The past 30 years have undeniably been marked by the development of easy access to information. The world wide web has made people more aware of their surroundings, giving them the opportunity to consider alternative options available to them which could direct their future.
Access to knowledge and awareness has led the way to a more frequent exercise of conscious choices to acquire a new citizenship and/or to migrate to a foreign country.
In the past 15 years, immigrant investor programs offering high net worth individuals (HNWI) residence or citizenship in exchange for local investments have proliferated around the world. Such programs have been modelled as tools to fuel local economies. A natural corollary of this is that these programs can also been used by investors as powerful financial planning and wealth management tools.
This article attempts to highlight some of the reasons for the choices that investors make. These choices are often (although not always) influenced by the financial planning and wealth management opportunities that the residence and citizenship programs offer.
1. Global migration: a conscious choice and privilege
1.1. For many, the daily commute to another country for work, school, or relocating to settle down to in a foreign country, can appear normal and effortless.
1.2. Citizens of the European Union (EU)1 enjoy free movement between other EU countries. Freedom of movement and residence in the EU is the cornerstone of EU citizenship, which was established by the Treaty of Maastricht in 1992. EU citizens can establish themselves to live and work in other EU countries in search of a better future. Nowadays, it is common to meet Spanish students in Paris, French bankers in Frankfurt, or German retirees in the Algarve in Portugal, in search of better education and work opportunities, higher standard of living, or even simply a more desirable climate. All of this is possible for one primary reason, the passport they hold.
1.3. The Schengen area (comprised of 26 countries that have abolished passport control at their mutual borders) counts for approximately 1.7 million people commuting to a foreign Schengen country daily. Out of these 26 countries, only 4 are not members of the EU (i.e. Iceland, Norway, Switzerland, and Liechtenstein).
1.4. Other arrangements exist to ease the movement of people, such as the Nordic Passport Union which has since 1954 allowed citizens of the Nordic countries (Iceland, Denmark, Norway, Sweden, and Finland) to travel, work and reside in another Nordic country without any travel, work or residence permit.
1.5. In 2016, the Organization of Eastern Caribbean States (OECS) implemented a free movement regime for citizens of all its full member states (Antigua and Barbuda; Dominica; Grenada; Montserrat; Saint Kitts and Nevis; Saint Lucia; and Saint Vincent and the Grenadines). As a direct result, all OECS nationals have the right to move, find employment, and access services such as education and healthcare in the same manner as the nationals of the member country.
1.6. 1.6 However, for many, having such kind of choice, is a privilege. A person cannot just freely relocate to a foreign country at convenience without complying with specific and often stringent visa requirements.
1.7. Migration opportunities (or even just visa-free access to foreign countries without long-term migration) will very much depend on the passport you hold, your citizenship. It is in this context that global migration and multiple citizenships can be a key aspect of one’s overall life management and strategy.
2. The important distinction between migration and citizenship
2.1. Distinction needs to be drawn between “migration” and “citizenship” as the two do not necessarily go hand in hand. Many HNWI seek additional or alternative citizenship(s) but do not intend to physically move to the country of the new citizenship as they are often physically located in the country of their choice.
2.2. Lawyers can help HNWI achieve their goals, whether it be to migrate to another country or to obtain a new citizenship. If the HNWI seeks an additional (or alternative) citizenship without relocating to a new country, then programs such as Caribbean citizenships may be better suited given some programs require local residency before granting citizenship (such as Spain or New Zealand).
2.3. Lawyers will need to assess the specific circumstances of the HNWI to advise on best options on a case by case basis.
a. Some countries offer attractive citizenship although not in a location where HNWI typically intend to relocate.
· Turkey started its citizenship by investment program in 2016. Many investors chose this program to benefit from the ability to gain a faster access to E2 immigration opportunities to the USA rather than to migrate to Turkey.
· HNWI seeking to quickly migrate to Germany may look at Cyprus passport as a possible option giving the HNWI access to all EU countries once he holds a European passport. Different European programs are not equal and will need to be carefully considered with a lawyer for successful result.
b. On the other hand, HNWI may intend to relocate to countries in which they do not wish to become citizens. For instance, HNWI may purposely stay away from a USA passport that would make them liable to worldwide taxes as it is based on nationality regardless of their place of residence.
c. Some countries have mechanisms in place to grant permanent residence to HNWI rather than citizenship which can be extremely difficult (for instance, in Hong Kong, due to the need to be of Chinese descent) or undesirable (for instance, Singapore requires boys to undertake military service and does not allow dual citizenship). Sometimes, permanent residency will cover the bene-fits that HNWI might be looking for such as good quality of life and medical care, advantages for asset protection due to reliable and trusted banking system in close proximity, and a favourable tax regime.
