For many entrepreneurs from less developed countries travelling to first world countries can become a difficult and often daunting prospect. Acquisition of visas and collecting the correct documentation can often be time consuming and tedious as are the queues and questioning by immigration officials. This coupled with other domestic issues makes the prospect of acquiring a second passport that can smooth entry at the border of their next destination an attractive proposition to many individuals.
Citizenship and residence planning has emerged as a new industry over the past few years aimed at a small but rapidly growing number of wealthy families interested in acquiring the privileges of visa-free travel or the right to reside in a developed country. However, this normally requires a significant financial investment.
As the ease of travel improves, the world has become more accessible to everyone. With the number of wealthy individuals increasing, especially in emerging economies, there has been a significant increase in affluent people interested in greater global mobility and fewer travel obstacles posed by visa restrictions. This has resulted in a number of so-called citizenship-by-investment or economic citizenship programmes, which allow wealthy people from developing or emerging economic countries to legitimately acquire passports that facilitate international travel. In exchange, countries offering such programmes receive a significant financial investment in their domestic economy.
The other reason for the rapid growth of such programmes is the pursuit of political and economic safety. In a deteriorating geopolitical climate and amid increased security concerns these programmes have become more attractive. Other considerations include estate and tax planning.
There are a number of different citizenship programmes which can be grouped by size of the state and the economy. There is a growing number of small states in the Caribbean and Europe which have these programmes. Their primary appeal is that they confer citizenship with minimal to no residency requirements. Dominica, St. Kitts and Nevis, and several Pacific Island nations have had such programmes for years. The St. Kitts and Nevis programme dates back to 1984. More recently, new programmes have been introduced or revived, including by Antigua and Barbuda, Grenada, and Malta, with St. Lucia the most recent addition to the list. While some of these programmes have been in place for years, they have only recently seen a substantial increase in applicants, with a corresponding surge in capital inflows.
A number of larger European countries have launched residency programmes, including Bulgaria, France, Hungary, Ireland, the Netherlands, Portugal, and Spain. Almost half of EU member states now have a dedicated immigrant investor route. These “Golden Visa” programmes give investors residency rights and access to all 26 Schengen Area countries, which have agreed to allow free movement of their citizens across their respective borders - while imposing minimal residency requirements. Although these programmes differ in that one grants permanent citizenship while the other provides just a residency permit, they both allow access to a large number of countries with minimal residency requirements, in return for a substantial investment in their economies.
However, some advanced economies, such as Canada, the United Kingdom, and the United States, have had immigrant investor programmes since the late 1980s or early 1990s, offering a route to citizenship in exchange for meeting specific investment conditions, with significant residency requirements. The Isle of Man operates the same Visa programme as the United Kingdom and the rules for applying in the Isle of Man are similar in most respects to the UK. The Island has until very recently not promoted this route for foreign nationals to legally live and work here, but with the market for second citizenship programmes becoming ever more popular and competitive, the Isle of Man needs to find something a little different to offer.
The cost and structure of these programmes differ from country to country. Most require an initial investment, in the public or the private sector, combined with large application fees and an amount to cover due diligence costs. The programmes in the Caribbean allow for either a non-refundable payment to the treasury or to a national development fund, which finances strategic investment in the domestic economy, or an investment in property (which can be sold after a specified holding period). Other programmes provide the option to invest in a redeemable financial instrument, such as Government securities. In Malta, the programme requires contributions in all three investment routes.
Maintaining the credibility of the citizenship programme is perhaps the most critical challenge to all the countries that offer this means of access. It requires a rigorous due diligence process of all applications to reduce the risk of any potentially serious integrity and security risks and to prevent any money laundering or financing of criminal activity. Such safeguards are integral to the success of economic citizenship programmes.
Globalisation has given rise to a new industry whereby passports can carry an economic value to countries. Citizenship programmes that facilitate travel for citizens of emerging and developing countries in the face of growing travel restrictions are an unconventional way for some countries, particularly small states, to increase revenue, attract foreign investment, and bolster growth.
Peregrine Corporate Services Limited is licensed by the Isle of Man Financial Services Authority.