Rogue companies offering lucrative second citizenship programmes will “find themselves weeded out”, according to Mohammed Asaria, founder and board member of Range Developments.
Speaking at the inaugural Arabian Business Money Forum, Asaria revealed that second citizenship or citizenship by investment (CBI) has become a $20 billion-per-annum industry, which has witnessed 20 percent year-on-year growth.
He said: “If you look at some of the people who are promoting second citizenships today you have some of the world’s leading private banks who are offering it to their clients. You have some of the world’s largest real estate companies, whether that’s Sotheby’s in Moscow or Savills in Vietnam, so this is the level of individual, which is promoting it.”
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Over 100 countries offered some variation of citizenship or residence by investment in 2018, according to the Organisation for Economic Co-operation and Development (OECD).
The most popular destinations include the Caribbean’s St Kitts and Nevis and Grenada; Malta and Portugal in Europe; and New Zealand.
Among the reasons people may choose to go down the route of CBI is to obtain the right to live, work and study in a different country; to secure visa-free travel to an increased number of countries; or as a safe place for family or assets if someone’s home country is witnessing political instability.
However, the programme has come under fire in recent years with accusations of fraud and abuse by citizenship agents and local developers, stretching from the aforementioned St Kitts, throughout Europe and Australia.
Asaria said: “Every industry has a bad actor. There is a process of natural selection in every industry and the bad stakeholders find themselves weeded out.”
Caribbean’s St Kitts and Nevis
And he stressed that countries can be equally at fault for not abiding by the rules, noting Cyprus as a prime example. The European island, which has reportedly made about $8.26 billion from its passport program since 2013, offered citizenship and visa-free travel across the EU for people who invested a minimum of $2.5 million, but officials were caught out in a sting being filmed using the scheme to assist a fictional Chinese businessman with a criminal record.
Asaria cautioned: “As you embark on this, choose a country which has very high due diligence standards, and one which has survived the test of time.”
Also speaking on the panel, Mark Schofield, partner, Tax and Legal Services, PWC Middle East, said there was increasing popularity for second citizenship for Canada for people from Lebanon, given the increasing challenges facing the country.
However, he warned anyone interested in pursuing any CBI programme must be fully aware of the tax implications before signing up.
Mark Schofield, partner, Tax and Legal Services, PWC Middle East
He said: “You know when you go for second citizenship, you do need to be concerned about the tax and progression. So, for example, if you decide you want a second citizenship in the US, it means that you, as a US citizen, becomes subject to US tax rules for life.
“It’s like all things in life and this probably sounds a little bit self-fulfilling to say, but everything you do in life has a tax consequence or tax implication. Second citizenship, definitely fits into that category. Sometimes it can provide you with advantages but there are also pitfalls that you need to be aware of.”