Buying Foreign Citizenship

With enough money, anyone can.

Hanna Ziady  /  27 May 2015

Moneyweb lio global

JOHANNESBURG – With enough money you can buy anything, even a foreign citizenship. And for the outrageously wealthy, the power to move and live wherever they like is worth paying for.

“For families with means, it’s really just about giving yourself and your kids options,” says Andrew J. Taylor, vice chairman of Henley & Partners, the company whose chairman basically created the citizenship-by-investment concept and turned the fortunes of a struggling Caribbean island, St Kitts & Nevis, around.

Taylor says that 90% of Henley & Partners’ clients don’t want to move from their home country immediately, often due to significant business or family interests, but would either like the option to do so at a future date or want the travel benefits associated with having multiple passports.

According to Henley & Partners latest Visa Restriction Index, South Africans can access 97 of 199 countries visa-free. The UK and Europe, however, are not included in this list of countries and South Africans, both for work and play, favour these destinations.

It’s perhaps no surprise then that the Caribbean Island of St. Kitts & Nevis, as well as Antigua & Barbuda are popular citizenship choices for the well travelled due to their favourable passports, which allow visa-free business or leisure travel for up to 90 days to Europe and the UK.

Malta, Antigua, Cyprus

Malta, a group of islands in the Mediterranean, is especially popular at the moment among clients at the top end of the wealth spectrum, according to Taylor.

“Malta has a minimum contribution to infrastructure and development of €650 000 per person, growing by €25 000 for every child under 18. On top of this contribution, you would need to invest €150 000 into a government bond and buy a property for €350 000, or lease property for five years at €16 000 a year,” Taylor explains.

“As soon as you become Maltese you become European and have the right to live, work and study in any one of the EU member countries,” he adds.

There is also no restriction on passing down citizenship to future generations. Generally, South Africans with more than R100 million in liquid assets choose Malta, says Taylor.

“In Antigua, you can either donate $200 000 to government, excluding due diligence and professional fees in the region of $100 000, or invest in real estate, where you would be looking at around R5 million to R6 million, which could be liquidated after five years of holding citizenship,” Taylor explains. 

In Cyprus, meanwhile, which is also a member state of the EU, a real estate investment of at least €2.5 million is one of the requirements to obtain citizenship.

Each jurisdiction has its own legislation, which may result in additional costs depending on an investor’s specific situation, as well as longer or shorter time periods to secure citizenship. For instance, in Malta it takes roughly 12 months to process citizenship, while in Cyprus and Antigua this is four months.

Henley & Partners charges clients a processing and administration fee, which differs from client to client depending on individual circumstances.

Residence vs citizenship

Taylor cautions against opting for a lower cost residence-by-investment option as a means of securing citizenship, unless you plan to relocate and acquire citizenship by another means. “Residence does not guarantee citizenship and this route can take time,” he says.

For instance in Portugal, a €500 000 investment in urban real estate can get you a Golden Residence Visa but before citizenship is granted the government wants to see you build ties to the country by, for example, learning Portuguese, says Taylor.

“It’s not just a matter of living there for six years,” he says, warning against misleading marketing.

“If you want to remain in South Africa, then you want to look at a pure citizenship programme,” he adds, noting that as a citizen your legal standing within the country is also of a higher level than a resident.

Taylor advises against choosing a programme where you get a passport without citizenship. “There are always people in political power selling passports that aren’t technically legal or where the constitution does not allow for it. You must first be legally naturalised as a citizen; a passport is just what you get by having citizenship,” he explains.  

Promoting illicit money flows?

Organisations such as Global Financial Integrity (a Washington-based research organisation), Human Rights Watch and Amnesty International argue that large outflows of illicit money via a shadow financial system aggravates poverty in emerging economies.

“Illicit money leaves poorer countries through a global shadow financial system comprising tax havens, secrecy jurisdictions, disguised corporations, anonymous trust accounts, fake foundations, trade mispricing, and money-laundering techniques. Much of this money is permanently shifted into western economies,” according to a group of 21 organisations – including universities, non-profits and faith-based organisations – which have together signed the New Haven Declaration On Human Rights and Financial Integrity.

Alongside potentially unfavourable and unsavoury money flows, there are concerns that these programmes enable criminals and terrorists to secure second passports. In November, Canada implemented a visa requirement on St. Kitts & Nevis “due to concerns about the issuance of passports and identity management practices within its Citizenship by Investment program”, the Canadian government said at the time. 

Taylor, however, argues that these programmes hold positive benefits for the countries that offer them and give these countries a means to attract wealthy and talented individuals. “As soon as an individual becomes a citizen in a country, they develop ties with that country and start investing money there,” he says.

For instance in Malta, which is currently attracting the wealthiest people in the world, some of the investors want to re-engineer the entire telecommunications infrastructure, he notes.

Taylor says that Henley & Partners does not deal with countries where legislation in this area is unclear or the tax situation is grey.

South African interest

The company’s Cape Town office receives “daily enquiries” from South Africans, according to Taylor.

Nadia Read, a private consultant at independent world residence and citizenship company, LIO Global confirms that there’s been a notable increase in recent months in queries from South African families looking for EU citizenship options, mainly to give their children the opportunity to work and study in Europe.

“Families are looking for the global freedom, mobility and access that a second passport can offer,” she says, noting that Malta is the most popular choice.

“It’s important that the client understands what their end goal is, whether residency or citizenship, in order to make the best choice,” Read adds.

Read notes that South Africans, when applying for a secondary citizenship, need to apply for retention of citizenship at Home Affairs.

Original article: 

https://www.moneyweb.co.za/investing/offshore-investing/buying-foreign-citizenship/