Citizenship by investment
Citizenship by investment is an attractive option for SA’s mobile investors, made more desirable as an increasing number of countries offer such programmes
In exchange for a significant financial contribution or property investment, citizenship-by-investment programmes provide the world’s elite with something more desirable than any material object — personal security and mobility. “Applications for immigration grow monthly,” says Andrew Rissik, MD of Sable International, specialists in European and Australian citizenship.
“The declining rand makes it increasingly difficult for South Africans to accumulate sufficient foreign exchange to meet investor-class criteria and is encouraging them to expedite their departure.” Says Andrew Taylor, vice-chairman of Henley & Partners, residence and citizenship planning experts: “Buying a property abroad is a hedge against future losses in the value of the rand, since your investment becomes an asset you can later dispose of in the stronger currency.”
Stats SA puts the number of South Africans who emigrated between 2000 and 2016 at more than 102,793. According to New Wealth Management, which tracks the movement and ownership of high-net-worth individuals, of the 8,000 South African dollar millionaires who left the country in the past 10 years, 36% moved to the UK, 15% to Australia, 11% to the US, 8% to Canada, 5% to Mauritius and 4% to Israel.
“While the majority of the country’s emigrants with good skills and qualifications go via points-based emigration programmes to traditional destinations such as Australia, New Zealand, the US, Canada and the UK, growing numbers of wealthy South Africans are using their cash to acquire second passports in less-familiar parts of the world such as Cyprus, Portugal and the Caribbean,” says Taylor. The most affordable citizenship-by-investment programme is offered by Dominica, for a contribution of $100,000.
“In many respects, alternative citizenship has become a strategic resource for wealthy individuals who want to operate transnationally, while, for South Africans in particular, it provides a lifestyle hedge and the ability to secure their futures and those of their children,” says James Bowling, CEO of Monarch & Co, specialists in international residency-and citizenship-by-investment programmes.
The US economy is the largest in the world in nominal value and purchasing power parity.
As part of the EB-5 Immigrant Investor Program, you need to invest $500,000 in an EB-5 approved Regional Center commercial enterprise project in a targeted employment area. In return, you may get conditional permanent residence (a Green Card) for two years. Thereafter, conditions may be removed and you can be granted full permanent residence. Once you have been a permanent resident for at least five years can you file for naturalisation.
“The declining rand makes it increasingly difficult for South Africans to accumulate sufficient foreign exchange to meet investor-class criteria and is encouraging them to expedite their departure.” Says Andrew Taylor, vice-chairman of Henley & Partners
There is no financing on the programme. The full investment amount and all fees must be paid upfront.
There is a dual tax treaty between SA and the US, which means that people who have lived in the US for less than 182 days during the tax year are regarded as tax non-residents and only pay tax on income earned in the country. Tax rates range from 15%-39.6%. Once a Green Card has been issued and you stay in the US, you must register as a tax resident.
You do not lose your citizenship if you sell. Investors can sell their EB-5 preferred shares once they have their Green Card and its conditions have been removed, which generally takes between five and six years.
The US offers high standards of free state schooling to all residents, from preprimary to secondary. There are also countless top-quality private institutions. The Webometrics Ranking of World Universities includes 103 US colleges in the Top 200, among these are Harvard, MIT, Stanford, Princeton and Yale. State universities offer tuition to residents at fees that are significantly lower than those for foreign students.
Says James Bowling, CEO at Monarch & Co: “Residency acquired through the EB-5 Immigrant Investor Program allows the visa holder to settle in any of US’s 50 states. “Ask us about the exciting EB-5-qualifying investment opportunity we are currently launching in Manhattan.”
Mauritius’s fiscal benefits are an incentive to investors who make the country their tax residence.
You need to invest a minimum of $500,000 into a Property Development Scheme (PDS), which replaces the Integrated Resort Scheme (IRS) and Real Estate Scheme (RES). However, there remain a number of these latter developments actively offering properties for sale. A residency permit entitles you to apply for an occupation certificate, which allows you to start a business or to become an employee of a company in Mauritius. After living in the country for five years, you can apply for a Mauritian passport.
The north of the island has good private schools, including Northfields International School, the International Preparatory School and Lighthouse. West Coast Private School is also an excellent option. Universities include the Mauritius campus of Middlesex University London, the University of Technology and the Open University of Mauritius. FINANCING Access to finance is by application to banks. A loan of up to 50% of the property’s value can be offered to foreign residents.
Key tax benefits include a 15% corporate and individual income-tax rate. This can be as low as 3% after allowing for tax credits through the Global Business Company – International Revenues structure. You lose your citizenship if you sell unless you are buying in another IRS, RES or PDS designated development.
