Introduction

Investment migration also referred to as residency and citizenship by investment (RCBI), describes the process of obtaining residency/citizenship through investment in the host country. The predominant benefit of investment migration programs is to provide the applicant the opportunity to live, work, and study abroad as a resident or citizen of that country, while also providing global mobility and access to favourable tax regimes, healthcare, and quality of life.

Residence and citizenship-by-investment (RCBI) programs, which allow individuals to obtain a new residence or citizenship through financial investment, have been around since 1984 and have expanded to include a variety of asset classes and geographic locations. These programs include investments in real estate or financial products like investment funds or government bonds, and each option has its own potential benefits and risks that individuals should consider before deciding which program is the best fit for them.

Benefits of Investment Immigration in Portfolio Diversification

Geographic diversification, also referred to as the reduction of country-specific risk, is among the main benefits of investment migration. Individuals can mitigate political and economic instabilities in a single country by diversifying investment across jurisdictions. Not only does geographical diversification provide financial benefits but provides individuals with alternative housing options, which becomes a priceless tool to hedge against events such as a military coup. By investing in different jurisdictions, investors also gain access to the global market and start to build a track record that may have additional future advantages.

Another predominant benefit under the spotlight in the last decade is mobility. HNWI, UHNWI, and C-level executives particularly look to maximize their mobility. As visas and travel documents become increasingly cumbersome and costly, it is becoming a strategic necessity to have a second residency or citizenship. In recent years, c-level executives are increasingly applying to more than one residency or citizenship program as a portfolio strategy to have complete flexibility over their mobility. For example, we see many cases where applicants invest in the Portuguese Golden Visa and Grenada citizenship to have visa-free access to 191 destinations, including China and Russia. Alternative combinations exist that can provide access to increased destinations.

Moreover, attractive tax regimes rank among the top reasons for pursuing investment migration programs. Different jurisdictions have varying tax regimes that individuals can benefit from. Although tax residency commonly refers to residing in the host country (usually referred to as the 182-day rule), “residency” may vary from jurisdiction to jurisdiction. Even though some countries are known to have favourable tax regimes, it’s not always straightforward to opt for one. A case-by-case analysis by a tax specialist may be required to understand if the tax regime provides benefits or whether the applicant is even eligible in the first place.

Examples

A family who diversified their portfolio by investing in a residency by investment program

The family decided to apply for the Portugal Golden Visa in order to gain more freedom to travel and live abroad, especially within the Schengen Area, as well as to diversify investments in their home country. The program’s requirement of only seven days of residency per year was the main factor that led the family to choose it over other Golden Visa options. Additionally, the ability to access public universities through the Golden Visa was appealing to the family for their children’s education.

A HNWI who diversified his portfolio by investing in a citizenship by investment program in a low-tax jurisdiction

The HNWI and his family chose St. Kitts and Nevis citizenship by investment program predominantly because there are no income and inheritance taxes, whether they are tax or non-tax residents. The family intends to relocate their company and spend more time travelling in the Caribbean. The processing time (c. three months) was another decisive factor for the family compared with other low-tax citizenship by investment programs.

Potential Risks 

Investment migration programs are complex and can be costly. Each program has its requirements and involves the applicant collecting and submitting several documents, falling under two buckets: Know Your Customer (KYC) and Anti Money Laundering (AML). Regulations are constantly changing and subsequently alternating the requirements of such programs. Costs associated with the program can range between a few hundred to several thousand. Cost items include government fees, investment costs (i.e., property transfer tax), consultation fees, and legal fees. Although some websites promote a fully digital process and advertise a more cost-conscious and seamless service, these are less likely to attract many customers since investment sizes are relatively big and a contact point is preferred. During the process of obtaining residency or citizenship, investors often prefer to have consultants or lawyers by their side to provide guidance and support.

Political instability is a potential risk to consider when evaluating investment migration programs, as governments have the ability to alter or discontinue these programs. With heightened scrutiny from bodies such as the European Union, coupled with opposing political muscles, governments are under pressure to change policies that could affect existing applications. For example, once an investor applies for a residency by investment program, which generally doesn’t guarantee a route to citizenship, they are only safe for the residency period. What might seem like a straightforward path to citizenship after permanent residency might not exist seven years from now.

Conclusion

In conclusion, investment migration programs can be a valuable tool for diversification. Benefits include geographic diversification, increased mobility, and access to attractive tax regimes. On the contrary, RCBI programs may have a burdensome application process considering the long list of required documents. Investors must also keep track of the laws around investment migration programs as they are everchanging. A given program may no longer exist by the time the investor narrows down the options and prepares to act.

In a nutshell, it’s crucial to choose the right program according to the needs and risk profile of the investor. By hiring a consultant, investors can effectively navigate their investment and application process and have someone to do the heavy lifting. To get an initial analysis of your case and understand the various programs, please reach out to us, and speak with one of our consultants.