REAL ESTATE KEY TO SECOND CITIZENSHIP For High Net-Worth Investors

Nuri Katz is President at Apex Capital Partners, a leading international advisory firm specializing in investment consulting and wealth management for multinational, high net-worth clientele.

According to recent data, there are more than 211,000 ultra-high-net-worth investors (UHNWI) globally, with a combined net worth of nearly $30 trillion, a 6% increase from 2013. Experts are predicting that this number will grow by another $10 trillion by 2020. As this investor base continues to expand, many individuals realize the need to provide security and wealth protection for their families, as well as diversify their assets, particularly given the state of today’s global economic climate and the increasing geopolitical instability worldwide.

Recognizing the investment opportunities around the world, one emerging trend among the ultra wealthy has been citizenship-by-investment, which provides UHNWI and their families the opportunity to become legal residents or citizens of a new country of their choice, through investment in real estate or government programs. With more and more affluent investors seeking out ways to invest in second citizenship, especially in the real estate sector, financial advisors who work with these wealthy individuals and their families should understand the intricacies of how this process works and the benefits and challenges associated with this opportunity.

 

OBTAINING SECOND CITIZENSHIP THROUGH REAL ESTATE INVESTMENTS

In the past five years, the number of Citizenship by Investment programs has more than doubled.

 

Recognizing the investment opportunities around the world, one emerging trend among the ultra wealthy has been citizenship-by-investment, which provides UHNWI and their families the opportunity to become legal residents or citizens of a new country of their choice, through investment in real estate or government programs. With more and more affluent investors seeking out ways to invest in second citizenship, especially in the real estate sector, financial advisors who work with these wealthy individuals and their families should understand the intricacies of how this process works and the benefits and challenges associated with this opportunity.

Of the three options available, the most common financially sound approach to dual citizenship by UHWNI is through real estate. These types of investment opportunities are mutually beneficial to both the investor and the participating country – helping to create jobs and stimulate the local economy through the injection of direct investments from foreign investors, while also allowing the investor to gain lawful and permanent access to a more financially desirable region or country.

Right now, there are approximately twenty nations that offer citizenship or residency programs, with most countries located in Europe, North America or the Caribbean. The benefits and minimum investment requirements vary tremendously depending on the participating country.

The least expensive country to offer second citizenship is Dominica, a small island in the Caribbean that requires a minimum investment of $100,000, plus $1,800 in filing fees.

Grenada reinstituted its residency program in 2013 and UHWNI can now immediately become a citizen for a minimum investment of $350,000 in real estate within the country. This program requires that the government individually vet applicants and their family members, though it typically only takes about 60 days for applications to be processed, with passports issued shortly thereafter.

St. Kitts and Nevis established their Citizenship by investment program in 1984, making it the longest standing second citizenship program in the world. It allows investments in pre-approved real estate to be purchased for a minimum investment of $400,000.

Antigua and Barbuda, which is home to the most active and prestigious yachting industry in the Caribbean, can also be an option for a minimum investment of $400,000.

For more luxurious real estate offerings, UHNWI can look to countries like Cyprus or Malta, where second citizenship can be purchased for a minimum investment of about $1.2 million. These programs offer full access to the EU and is one of the least restrictive passports available for global travelers.

In Spain, the minimum investment is $700,000, while countries such as Portugal have a Golden Visa Program that offers non-EU investors a fast track to obtaining a valid residency permit.

In Cyprus, UHNWI can choose to invest €5 million in either state bonds, local real estate and other developments, or local businesses. Alternatively, investors can purchase a €2.5m stake in a collective investment opportunity, providing the total value of the plan is at least €12.5m. Applicants also need to buy a Cypriot residential property for at least €500,000 and maintain this after being granted citizenship.

 

CHALLENGES ASSOCIATED WITH OBTAINING CITIZENSHIP BY INVESTMENT

 

Ultimately, there is a great variety of citizenship by investment programs available to UHNWI, with the choices that vary based on available capital, desired location and the length of time required to obtain residence or citizenship. There are, of course, different challenges associated with each individual country’s program, which financial advisors should understand in order to educate and advise their clients.

American UHNWI have additional issues to overcome in order to benefit from gaining a second citizenship.

The most common hurdle is the financial obstacles that result from the Foreign Account Tax Compliance Act (FATCA), which took effect in July 2014. It requires banks worldwide to report to the U.S. authorities the accounts held by Americans abroad, meaning that U.S. citizens must continue to pay U.S. tax regardless of where they reside. With approximately eight million Americans living abroad, many have reported problems with applications for and maintenance of accounts locally as foreign banks have rejected American customers rather than comply with the exhaustive demands of FATCA.

This has presented a challenge for Americans living or doing business overseas that, according to recent data from the U.S. Treasury, 1,335 expats renounced their U.S. citizenship in the first three months of last year. Moreover, almost 75% of expats say at least one part of their finances has become more complicated living abroad, whether that concerns new currencies, taxes or moving money abroad.

Despite these obstacles, UHNWI’s are continuing to seek out second citizenship investment opportunities around the world. They are looking to their advisors to understand the challenges, as well as the different minimum investment requirements required by each country, in order to weigh up the various government programs and real estate developments available worldwide in order to find the right opportunity that best meets their needs.

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