France’s wealthiest flee the country in search of residence and citizenship elsewhere in the EU.
In September last year, France’s socialist President Francois Hollande proposed a wealth tax of 75 percent on anyone with an income exceeding €1 million. Although it has yet to be passed into law and Hollande’s promises that the hike is only meant to be temporary, the proposal has caused enough stir to prompt some of France’s most high profile sons to flee the country for cheaper tax climates.
Most recently French actor Gerard Depardieu renounced his French nationality and accepted Russian president Vladimir Putin’s offer of Citizenship. This follows the huge blow last summer when French Billionaire, Bernard Arnault, chief executive officer of LVMH Moet Hennessy Louis Vuitton SA and the richest man in France (and Europe), announced that he was applying for Belgian citizenship, although he insisted it had nothing to do with paying lower taxes.
Although Belgium has high taxes as well – 50 percent for those making over €35,000 ($44,541) – at least it’s capped off there and is still a relief from the French tax. And French expatriates can still remain close to their home country – even if they don’t want to live there. Depardieu also recently bought a property in Belgium and is reportedly seeking Belgium nationality.
Putin bypassed official citizenship procedures for Depardieu. Russian legislation does not allow anyone to gain citizenship in less than three months. To be eligible for the fast track, one has to be a national of a former Soviet republic and already holding a Russian residence permit. However, the official explanation for the gift of Russian citizenship to Depardieu was that he had rendered outstanding services to cinematography.
High Profile Exits
France’s tax problem is similar to the one in the U.S., highlighted by Warren Buffett, which inspired Obama to propose the “Buffett Rule”- a minimum tax rate of 30 percent on individuals making more than a million dollars a year.
However, in France, citizens with moderate incomes tend to pay higher taxes than the extremely wealthy, who benefit from exemptions and loopholes. But the solution proposed by Hollande- who famously once declared, “I don’t like the rich,” was not to tighten the loopholes and remove the exemptions; it was to set an exorbitantly high tax rate.
Needless to say, these high profile exits have resulted in fierce criticism from French politicians. But Depardieu says he is not turning his back on France.
I have a Russian passport but I remain French, and of course I will keep dual Belgian nationality
he told L’Equipe 21 television.
Ironically, Depardieu, gained famed in the U.S. playing a cigarette smoking, wine-swilling French bon vivant who marries for American residency in “Green Card.”
Tax Planning Spikes Demand
Meanwhile, British PM, David Cameron controversially pledged to “roll out the red carpet” for any French residents trying to flee the massive tax hike. The UK currently offers wealthy foreigners the opportunity to gain residence and second citizenship to the UK through an Immigrant Investor Program (IIP). This citizenship for Investment program allows investors to gain residency and eventually citizenship in exchange for making an investment in government bonds or a business in the UK.
Nicolas Salerno, Vice President of Arton Capital, a financial advisory firm that specializes in advisory services relating to Immigrant Investor Programs to high net worth investors, governments and industry professionals, has facilitated second residences and citizenships for scores of high net worth individuals in the region who crave a more desirable passport for visa free travel, as well as better education options for their families. Salerno himself has multiple passports and has also recently renounced his French nationality for tax reasons since he never actually lived in the country.
“Second citizenships and residences have increased in popularity amongst the wealthy over the past few years, especially in light of the instability in the middle east. Clients can benefit from having a second passport without losing their current citizenship or without having to relocate in many instances. The option is also there to then send your children to study abroad at a much lower cost if you have home residency status,” explained Salerno. He added;
The idea is for a second passport to be used as an insurance policy, just incase you ever need it. Most of our clients are proud of their origins but they cannot afford to jeopardize their business or the safety of their family in a global environment that is harder and harder to predict.
The irony is that traditionally, those who are wealthy enough to invest in a second citizenship have hailed from unstable countries such as Iran, Pakistan and more recently, countries embroiled in conflict due to the Arab Spring. However, a new trend is emerging for wealthy entrepreneurs and businessmen from Western countries usually considered as the most desirable and coveted passports in the world, to leave for tax reasons.
“Over the past few years, the number of European and US citizens applying for St Kitts or Dominica Economic Citizenship programs for tax reasons has more than doubled,” added Salerno.
Salerno also cites Bulgaria as one of the most popular Immigrant Investor Programs amongst his clients because it has a physical residency waiver meaning that investors do not have to actually live in the country to gain citizenship, coupled with the lowest taxes in Europe (10% corporate and personal tax, 5% on dividends and 0% capital gains tax.)
“Not many countries in the world offer this type of flexibility to businessmen and their families, while at the same time guaranteeing safe investments in bonds, permanent residence and future European citizenship with the lowest taxes possible,” explained Salerno. He added, “As long as the investor meets all the legal requirements and invests €511,292 in the country, they will be granted residency and after five years get citizenship, without ever having to live there or without paying taxes on their wealth, inheritance or income outside of the country.”
Meanwhile, Hungary has just passed new legislation to set up an Investor Program for Residence, in a bid to attract wealthy foreigners who invest €250,000 in government bonds. Salerno points out that the Arton Capital team are actively advising the Hungarian government on the program which will be rolled out in the coming months.
Regardless of the reasons for acquiring a second citizenship or residency it has become ‘a safety net’ for securing assets for many wealthy businessmen across the world.
Arton Capital are available to advise clients on individual solutions and programs, which best suit their needs.