Aside from benefits such as freedom of travel and ease of access to international markets that a second passport offers for wealthy South Africans, many of these programs offer attractive property investments with good capital value retention, a currency hedge as well as growth.
Top Citizenship-By-Investment Choices For South Africans (Seeff Southern Suburbs Magazine)
Following one of the most austere mini budget presentations since 1994, there will no doubt be a further rise in the demand from wealthy South Africans for a second residency or citizenship, says Ms Nadia Read Thaele of LIO Global, a specialist in residency and citizenship-by-investment planning for private clients.
With enough money, anyone can.
Hanna Ziady / 27 May 2015
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 HP. Taylor says that 90% of HPs’ 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 HP 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.
HP 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.
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.
By Chris Buchanan
THE subject of global citizenship a.k.a. dual citizenship or alternative residence is occupying more and more column space in financial media as South Africa spirals into economic uncertainty and socio-political tension. Chris Buchanan talks to Nadia Read of LIO Global about the real benefits of these schemes and one or two blind side possibilities that could cost you dear.
A recent article on Traveller24 listed the 97 counties South Africans can visit on their passport alone, no visa required. The comments made for interesting reading, generally slating the fact that of the 97, not many were worth the trouble for a holiday, never mind a second home or business possibility. If you want to do business globally in the economies that won’t bury you in red tape but will give you access to important markets, you will need expand your business out of Africa and into a country with credibility.
NADIA READ says the following about the importance of having options when entering global markets, “For business owners who travel extensively, a second citizenship can open many global doors. Freedom of mobility and travel allows flexibility and ease of movement, as visa restrictions become more stringent and restrictive to South African businessmen and women. Establishing companies as well as bank accounts is easier, less hoops to jump through.
Big names like Elon Musk and Mark Shuttleworth, despite having moved abroad have done wonders for brand South Africa. A second passport allows not only freedom of movement but also access into EU, US, UK, etc.”
Barriers to entry will differ extensively from country to country and bear in mind the first and most significant of those barriers – the Rand/Euro/Dollar/ Sterling exchange rate. Suddenly you’re dividing your capital by 11, 12 or 19 so whether it’s an investment in government bonds, a start-up business or a property investment, your wheelbarrow full of Rands is an envelope of Dollars. European markets are also more sophisticated and competitive – they do business differently, less start-up red tape but more strict on corporate governance and fiduciary duty.
You have the cash and you’re ready to make the move to the EU which will give you the option of Cyprus, Malta, Portugal, Greece and Hungary. The details of each programme are well documented on the LIO Global website www.lio-global.com, but most important if you want your money well spent is to know the difference between what an EU Residence vs Citizenship can offer you.
READ says the following points should be considered when looking at the options:
• EU Residence gives travel access to Schengen zone countries for 90 days only. You can only live, work, study in country of residence – not anywhere in EU. Only EU citizenship gives the right to live, work and study anywhere in the EU .
• EU residence can change and is less secure than EU citizenship. Once you are a part of the EU, you are protected by EU law. Citizenship is much more secure in the long term.
• Most countries allow you to pass your citizenship or residence on to future generations. Eg. Malta, your kids can pass on to their kids, therefore establishing legacy plan for your future generations
• EU residence means you can only travel to 26 countries in the Schengen zone. With citizenship, eg. Malta or Portugal you can travel to over 160 countries worldwide. Malta also allows visa free travel to US and many other countries making it one of top 10 passports you can have.
ANOTHER potential pitfall says Read is understanding the benefits and risks to holding dual citizenship as a South African.
• You will need to complete a retention of citizenship with home affairs, otherwise you can lose your SA passport and you must notify them before you get your new passport.
• Make sure you get naturalisation certification in your new country of citizenship in order to allow you to renew your passport.
• Be clear on where your new freedom allows you to travel and other benefits such as reduced EU education rates – this can mean a massive saving depending on how many kids.
• When you travel, always leave on your SA passport.
• There’s an ease of opening international bank accounts, for example you can open an account in France even though have Maltese citizenship.
• Get yourself full understanding of the tax implications of a second citizenship.
MAYBE it’s a time zone thing or maybe it’s the ‘jet-set’ tag but the Caribbean is often overlooked as a citizenship option but offers some of the most successful and popular citizenship by investment programmes. Read says there are some really good reasons to consider the land of the Calypso with convenience being top of the pile:
• St Kitts and Nevis has been running program successfully since 1984 and have over 30 000 individuals who have acquired citizenship (includes children, dependents etc.).
• Fast and straight forward application process (very strict due diligence) with very limited, if any travel requirement to visit.
• Short processing time: St Kitts 6-8 months to get passport, Antigua 4-5 months.
• St Kitts and Antigua passports open no-visa travel to over 130 countries including the UK, the Schengen zone. They are commonwealth countries and form part of Caricom (The Caribbean Community).
• Antigua is an up and coming celebrity destination pushing property prices up and stimulating the economy. It is a beautiful and rustic tropical island, good holiday location and popular yachting destination.
• In short, passport application is straightforward and fast.
BUT if it’s the EU you’re set on then Malta is your best bet says Read and you need to start enquiries fast. Malta offers one of Europe’s most exclusive investor programmes, offering full EU citizenship in just over 12 months, problem is It’s capped at 1800 investors and will cost you over one million Euro. There’s no free lunch in life or business and gaining global access for you and your family to hedge yourself against uncertainty and instability, comes at a price. Your best ally in any citizenship by investment programme is doing your homework and using credible consultants to walk you through the process. There were a few investors who got hurt recently in EU property schemes and making an investment mistake is costly enough in Rand, do the multiplication and your loss is elevenfold. www.lio-global.com
~ Chris Buchanan Prestige