The New Alternative Investment: Second Residency and Citizenship

Today many developed countries are refining their immigration policies to attract wealthy new citizens.

In these difficult financial times, most countries are trying to be as competitive as possible in order to attract foreign investment. This is the first in a series of articles that will keep high net worth investors, who want to obtain a second residence and citizenship, informed about the investment benefits and products for each country’s Immigrant Investor Program (IIP) and the various drawbacks associated with each.

Why you need a second passport

The true wealth of a businessman can often be weighed by the contentment of his family first and his business second. Regardless of how many millions a global investor has in the bank, it’s not always possible for him to provide the stability that he craves for his family without compromising on the success of his business.

Investors belong wherever their business is, which often isn’t the best place for their family to live. Herein lays the dilemma that so many wealthy businessmen have to face; should they remain where business is booming, regardless of the social problems in that country or should they uproot to a more stable country for their families’ sake?

The contradiction of business is that it is sometimes easier to make money in emerging economies. Most often, these emerging markets are far from ideal for raising a family, as most of them don’t provide adequate security or education systems. This invariably means that the top education systems in the world are predominantly in the West, which means most wealthy businessmen, see it as a priority to invest in their children’s education abroad.

Another obstacle that many investors face, is having limited access to certain financial markets. This can be for a variety of reasons but the most common is due to bank closures, trade embargos in Iran for instance, and foreign exchange controls, which although in theory were abolished in 1994, are still imposed in some emerging markets.

Wealth and status are irrelevant if you belong to a nationality that is considered to be hostile or a terrorist threat. An increase in aviation security post 9/11 and caps on immigration has made it even more difficult to obtain a visa for traveling abroad. It’s such a time-consuming and complex process to arrange visas for overseas business trips that it sometimes takes a full- time employee to organise and plan for them in advance.

These circumstances are unlikely to change in the next decade in terms of geopolitical disturbances, trade sanctions and poor education systems for businessmen who operate in emerging economies. It’s the accumulation of these factors that has paved the way for a relatively new industry of second residence and citizenship for wealthy investors. Planning for a second residence and nationality is usually considered as the best way to safeguard your children’s future education and quality of life whilst protecting your business interests at home.

Deemed as the ‘new alternative investment’ these so called Immigrant Investor Programs (IIP) have even been equated to the likes of an insurance policy- it should be acquired well in advance of you needing it in an emergency.

This is by no means a novel idea. People from politically and economically unstable countries are born with the idea of residence planning, according to a Lebanese investor who is in the process of obtaining a second residence and citizenship for him and his family to a EU member country.

As a successful investor in his fifties, he considers himself a ‘late comer’ to the second residence and citizenship process. “Most people who want a second passport tend to get it when they are younger via students visas or green cards, but as a businessman based in Beirut I’m unable to travel for long periods of time.”

Similarly, a Pakistani entrepreneur living in Dubai explained that he wasn’t willing to put his business on hold to move to another country to obtain second residence. Instead he prefers to invest in a EU member country that will in turn grant him and his family a second residency without having to physically move to the country.

Investing for Residency and Citizenship

The idea is that wealthy businessmen invest in a country in return for a second passport through an Immigrant Investor Program. Incentives for these applicants include, tax exemptions, faster application processing times for citizenship and a physical residency waiver.

Canada offers one of the most proven and well-established residency and citizenship programs in the world. Successful applicants to the IIP and their families get to reap the benefits of Canada’s education and health systems, ranked as some of the best in the world, for generations to come.

The only other two similar programs to Canada (with passive investment in government guaranteed bonds) are available in the UK and in Bulgaria, one of the newest EU member countries.

Other states that offer similar programs to wealthy investors but in non-guaranteed investment products are the US, Australia and Singapore to name a few. It must be noted that each country has different financing requirements and provides different immigration procedures and benefits to their investors in a bid to keep the market competitive. Real Estate investments and even donations to specific charity organizations are also investment options in the island of St Kitts and Nevis for obtaining direct citizenship.

A simple overview of the programs provides investors with examples of the financing and investments options available in an attempt to find out which program suits them best. For example, the Canadian program that launched in 1984 in the province of Quebec has served as a model for other programs, such as Bulgaria.

Program requirements

Since 2000, the IIP has attracted over 10,000 families bringing revenue-exceeding CAD $2 billion to Quebec alone.

Canadian legislation was recently reevaluated and the required passive investment for the Federal and Provincial programs is now CAD $800 000 in governmental bonds, with a minimum required personal net assets of CAD $1.6 million, accumulated through lawful activities, as well as two years of recent management experience. This required investment can be financed by a chartered Canadian bank for around CAD $200,000 and the procedure to obtain permanent residency can take between 12 to 18 months under the new regulations. However, in order to qualify for citizenship, investors and their families will have to physically spend three out of four years in Canada.

One of the other most desirable countries to obtain second residence and citizenship to is the UK. The UK passport is ranked as the best passport to have in the world in terms of visa restriction ratings as it allows you to visit the most countries without a visa. Successful applicants have to invest one million GBP in UK bonds and have a personal net worth exceeding two million GBP.