Mohammed Asaria, founder and managing director of Dubai-based Range Developments
After almost a decade of being involved in the citizenship by investment industry, helping people find an investment that also provides freedom to travel and the ability to live in pastures greener, I have never seen a year quite like this one.
It wasn’t all negative for the industry. Yes, Covid-19 cut a swathe through certain cross sections of society and due to economic constraints placed the product beyond the reach of many who previously would have considered this avenue.
At the same time, the stresses induced by Covid-19 magnetised ultra high net worth individuals residing in emerging markets to seek second citizenship. The offering became an essential hedge for them from the political, social and economic challenges induced by Covid-19.
From a product offering standpoint – while the second citizenship industry thrives on turmoil – some regulatory changes have in effect totally shut down certain countries’ proposition. The largest of all, the United States, saw its EB5 program almost become redundant thanks to the combination of President Trump’s rhetoric (reducing the appeal of the United States), waiting lists and price increases. Equally hit by President Trump were the H1 and L1 programs. Can they recover? More on that later.
Europe also enjoyed its share of turbulence. TV reports showed Cypriot politicians and business people prepared to flout the rules to enable a ‘convicted criminal’ gain citizenship. Despite denials, it was forced to suspend its program.
Its island rival, Malta, also enjoyed an unhappy year, as the fallout from the brutal murder of Daphne Caruana Galizia continued. The Government of Joseph Muscat fell, and drastic changes made to the country’s citizenship program in the hope of keeping it afloat.
This included making public the names of those who receive passports. And the names of those who received Maltese citizenship through the scheme, and who subsequently break the rules and lose their Maltese citizenship, will be publicised as well.
In addition to this, the European Commission has vowed to crack down on passport-for-investment schemes, and put an end to such activity. According to Commissioner Didier Reynders: “EU citizenship may not be sold as a commodity. This violates European values and principles… These citizens, who have spent from €1 million to €2 million for their status, have no real link with the Member State that has granted them citizenship… The impact of these schemes on other Member States is not acceptable,” he said.
Such trenchant opposition makes it questionable whether Portugal and Bulgaria will be able to fulfil their promise and convert their Golden Visas into passports. Montenegro will face a similar barrier with its own citizenship program given its ambitions to accede to the EU. By way of analogy, Moldova has already abandoned its citizenship by investment program. The timing of this move co-incidentally coincided with a significant EU grant.
Turkey’s program was unexpectedly successful. It has provided a solution to many who are looking from a comfort blanket from troubled countries who are not concerned with global mobility as Turkish citizens do not enjoy visa free travel into the Schengen Zone or the UK. Will its appeal survive as the EU and US, increase the rhetoric surrounding sanctions on Turkey given the Sultan’s actions? Time will tell. After all, jumping from the frying pan into the fire, will be on the back of emerging market HNW investors’ mind as they consider their CBI strategies.
So, where does this leave an applicant? The Caribbean and Vanuatu are often mooted. We can discount Vanuatu for a serious applicant, as the due diligence is virtually non-existent. It’s where you go when you can’t go anywhere else, so if you have the choice, best to avoid it.
The Caribbean remains attractive – Covid-19 makes certain islands more attractive than others – those (Grenada) which permit relocation to the US (through the E2 visa) opposed to those which merely provide a second document have thrived.
HNWIs want a place to live and they also seek investment security. They want to belong to country where undesirables are not admitted. In this regard, certain parts of the Caribbean seem to be the recipient of praise in 2020. The US Ambassador to the Organisation of Eastern Caribbean States, told reporters recently that Grenada is using the Joint Regional Communications Centre due diligence facility to investigate applicants to its program. “Grenada is doing a good job and using it more than some of the other [Caribbean] islands,” she said.
This brings us back to the United States. With Joe Biden as president, America’s desirability will increase. America’s offering to immigrants looks set to change dramatically but not to investor immigrants. We are still waiting for the immigration changes promised by President Obama in his first 100 days of office to take effect. Democrats and Republicans alike have taken a tough view to investment migration. The EB5 program is considered by the US populus as a program designed to admit wealthy Chinese into the US. If President Elect Biden liberalises the EB5 program, he will come under significant media attack for being sympathetic to China. I doubt he will risk doing so.
Where else? The United Kingdom, almost free of Brussels-based bureaucrats, is bound to look to attract talent and money. In particular, expect them to target Hong Kongers for obvious reasons. According to Bloomberg, the UK Passport Office has issued a record number of British National (Overseas) passports to residents of Hong Kong this year.
With about 200,000 passports issued in the first 10 months of the year, That is a rate a rate of about one every two minutes. This will stimulate Britain’s economy and push up property prices, traditionally the driver of the UK’s economy.
Non resident Indians living in tax efficient jurisdictions across the Gulf are evaluating their citizenship options (noting most will not be seeking to migrate – unless forced, of course). In last years’ Finance Bill, extra-territorial, citizenship based taxation was subtlety weaved into Indian law.
With the Indian economy struggling from the damage induced by Covid, many commentators for see a popularist government aggressively taxing wealthy NRIs. Many NRIs are scrambling at present to change their status and obtain second citizenship before 1 April 2020, after all the corollary of a citizenship based taxation regime, is an exit tax – a significant government levy when one returns their original passport.
This levy was coined in the US, and if adopted by India, those wealthy members of the Indian diaspora that did not heed their tax consultant’s advice will earn a very expensive and avoidable degree in hindsight.
As the second citizenship industry becomes mainstream, do remember this is a decision that requires thought, analysis and the correct advisor. Mistakes are very difficult (and expensive) to reverse.
