In any given week, Fadi Mehio, a Lebanese businessman based in Dubai, spends at least half his time on a plane, jetting between homes and business ventures in the UAE, Lebanon, Iraq, Kazakhstan, Saudi Arabia, Pakistan, and Southern Africa.
Fadi’s story is not unusual in Dubai. He and his family have been based in the emirate for 20 years. He’s fortunate, he says, to have grown his businesses here. “This is a place where my attachment and loyalty are 100%.” But as his business expands, he spends more and more time shuttling between countries.
The globetrotting businessman is in the process of getting his Bulgarian citizenship through a unique Immigrant Investment Program that enables investors to get residency and eventually citizenship to the Eastern European country.
“My passport is a document that allows me to carry on with my life. I’m not trying to change my identity. Just extend my reach,” he says. Adding that a big motivation is for his four children – ages 18, 16 and 10 year old twins – to have the ease of travel a European passport offers.
Benefits of second citizenships
Ease of travel is just one of the benefits of having a second passport. The spirit of revolution that swept across the region in 2011 brought hope to many, but one year after governments toppled, the short-term economic environment remains unstable. In the Middle East businessmen are concerned about whether their assets are protected.
My passport is a document that allows me to carry on with my life. I’m not trying to change my identity. Just extend my reach.
Finding the right program
As clients look to build a proverbial portfolio of passports, what are the options?
Many western countries welcome wealthy foreigners. The United States, Canada, the United Kingdom, Australia and Singapore all offer immigrant visas to those who invest enough money in certain types of enterprise. These programs don’t automatically result in a passport, but the visas are often a fast track to naturalisation, and in some cases, large investments can expedite citizenship. However in almost all of these cases there is a minimum residency requirement.
“Traditional Immigrant Investor Programs have become a lot harsher in terms of their requirements. Most of the better-known programs such as Canada, the US and UK require physical residency; sometimes clients have to live there for 6 months of the year,” explains Bayat. This can be a major deterrent.
For businessmen like Fadi, Bulgaria, which does not have a legal residency requirement, was a great choice, as he said he wanted to do everything by the book.
The country also has another added potential bonus, explains the Consul General of Bulgaria to Dubai. “Bulgaria has already covered all technical requirements for entering into the Schengen Agreement,” says Angel Kalinov. It could just be a matter of months before the membership is official and holders of Bulgarian residency will not require a visa for member countries, which include France, Italy, Portugal, Spain, Switzerland and more.
Benefits for governments
At a time when many western countries are in dire need of inflows of investment, developing immigrant in- vestment programs are a great way to diversify economies. “While Bulgaria benefits from fresh inflow of capital, know-how, and job creation, the investors gain access to a country that has a lot to offer,” says Consul General Kalinov.
In the small island country of St. Kitts and Nevis, sugar cane exports sustained the economy for decades. When sugar prices fell, the government needed to find another source of revenue. As a member of the Commonwealth with visa free access to all Schengen states, their citizenship became a high value commodity. They developed a program enabling foreigners to invest $400,000 in order to get a citizenship. It’s a simple, short process without any residency requirement. An added bonus: there are no personal income taxes in St. Kitts and Nevis.
Taxation is a big concern for most wealthy investors. Even some with a coveted US passport are looking at alternatives. John Hanafin, Managing Partner of Sovereign in Dubai, advises clients on wealth management. He explained an increasing number of inquiries are coming from non-Middle Eastern clients for economic citizenship programs in tax free countries. “From a tax perspective, there are some disadvantages to having a US or British passport,” he says.
Many Americans are renouncing citizenship due to the financial burden. US government statistics show this year almost 1,800 people renounced their American citizenship. The main reason? The US is one of the only countries in the world that requires its citizens working abroad to file taxes at home as well as dis- close information on any foreign bank accounts containing more than $10,000.
But Hanafin says the American government have caught on to the trend of renouncing, making it more difficult for high net worth US citizens to give up their citizenship. “The US has created an ‘exit tax’ which applies to individuals with a net worth of over $2 million,” he explains.
Attracting the right investments
Immigrant Investment Programs are not necessarily open to just anyone who can afford to pay for it. Canada, long considered one of the most immigrant friendly countries in the world, has put a cap on their program. Analysts believe it is because of abuses to the system. But the government says they will just be restructuring it to attract stronger investment.
“We can no longer be a passive player in the global competition for talent and investment,” said Jason Kenney, Canadian Minister of Citizenship, Immigration and Multiculturalism. “That is why we need to review and amend our immigration laws to create dynamic programs that allow immigrants’ investments to directly benefit the Canadian economy.
Beware of fraud
“The demand for second citizenships has created opportunities for fraud and misrepresentation,” says Armand Arton, Chairman of Arton Capital, a global investment firm specializing in Immigrant Investor Programs. He warns people to review options carefully and double check promises of passports in exchange for cash. Panama, for instance, offers passports without citizenships. Such passports clearly stipulate the holder is a citizen of another country. These, he says, do not qualify for visa free travel or other benefits of citizenship.
When asked about this, the German Consulate in Dubai confirmed they look at the citizenship of the passport holder, not the country that has issued the travel document, when issuing visas.
Similarly real estate developers in Cyprus have launched schemes to try and unload low value real estate projects on wealthy investors from the Middle East with false promises of fast track passports. But law in the country clearly stipulates “physical residency” as one of the many requirements to get citizenship, which takes eight years.
This is not deterring the development of legitimate economic citizenship programs. The governments of the Seychelles and Ireland have both announced plans for economic citizenship programs, recognising the demand among businessmen for second citizenships as a basic business tool. Arton, who also advises governments, including that of Bulgaria, on how to structure such programs, believes they are a key component of financial planning for the wealthy. “Second residencies and citizenships are fast becoming an essential part of basic wealth management strategy for high net worth individuals. It’s an important consideration if not just for yourself, but for future generations,” he says.