenship can pay for itself in tax relief. With a 0% corporate and income tax rates (along with many other favourable rates) offered by several countries around the world, particularly those in the Caribbean, the potential savings are clear.
Quality of life: Many second citizenship programmes are designed so you don’t have to live in (or in some cases ever travel to) the country to gain and maintain your new citizenship. While many investors see this as a real plus, many embrace the opportunity to relocate.
When money is no object, it makes sense that securing the best possible life for you and your family would be high on your agenda. And sometimes, that requires a new country, a new home and a new lifestyle.
On average 32% of ultra high-net-worth individuals plan to buy a new home outside their country of residency in the next two years, reports the Knight Frank World Wealth Report 2019. The UK, US, France, Switzerland, and Spain are the five most popular locations for second homes, while lifestyle is the most important factor determining location choice.
For those with means, citizenship- or residency-by-investment can be the first step in building a new life somewhere you really want to be.
Which citizenship-by-investment programmes are most popular? Let’s look at the top 5 programmes that especially appeal to high-net-worth individuals’ main concerns:
- The US Immigrant Investor Program:When lifestyle is the most important factor determining location choice, it’s little surprise the US Immigrant Investor Visa is so popular. This EB-5 visa – otherwise known as a green card – allows you to secure permanent US residency for you and your family for an investment from USD 900,000.
As a US resident, you enjoy domestic access to US education – no small thing, given that 15 of the top 20 universities in 2019 are from the US. You benefit from world-class healthcare, and a unique culture of opportunity and liberty. For many investors, the US Immigrant Investor Program is a golden ticket to the American Dream, albeit not the friendliest country in the world from a tax perspective.
- St. Kitts and Nevis:The Caribbean is the undeniable birthplace of second citizenship, and remains enduringly popular amongst high-net-worth individuals as a means of protecting their wealth. The most established of the many Caribbean programmes, St. Kitts and Nevis definitely deserves a mention.
The St. Kitts and Nevis program is now 36 years old, and still offers fantastic benefits for global mobility and a laid-back island lifestyle, but the tax advantages are where the programme really comes into its own.
There is no personal income tax or capital gains tax, and companies that conduct business exclusively with non-residents are exempt from all income, capital gains and withholding taxes.
- Cyprus:There are a number of citizenship and golden visa programmes across Europe. While they all have their benefits, Cyprus is probably the most impressive of them all. You can secure full EU citizenship here in a matter of months, and your new passport will unlock 149 countries on visa-free or visa-on-arrival terms. Cyprus offers an attractive relocation destination too, with a high-quality of life and good infrastructure. And you’ll benefit from a very low corporate tax rate of only 12.5%.
One of the most interesting benefits of the programme, though, will be your newfound status as an EU citizen – and therefore access to the EU single market. Businesses operating within the EU single market enjoy preferential terms and tariffs and less red tape, making intra-EU trade easier and more profitable.
For international businesspeople wanting to unlock trade through the EU, Cypriot citizenship is the obvious answer, but this comes with a starting price of EUR2m. This EUR2m should be invested in Cyprus for a 5 year period.
- Portugal: The market leader in the golden visa market. Portugal allows investors from as little as Eur280k, to acquire Temporary Residency status, which allows access to all of the Schengen member states.
After 5 years of Temporary Residence, the investor can apply for Portuguese Citizenship, and your real estate investment, should you have chosen that option, should have had double digit growth annually over this period of time. Mandatory residence requirement? Yes, 7 days per year.
Portugal real estate is currently the talk of the town, with Lisbon seen as the best performing city globally over the last three years. The Portuguese government will bring in investment restrictions in 2021 (to the cities of Porto and Lisbon) to try to control the increasing property prices.
- Vanuatu: The newest kid on the block. A Commonwealth archipelago nation, spread across 82 islands in the south Paciﬁc Ocean, Vanuatu is a three hour flight from Sydney, and is Consistently rated as one of the “Happiest Countries on Earth”. Vanuatu’s location, people, pristine environment and natural beauty render this as truly one of the Planet’s last undiscovered “gems”.
Vanuatu’s citizenship by investment program is called the “Development Support Program” or DSP, and was launched on 01 January 2017. The Government of Vanuatu designed the DSP to both attract quality high net worth applicants – who might also become investors in Vanuatu, and also to directly raise funds in support of the further development of the country. As the newest citizenship by investment program in the world, it is also the fastest, by far, with Government pre-clearance for applicants taking as little as 10 days.
The entire process in Vanuatu can permit applicants to have a new passport in their hand, in less than 60 days. So if time is of the essence, this is the by far the best option, allowing visa free travel to over 130 countries, including Schengen and the UK. Costs for an individual start at USD $130k.
So what does the future hold for wealthy migration and second citizenship?
As global wealth continues to grow, so will the high-net-worth individuals’ need to amplify and protect it. As global political and economic stability remains tenuous, wealthy individuals will continue to seek refuge in safer, more stable climes.
The combination of increased global wealth with decreased stability is likely to fuel continued growth in the second citizenship landscape. In turn, more countries are expected to take advantage and set up citizenship by investment programmes catering to the world’s wealthy.
Ultimately, second citizenship will become the norm for high-net-worth individuals, as more and more people become global citizens.
Contact the team at Huriya Private for more details on the many international investment programs available today.