Mohammed Asaria is founder and managing director of Dubai-based Range Developments
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How Covid-19 has impacted the citizenship by investment industry
Mohammed Asaria says some regulatory changes have in effect totally shut down certain countries’ proposition
Mohammed Asaria, founder and managing director of Dubai-based Range Developments
After almost a decade of being involved in the citizenship by investment industry, helping people find an investment that also provides freedom to travel and the ability to live in pastures greener, I have never seen a year quite like this one.
It wasn’t all negative for the industry. Yes, Covid-19 cut a swathe through certain cross sections of society and due to economic constraints placed the product beyond the reach of many who previously would have considered this avenue.
At the same time, the stresses induced by Covid-19 magnetised ultra high net worth individuals residing in emerging markets to seek second citizenship. The offering became an essential hedge for them from the political, social and economic challenges induced by Covid-19.
From a product offering standpoint – while the second citizenship industry thrives on turmoil – some regulatory changes have in effect totally shut down certain countries’ proposition. The largest of all, the United States, saw its EB5 program almost become redundant thanks to the combination of President Trump’s rhetoric (reducing the appeal of the United States), waiting lists and price increases. Equally hit by President Trump were the H1 and L1 programs. Can they recover? More on that later.
Europe also enjoyed its share of turbulence. TV reports showed Cypriot politicians and business people prepared to flout the rules to enable a ‘convicted criminal’ gain citizenship. Despite denials, it was forced to suspend its program.
Its island rival, Malta, also enjoyed an unhappy year, as the fallout from the brutal murder of Daphne Caruana Galizia continued. The Government of Joseph Muscat fell, and drastic changes made to the country’s citizenship program in the hope of keeping it afloat.
This included making public the names of those who receive passports. And the names of those who received Maltese citizenship through the scheme, and who subsequently break the rules and lose their Maltese citizenship, will be publicised as well.
In addition to this, the European Commission has vowed to crack down on passport-for-investment schemes, and put an end to such activity. According to Commissioner Didier Reynders: “EU citizenship may not be sold as a commodity. This violates European values and principles… These citizens, who have spent from €1 million to €2 million for their status, have no real link with the Member State that has granted them citizenship… The impact of these schemes on other Member States is not acceptable,” he said.
Such trenchant opposition makes it questionable whether Portugal and Bulgaria will be able to fulfil their promise and convert their Golden Visas into passports. Montenegro will face a similar barrier with its own citizenship program given its ambitions to accede to the EU. By way of analogy, Moldova has already abandoned its citizenship by investment program. The timing of this move co-incidentally coincided with a significant EU grant.
Turkey’s program was unexpectedly successful. It has provided a solution to many who are looking from a comfort blanket from troubled countries who are not concerned with global mobility as Turkish citizens do not enjoy visa free travel into the Schengen Zone or the UK. Will its appeal survive as the EU and US, increase the rhetoric surrounding sanctions on Turkey given the Sultan’s actions? Time will tell. After all, jumping from the frying pan into the fire, will be on the back of emerging market HNW investors’ mind as they consider their CBI strategies.
So, where does this leave an applicant? The Caribbean and Vanuatu are often mooted. We can discount Vanuatu for a serious applicant, as the due diligence is virtually non-existent. It’s where you go when you can’t go anywhere else, so if you have the choice, best to avoid it.
The Caribbean remains attractive – Covid-19 makes certain islands more attractive than others – those (Grenada) which permit relocation to the US (through the E2 visa) opposed to those which merely provide a second document have thrived.
HNWIs want a place to live and they also seek investment security. They want to belong to country where undesirables are not admitted. In this regard, certain parts of the Caribbean seem to be the recipient of praise in 2020. The US Ambassador to the Organisation of Eastern Caribbean States, told reporters recently that Grenada is using the Joint Regional Communications Centre due diligence facility to investigate applicants to its program. “Grenada is doing a good job and using it more than some of the other [Caribbean] islands,” she said.
This brings us back to the United States. With Joe Biden as president, America’s desirability will increase. America’s offering to immigrants looks set to change dramatically but not to investor immigrants. We are still waiting for the immigration changes promised by President Obama in his first 100 days of office to take effect. Democrats and Republicans alike have taken a tough view to investment migration. The EB5 program is considered by the US populus as a program designed to admit wealthy Chinese into the US. If President Elect Biden liberalises the EB5 program, he will come under significant media attack for being sympathetic to China. I doubt he will risk doing so.
Where else? The United Kingdom, almost free of Brussels-based bureaucrats, is bound to look to attract talent and money. In particular, expect them to target Hong Kongers for obvious reasons. According to Bloomberg, the UK Passport Office has issued a record number of British National (Overseas) passports to residents of Hong Kong this year.
With about 200,000 passports issued in the first 10 months of the year, That is a rate a rate of about one every two minutes. This will stimulate Britain’s economy and push up property prices, traditionally the driver of the UK’s economy.
Non resident Indians living in tax efficient jurisdictions across the Gulf are evaluating their citizenship options (noting most will not be seeking to migrate – unless forced, of course). In last years’ Finance Bill, extra-territorial, citizenship based taxation was subtlety weaved into Indian law.
With the Indian economy struggling from the damage induced by Covid, many commentators for see a popularist government aggressively taxing wealthy NRIs. Many NRIs are scrambling at present to change their status and obtain second citizenship before 1 April 2020, after all the corollary of a citizenship based taxation regime, is an exit tax – a significant government levy when one returns their original passport.
This levy was coined in the US, and if adopted by India, those wealthy members of the Indian diaspora that did not heed their tax consultant’s advice will earn a very expensive and avoidable degree in hindsight.
As the second citizenship industry becomes mainstream, do remember this is a decision that requires thought, analysis and the correct advisor. Mistakes are very difficult (and expensive) to reverse.
Mohammed Asaria is founder and managing director of Dubai-based Range Developments
Follow us on
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