In the midst of the Covid-19 pandemic, many people find the idea of a secondary residency or citizenship appealing. At the same time, many countries are interested in raising capital and bringing wealth across their borders to pay for social programs and keep their economies afloat—specifically if they rely on leisure and tourism for tax income.
At the center of these interests are investment migration programs, in-demand in the U.S. and U.K., but now available worldwide in countries including Portugal, St. Lucia and Montenegro, granting residency or citizenship to foreign investors. In some cases, these schemes are known as “golden visas.”
Popularized after the 2008 financial crisis, residence- or citizenship-by-investment programs have undergone significant changes in recent years, in part due to pressure from governments to clamp down on immigration and require more transparency related to foreign investment. But even with these concerns, the supply-side of these programs has expanded—a trend that experts expect to continue, as more programs are likely to crop up because of the financial stress caused by Covid-19.
At the same time, there has been increased interest and demand for these sorts of programs from high-net-worth individuals who want easier global mobility, volatility management and investment diversification, including interest from people outside of the traditional countries.
“Our firm has seen a 49% increase in interest and inquiries from January to April 2020, compared to the same period last year,” said Paddy Blewer, the U.K.-based public relations director for Henley & Partners, an investment migration advisory firm. “And interestingly, there’s been a massive spike in interest from Americans, who have traditionally not been a big client market.”
The Programs: Rapid Expansion and Recent Changes
Residence-by-investment programs are not new. Canada established a Federal Immigrant Investor Program in the 1980s, the U.S. launched the EB-5 visa offering in 1990, and the U.K. soon followed suit. According to Henley Global, there are now investment migration programs in more than 100 countries—over half of which were set up after 2000.
Many of these programs were specifically launched after the financial crisis in 2008, when countries needed a way to support the local economy, said Kate Everett-Allen, the head of international residential research at Knight Frank. These countries opened their doors to high-net-worth individuals in exchange for a significant real estate purchase or other business investment. Cyprus created an investment program in 2012, Malta launched its investor program in 2014, and golden visa programs were introduced in Portugal, Spain and Greece.
But while they are common, about 80% of investor visas are still given out by a small group of high-income nations, including the U.S., the U.K., Canada, Hong Kong and Australia, according to Henley & Partners.
Following are updates on many of the more popular programs, most of which occurred in the past few years—in some cases, in the past few months.
The United States’ EB-5 Immigrant Investor Program
The EB-5 program was launched in 1990, offering a green card in exchange for an investment of at least $500,000 in a U.S. business. In November 2019, the investment threshold was increased, and the program now requires a $900,000 investment in a rural area or area of high unemployment, or a $1.8 million investment—up from $1 million—elsewhere.
Because the program has been so popular with residents of mainland China, and no country can have more than 7% of the visas (out of 140,000 annual employment-based green cards total), there was a 10-year backlog for Chinese citizens.
“We’re now seeing fewer applications from mainland Chinese investors and more from other jurisdictions, including India, Vietnam, Malaysia, Indonesia, and other countries we didn’t historically see,” said Chad Ellsworth, a New York-based partner at immigration law firm Fragomen. Experts say this increased interest in EB-5 and other residency-by-investment programs from emerging market countries, where there is new wealth and an increasing number of high-net-worth individuals, is natural, and in part a way to skirt tightening regulations around global movement.
The U.K.’s Tier 1 Visa Program
The Tier 1 visa program, which is often called a golden visa, was launched in the early-1990s as a way to simplify routes to U.K. residency and citizenship. As of 2014, foreign applicants have to invest a minimum of £2 million in the U.K. In return, they could apply for citizenship in five years. Up the investment to £5 million or £10 million, and that wait drops to three or two years, respectively.
Mr. Ellsworth noted that while in the past, people who wanted access to the U.K. may have sought citizenship through Malta or Cyprus, because of Brexit, they are now looking at this program instead.
European Residency Programs: Portugal, Spain and Greece Portugal’s golden visa program, launched in 2012, is currently surging. The program offers investors who purchase a property for more than €500,000 in a city or a bit less in a low-density area the opportunity to get a fully valid residency permit and apply for citizenship after six years. It also provides a 10-year tax abatement on worldwide income.
In February 2020, the Portuguese Parliament approved a budget that included new laws that would exclude properties purchased in the country’s two major cities, Lisbon and Porto, starting in 2021. To get their golden visa, investors would need to purchase in lower-density zones.
There is more to these Portuguese programs, Mr. Blewer added, including a series of policies, laws and tax benefits meant to attract international tech entrepreneurs to set up their European hub in the country.
Overall, this program has been incredibly successful, Ms. Everett-Allen said, noting that it has attracted more than €5.1 billion in investment since its inception for a total of 8,736 residency permits—52% of which were granted to Chinese applicants.
Spain launched just after Portugal in 2013, and similarly requires a €500,000 investment, but in this case, investors must wait 10 years to apply for citizenship. Like Portugal, Spain also offers a major tax benefit, with no tax on foreign-source income for non-domestic residents.
Greece, which closed its immigration process due to the coronavirus pandemic, recently reopened the golden visa process to stimulate investment. There are a couple of options in their permanent residence program. One requires a minimum €250,000 investment in a real estate property; another a minimum €400,000 capital contribution to a real estate investment company that will invest exclusively in Greece. Investors can apply for citizenship after seven years of residency. The program, in general, has recently been popular with the Chinese, Mr. Ellsworth said.
Citizenship Programs that Offer EU Access: Cyprus, Malta and Montenegro According to Ms. Everett-Allen, the European Commission publicly criticized Cyprus, Moldova and Malta for how lax their residency-by-investment programs were in 2019, noting that they were worried that investment funds could be used for corruption or money laundering. As a result, Moldova canceled its program.
Cyprus has recently suspended its citizenship by investment program, effective 01 November, 2020 following reports of abuses of a the program. Malta is set to launch a revamped Malta Individual Investor Program with significant changes. In addition, it will be implementing new residence regulations which may lead to citizenship and which take into consideration the European Commission's concerns and recommendations.
The newest addition, launched in 2019, Montenegro requires a €450,000 minimum real estate investment in new development projects in the coastal region in return for citizenship, according to Mr. White. However, Montenegro is not currently part of the EU. The country is looking to meet the EU requirements, but that is not expected until at least 2025.