2.4. Citizenships by investment programs evolve constantly and so require experienced and trusted lawyers.
a. Citizenship by investment programs have often been used by governments as tools for local development and to attract foreign wealth. Accordingly, they constantly evolve based on how well local economies perform.
b. Just recently, the Moldova program was cancelled (in June 2020), and the rules of the Malta Individual Investor Program (MIIP) are expected to be revised shortly.
c. On the other hand, new programs may be rolled out for economic and political reasons, such as the recent Jordan (2018) and Egypt (2019) programs. Those programs are intended to boost local investment by treating investors as citizens instead of foreigners which can also serve to bring some political weight to a country that has a growing population. These countries have limited visa free access and their primary purpose is local investment and stability, rather than flexibility to travel out country.
d. The profiles of the HNWI/investors have also evolved. More choices at various level of investment required means a higher number of individuals can afford to participate. Some Caribbean options are available for families from USD125,000, and Turkey requires real estate investment of only USD250,000.
e. HNWI may base their decision to migrate and/or acquire another passport on many different factors, such as their perception of social justice, political and economic environment, or even sanitary and health factors. Their choice is generally based on what they require to achieve their living goals, for themselves and their family. Sections 3 to 6 below seek to look at some of those factors.
f. Although global migration and multiple citizenships can be used as powerful financial planning and wealth management tools, it is not a ‘one fits all’ situation. The programs are constantly changing, as do the economic and political climates, and thus, advice from reputable and competent lawyers will be paramount to successful long-term planning. Lawyers should understand the individual needs of their clients so that they can help navigate through the various immigration programs then available. The lawyers will also be able to help assess what is achievable, help clients prepare for the many steps ahead to maximise their chances of success, and will liaise with other third parties which are often based in different jurisdictions and time zones (such as local migration agents, local tax and legal advisors, property agents, business incubators etc.) to assist the client achieve their goal.
3. Global migration and multiple citizenships: for lifestyle
3.1. A particular passport/citizenship can impede the HNWI’s life- style, for instance limited visa free access to foreign countries. Therefore, access to a passport with a wide range of visa free countries (even just for short trips) might be the motivating factor not only for leisure purposes but also for business purposes.
For instance, passport holders of Australia, Canada, Malta, Portugal, Singapore or USA can enjoy visa free access to over 180 countries, whereas passport holders of Bangladesh or Afghanistan are restricted to access to a mere 41 and 26 countries respectively. This will inherently affect their lifestyle.
3.2. Nowadays, many people place lifestyle among their top personal achievement goals. This may require migration to another country, for instance to live in a less polluted environment, or to practice hobbies more easily accessible in certain parts of the world.
3.3. Education opportunities is a key determining factor for families of HNWI. Wealth planning tool and lifestyle are long term objectives. HNWI and families will often plan not only for now but also for the next 10 or 20 years to come.
3.4. Choosing a new lifestyle is the luxury some HNWI possess where they can choose where to live, study, work, raise children and retire. Sometimes the sole decision to acquire a passport is to give a better opportunity to their children and future generations at minimal costs. For instance, a European passport will give children good and affordable education throughout Europe.
3.5. This “lifestyle” rationale for migration and multiple citizenship is very personal and often an emotional choice. However, citizenship by investment options are not cheap and will need to be considered carefully to ensure they will be sustainable. The choice needs to make sense in view of the business or other income generating activity that will permit to maintain the lifestyle year after year. Accordingly, wealth growth and preservation opportunities will also be considered to assess if this is a viable option, even if they are not the main purpose of the migration/multiple citizenships.
4. Global migration and multiple citizenships: for wealth growth
4.1. Wealth growth through real estate investment
a. Different citizenship by investment programs have different criterions to satisfy and investments to make.
b. Sometimes the quickest and cheapest way (in term of dollar amount) to acquire citizenship may require payment of a specified lump sum in national development funds. However, often there is a choice to elect to make a local investment in property. The property minimum investment amount may be higher than a lump sum payable to national development funds but the investor will be the owner of a tangible asset that can be rented out to generate revenues (or not, for instance in Malta) and sold after a number of years (usually 3 to 5 years, but note that certain countries such as Cyprus require to hold property worth a minimum EUR500,000 for an indefinite period of time). Often, the immigration program will require both a real estate investment and lump sum payment to national development funds (for instance, Malta and Cyprus).
c. c) The real estate opportunity creates a potential for wealth growth based on property appreciation (and in many cases also passive income through rents).