Says Pam Golding Properties Mauritius director Richard Haller: “We have for the past 10 years focused on the Grand Baie and Tamarin region, where infrastructure is continually growing. These are the areas where the majority of people moving to the island reside, so the ability to rent your unit is higher, capital growth is better and your ability to resell the unit is greater.” govmu.org, itsaboutlife.co.za, maurinet.com, monarchandco.com, pamgolding.co.za, villasvalriche.com
Portugal’s Golden Visa is one of the most affordable in the world — and it takes just eight weeks to obtain residency.
There are various ways to obtain a Golden Visa, which grants investors residency in Portugal for one year. This can be renewed twice for two-year increments as long as you reside in the country for at least 35 days during a five-year period. The €350,000 real estate investment is by far the most popular route. After five years of residency, you can apply for citizenship through nationalisation, although this is conditional on you being able to speak basic Portuguese.
International schools include the English and American schools in Estoril. All educational facilities supply students with lunch daily. Tertiary facilities include the universities of Lisbon and Porto, which provide tuition in English and Portuguese.
Banks will lend up to 50% of the investment sum to foreigners.
There is normal country tax if you are a tax resident, on a sliding scale between 0% and 35%. Golden Visa holders who do not stay in Portugal for more than 183 consecutive days are not required to pay taxes for income generated outside the country. Income arising from rentals, interest or dividends is taxed at 28%.
You do not lose your citizenship if you sell if you have held your investment for the required five years.
Says Sable International MD Andrew Rissik: “Cascais, a prosperous former fishing village situated on the western edge of the beautiful Lisbon coastline, is to Portugal what Camps Bay is to Cape Town. It boasts a strong tourist component and some of the best beaches in the world, and it’s half an hour from the city by train. It’s an ideal location for a good property investment.” goldenvisa-portugal.com, henleyglobal.com, pamgolding.co.za, sableinternational.com
Residency minimum investment
You need a single, secure property investment of €300,000, along with a letter from a Cypriot bank confirming that you have a three-year fixed deposit of €30,000. Dependents up to the age of 25 also qualify for residency permits.
State schooling and higher education are paid by taxes. The European University Cyprus and Frederick and Nicosia universities are English medium, while Neapolis University is Greek and English.
Financing for a residency visa is available — only two-thirds of the purchase price needs to be paid before the fast-track residency application process can start. All resales need to be in cash.
You pay normal country tax if you are a tax resident, on a sliding scale between 0% and 35%. There’s no worldwide taxation if you are not a tax resident.
You do not lose your residency if you sell provided you hold the investment for three years and retain a minimum investment of €300,000.
Citizenship and minimum investment
You need a minimum investment of €2m for the acquisition or development of real-estate projects; the acquisition of land is not deemed a qualifying investment. Dependents up to the age of 28 also qualify for citizenship.
You do not lose your citizenship if you sell provided you hold the investment for three years and you retain an investment of at least €500,000.
The programme does not offer financing. The investment amount and fees must be paid in full upfront.
Income tax works the same as with residency.
Says James Bowling, CEO, Monarch & Co: “Ensure you purchase property (which can include commercial property) in the right location in Cyprus. The country is split in two, the north belonging to Turkey and the south to Cyprus.” cyprusvisa.eu, henleyglobal.com, monarchandco.com, cypriotrealty.com
Five Caribbean countries run citizenship-by-investment programmes: Antigua and Barbuda, Dominica, Grenada, St Lucia, and St Kitts and Nevis. You can get a Caribbean passport through contributions to national development funds or the treasury, ranging from $100,000 to $250,000, or through property acquisition, starting from $200,000.
There are a number of well-regarded private and public schools in all five countries and the International University for Graduate Studies is in St Kitts and Nevis.
None of the programmes offers financing options. The investment amount must be paid in full upfront.
Those who live in Dominica or Antigua and Barbuda for less than 182 days a year only pay tax on income earned in those countries. Provided you do not do business in St Kitts and Nevis, you are not liable to pay tax at all.
You do not lose your citizenship if you sell provided the investment is held for the required five years.
Says Andrew Taylor, vice-chairman, Henley & Partners: “While citizenship by investment provides conditional freedom of movement within the Caribbean Community (Caricom), as a Caricom citizen you also need a skills certificate, which is generally easily obtainable, together with your passport to avail yourself of that freedom of movement.” caricom.org, henleyglobal.com, monarchandco.com
Residency and citizenship
Residency is the legal right to live, work, travel and study in a country, subject to certain conditions. Typically you would not give up citizenship in your own country. Citizenship confers additional legal privileges in that country, for example, the right to vote. Some countries allow dual citizenship; others do not.
Credits: Photos: iStock by Getty Images, Text: Jocelyn Warrington, David A Steynberg