4.2. Wealth growth through investment funds
a. Given that citizenship /residency programs are modelled to fuel and support local economies, it is no surprise that certain jurisdictions require HNWI to invest in local funds and/or companies. This gives HNWI the opportunity to invest and participate in the future potential growth of the local economy.
b. For instance, Australia’s significant investor visa 188c requires the HNWI to make a AUD 5 million investment (with a genuine intention to hold that investment for at least 4 years) broken down into 3 components: (i) at least AUD 500,000 in venture capital and growth private equity funds which invest in start-ups and small private companies; (ii) at least AUD 1.5 million in approved managed funds investing in emerging companies listed on the Australian Stock Exchange; (iii) a balancing investment of at least AUD 3 million in managed funds that may invest in a range of assets.
4.3. Wealth growth through work and business opportunities
a. Global migration and multiple citizenships can facilitate employment opportunities and be conducive to the establishment of business or business expansion in various regions of the world.
b. Those opportunities will be the base of the wealth created through work and business opportunities. This will demand some hard work and involve a certain amount of risks to be taken by the HNWI. This type of wealth will by nature be very different to wealth that is generated by passive revenues and appreciation through the real estate and investment funds.
c. The Canadian SUV program is a good example of a national program that allows innovative business persons who have a business idea to connect with local business incubators to further their business plan and take active steps to carry out the venture with professional advice and support. Portugal also has a similar program. Those programs result in a resident permit which, after a few years, can be the basis of an application for citizenship.
d. Once obtained, citizenship can also allow a person to undertake business or investments that are normally reserved to nationals.
5. Global migration and multiple citizenships: for wealth preservation
5.1. To the extent possible, HNWI will seek to establish their tax residency in a low tax jurisdiction that is close to their main place of business. This is the base for wealth preservation.
5.2. In addition, the investments HNWI may be required to make, whether in the form of real estate or in local investments funds (as per sections 4.1 and 4.2 above) may also present an opportunity for wealth preservation in the sense they may be used as diversification to hedge currency and country risks.
5.3. HNWI may time their investments to make the most out of foreign exchange. For instance, to a Hong Kong person, buying a property in Euros now is considerably cheaper than some months ago due to exchange rates.
5.4. Global migration and citizenship can help plan and preserve wealth during the life of the persons but also at the time of their death. The choice of migration and citizenship can give people the opportunity to structure their estate to preserve their capital and to plan their succession.
5.5. Successions and tax regulations may change by the time of death. However, HNWI would benefit from ensuring that they have will(s) in place, drafted by lawyers who have a clear understanding of their residency and citizenships plans. The wills should be structured to take account the HNWI’s assets, as well as place of residence, domicile, and nationality. In certain cases, based on European regulations, nationality might offer a choice of law to the HNWI, that could govern their successions. HNWI may also wish to seek legal advice to assess the extent to which local laws may imposed forced heirships.
6. Global migration and multiple citizenships: for financial privacy
6.1. Increasingly, HNWI are considering acquiring an additional citizenship or tax residence to better protect their assets and financial information.
6.2. While financial regulations are enacted with the best of intentions, they tend to overcomplicate the business operation and disclosures required.
6.3. In hope of facilitating business, some countries have applied a more flexible regime on corporate governance. For instance, St Kitts and Nevis:
a. unlike traditional countries that require corporations to report their financial standing on an annual basis, St Kitts and Nevis tend to subject corporations to minimal financial reporting standards.
b. Not only is there no requirement for filing of annual returns in St Kitts and Nevis, the territory does not make the information in their company registry available to the public.
6.4. HNWI looking to best maintain their financial privacy could therefore consider establishing themselves and their corporations in countries and territories that offer strong asset protection and financial privacy laws like St Kitts & Nevis.
7. Global migration and multiple citizenships: more options in case of crisis
7.1. Citizenships of different countries may be valued due to the consular and health care protection that may be beneficial in a crisis.
7.2. For instance, citizenships of Commonwealth member states (which include Malta, Cyprus, Vanuatu, Antigua & Barbuda, Dominica, Grenada, St Kitts and Nevis) offer the following advantages:
a. support of British embassies/consulates in foreign non-Commonwealth countries where their home countries have not established diplomatic or consular posts; and
b. in many cases, visa free access to visit United Kingdom for up to six months for business, tourism and family visit.
7.3. The recent COVID-19 sanitary crisis has highlighted other potential benefits of having multiple citizenships, such as having the choice where to live or travel to, in the event of health crisis.
a. COVID-19 unprecedented long-term lockdowns and world-wide travel bans except for nationals have shown the importance of having the right passport.
b. This could allow a person access to a place with better medical care and more favourable hospital occupancy rates.
c. Potentially, this could result in priority of treatment by having the right to travel to countries where medicines or technologies for treatment become available first.
7.4. Additional citizenship can be used by HNWI as powerful financial planning and wealth management tools, but also as insurance in case of health crisis or any other political and economic crisis. Additional citizenship gives an additional back-up plan and alternative location to preserve wealth and split risks.
8. Looking out to the future
8.1. Citizenship by investment programs are costly. Sometimes, an additional citizenship can be acquired as a mark of status or a backup plan, but in most cases it is a personal choice which is carefully planned after review of the HNWI’s personal goals, wealth growth and preservation opportunities that can be realised on a long term basis.
8.2. Our experience shows that HNWI tend to acquire multiple citizenships primarily for mobility (which can be for personal or professional reasons), not so much for the tax residency (unless they are single and nomad). This indicates that there is more to citizenships than just tax planning.
8.3. HNWI will need lawyers to help them navigate through the many different types of citizenship by investment programs and identify the best fit. Not all programs are regarded as equal (for instance in in terms of reputation), and programs that are being offered change constantly to reflect market conditions.
8.4. In the last few years, significant focus has been placed on the avoidance of tax evasion and banks have tightened up their practices and due diligence processes, in particular in respect of foreign residents and citizens by investment. We can expect this trend to continue and financial institutions may be required to update their practices regularly to address any new scheme that may be put into place.
8.5. As an extension of this, in the future, it might be possible that countries offering citizenships by investment and residence programs get together to vet applicants through third party nations which have major intelligence databases (US, Canada, UK, Interpol etc.).
8.6. An even more extreme development could be to grant people the right to travel visa free not based on nationality but based on whether they have personally been vetted as beyond suspicion by third party nations which have major intelligence databases. So, there would effectively be two classes of people: those beyond suspicion able to travel visa free; and others.
8.7. With the COVID-19 pandemic, we have seen initiatives toward the tracing of people’s movement. Full transparency and tracing might become a future accepted norm and common choice. In that case, HNWI would need a tax residency with substance and may consider, the tracing of people’s movement before deciding which investment program is the best suited.
8.8. In summary, time will tell how migration opportunities and citizenship by investment programs will develop. Although global migration and multiple citizenships can be used as powerful financial planning and wealth management tools, there is no one miracle program that fits all. The programs change constantly function of the economic and political climates, and advice from reputable and competent lawyers will be paramount to successful long-term planning.
PRINCIPAL CONTRIBUTOR
Laure Cochet
Senior Associate, Registered Foreign Lawyer (Solicitor England & Wales)
lcochet@harveylawcorporation.com
Laure Cochet started her journey in the law in Canterbury (United Kingdom) where she obtained a Bachelor of Laws (LLB and Licence) in English Law and French Law in 2001. She then pursued her legal education in Paris to undertake a Master of Laws in European Business Law (DESS, Paris II, 2002), and moved on to Hong Kong to complete a Postgraduate Certificate in Laws (PCLL, HKU, 2005).
Laure has been based in Hong Kong for over 15 years and has practiced as Hong Kong and English practicing solicitor in inter-national law firms before joining Harvey Law Group. Her practice areas have included non-contentious construction projects, and the development, acquisition/divestment and financing of energy businesses and infrastructure and the commercialization of energy resources.
Laure joined Harvey Law Group in 2020 and now practices as a registered foreign lawyer in the areas of immigration law, commercial law, and private client.
SECONDARY CONTRIBUTORS
Amelia Polisano
Senior Associate, Registered Foreign Lawyer (Solicitor England & Wales)
apolisano@harveylawcorporation.com
Amelia Polisano completed her Bachelor of Arts (Honours) in Law with Accountancy at the University of Brighton in 2003 and pursued further legal education at the College of Law in Surrey in 2004. Amelia successfully qualified as a solicitor of the Senior Courts of England and Wales in 2008.
Over the years, Amelia gained invaluable wide exposure into different areas of the legal profession. She completed her training contract in a boutique firm in Central London, and then practiced in several London firms before moving to a large national firm in Surrey.
At various times, Amelia took leading roles within law firms, for instance as Operational Team Leader of the Commercial Team, and head of the Contested Probate Department.
This has helped her become a one-stop legal adviser for many companies, assisting them on all aspects of their businesses including civil litigation and commercial law. It also gave her insight into the preventive measures required when dealing with private client matters.
During her career, Amelia worked on many high-profile employ- ment and criminal cases with prominent Queen’s Counsels in the UK. Since 2014, Amelia has been working in Hong Kong and joined Harvey Law Group in 2015 and practices as a registered foreign lawyer in the areas of immigration law, commercial law, and private client.
Polly Ho
Associate, Ontario (Canada)
pho@harveylawcorporation.com
Polly obtained her Juris Doctor degree from the University of Ottawa and is a licensed barrister and solicitor in Ontario, Canada. As an Associate based in the Hong Kong office of Harvey Law Group, Polly regularly advises clients of all sizes, from individual startup investors to multinational corporations, on business and professional immigration, cross-border investment, and corporate matters. Polly enjoys sharing her rich insights on global migration trends and helping clients navigate the complex challenges they face when moving their business operations overseas.
Prior to joining Harvey Law Group, Polly has experience prosecuting invention and design patents in various jurisdictions, including United States, China, and Japan.
PARTNERS
Jean-Francois Harvey
Worldwide Managing Partner & Founder
jfharvey@harveylawcorporation.com
Harvey Law Group (HLG) was founded in Montreal, Québec in 1992 by Attorney Jean-François Harvey.
Mr. Harvey completed a Bachelor of Laws Degree from the University of Ottawa and was appointed to the Québec Bar in 1992. He is a member in good standing of both the Québec and Canadian Bar Associations. Mr. Harvey is recognized internationally as an expert in immigration law, and he brings a wealth of experience in providing comprehensive immigration law services to corporations and high net worth individuals.
Mr. Harvey also brings extensive experience in commercial legal matters, including many high-value due diligence and merger and acquisition activities for a broad range of International and multi-national industries.
Bastien Trelcat
Managing Partner – Thailand, Southeast Asia
btrelcat@harveylawcorporation.com
Bastien Trelcat obtained his Master in Business Law and Corporate Taxation from the Law School of Aix-Marseille University, France in 2002. During his studies, he was ranked among the 10 Best business law students by Freshfields Bruckhaus Deringer in 2001 and won the 1st edition of the Landwell Award (PwC) in 2002.
In 2003, Bastien successfully completed an LLM in International Business Laws in Hong Kong. He then qualified as a French lawyer in Paris in 2004.
After that, Bastien gained extensive professional experience in private practice in France and throughout Asia (Hong Kong, Shanghai, Bangkok).
Bastien has been based in Asia for over 15 years. His practice areas have included taxation and mergers and acquisition covering structuring and negotiation of joint ventures. He also assisted compa-nies in the tax structuring of their investment in Asia and creation of their distribution networks. He has worked on several cross-border transactions in South East Asia.
Bastien manages six of Harvey Law Group’s Asian offices and two offices in Africa.
Harvey Law Group (www.harveylawcorporation.com)
Units 2505-6, 25/F China Online Centre, 333 Lockhart Road, Wanchai, Hong Kong
Tel: +852 2116 1333 / Fax: +852 2116 1332 / Email: info@harveylawcorporation.com
Harvey Law Group (HLG) is a multinational law firm specializing in corporate law and investment immigration, with a worldwide reputation for representing high-profile clients and corporations. HLG was awarded the Immigration Law Firm of The Year at the Annual Macallan ALB Hong Kong Law Awards in 2014 and 2017. As Asia’s pioneer within the Residency & Citizenship-by-Investment industry, HLG has notably been offering investment immigration services for over 28 years. HLG is headquartered in Hong Kong with over 22 offices worldwide including Thailand and Vietnam in Asia. HLG offers Residency & Citizenship-by-Investment programs to 23 countries and counting.