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Buying foreign citizenship

With enough money, anyone can.

JOHANNESBURG – With enough money you can buy anything, even a foreign citizenship. And for the outrageously wealthy, the power to move and live wherever they like is worth paying for.

“For families with means, it’s really just about giving yourself and your kids options,” says Andrew J. Taylor, vice chairman of Henley & Partners, the company whose chairman basically created the citizenship-by-investment concept and turned the fortunes of a struggling Caribbean island, St Kitts & Nevis, around.

Taylor says that 90% of Henley & Partners’ clients don’t want to move from their home country immediately, often due to significant business or family interests, but would either like the option to do so at a future date or want the travel benefits associated with having multiple passports.

According to Henley & Partners latest Visa Restriction Index, South Africans can access 97 of 199 countries visa-free. The UK and Europe, however, are not included in this list of countries and South Africans, both for work and play, favour these destinations.

It’s perhaps no surprise then that the Caribbean Island of St. Kitts & Nevis, as well as Antigua & Barbuda are popular citizenship choices for the well travelled due to their favourable passports, which allow visa-free business or leisure travel for up to 90 days to Europe and the UK.

Malta, Antigua, Cyprus

Malta, a group of islands in the Mediterranean, is especially popular at the moment among clients at the top end of the wealth spectrum, according to Taylor.

“Malta has a minimum contribution to infrastructure and development of €650 000 per person, growing by €25 000 for every child under 18. On top of this contribution, you would need to invest €150 000 into a government bond and buy a property for €350 000, or lease property for five years at €16 000 a year,” Taylor explains.

“As soon as you become Maltese you become European and have the right to live, work and study in any one of the EU member countries,” he adds.

There is also no restriction on passing down citizenship to future generations. Generally, South Africans with more than R100 million in liquid assets choose Malta, says Taylor.

“In Antigua, you can either donate $200 000 to government, excluding due diligence and professional fees in the region of $100 000, or invest in real estate, where you would be looking at around R5 million to R6 million, which could be liquidated after five years of holding citizenship,” Taylor explains. 

In Cyprus, meanwhile, which is also a member state of the EU, a real estate investment of at least €2.5 million is one of the requirements to obtain citizenship.

Each jurisdiction has its own legislation, which may result in additional costs depending on an investor’s specific situation, as well as longer or shorter time periods to secure citizenship. For instance, in Malta it takes roughly 12 months to process citizenship, while in Cyprus and Antigua this is four months.

Henley & Partners charges clients a processing and administration fee, which differs from client to client depending on individual circumstances.

Residence vs citizenship

Taylor cautions against opting for a lower cost residence-by-investment option as a means of securing citizenship, unless you plan to relocate and acquire citizenship by another means. “Residence does not guarantee citizenship and this route can take time,” he says.

For instance in Portugal, a €500 000 investment in urban real estate can get you a Golden Residence Visa but before citizenship is granted the government wants to see you build ties to the country by, for example, learning Portuguese, says Taylor.

“It’s not just a matter of living there for six years,” he says, warning against misleading marketing.

“If you want to remain in South Africa, then you want to look at a pure citizenship programme,” he adds, noting that as a citizen your legal standing within the country is also of a higher level than a resident.

Taylor advises against choosing a programme where you get a passport without citizenship. “There are always people in political power selling passports that aren’t technically legal or where the constitution does not allow for it. You must first be legally naturalised as a citizen; a passport is just what you get by having citizenship,” he explains.  

Promoting illicit money flows?

Organisations such as Global Financial Integrity (a Washington-based research organisation), Human Rights Watch and Amnesty International argue that large outflows of illicit money via a shadow financial system aggravates poverty in emerging economies.

“Illicit money leaves poorer countries through a global shadow financial system comprising tax havens, secrecy jurisdictions, disguised corporations, anonymous trust accounts, fake foundations, trade mispricing, and money-laundering techniques. Much of this money is permanently shifted into western economies,” according to a group of 21 organisations – including universities, non-profits and faith-based organisations – which have together signed the New Haven Declaration On Human Rights and Financial Integrity.

Alongside potentially unfavourable and unsavoury money flows, there are concerns that these programmes enable criminals and terrorists to secure second passports. In November, Canada implemented a visa requirement on St. Kitts & Nevis “due to concerns about the issuance of passports and identity management practices within its Citizenship by Investment program”, the Canadian government said at the time. 

Taylor, however, argues that these programmes hold positive benefits for the countries that offer them and give these countries a means to attract wealthy and talented individuals. “As soon as an individual becomes a citizen in a country, they develop ties with that country and start investing money there,” he says.

For instance in Malta, which is currently attracting the wealthiest people in the world, some of the investors want to re-engineer the entire telecommunications infrastructure, he notes.

Taylor says that Henley & Partners does not deal with countries where legislation in this area is unclear or the tax situation is grey.

South African interest

The company’s Cape Town office receives “daily enquiries” from South Africans, according to Taylor.

Nadia Read, a private consultant at independent world residence and citizenship company, LIO Global confirms that there’s been a notable increase in recent months in queries from South African families looking for EU citizenship options, mainly to give their children the opportunity to work and study in Europe.

“Families are looking for the global freedom, mobility and access that a second passport can offer,” she says, noting that Malta is the most popular choice.

“It’s important that the client understands what their end goal is, whether residency or citizenship, in order to make the best choice,” Read adds.

Read notes that South Africans, when applying for a secondary citizenship, need to apply for retention of citizenship at Home Affairs.

 

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I grew up in Cape Town and own property in Cyprus. Please be very careful about buying property on the overseas market. Exercise due diligence when making large capital purchases, no matter what country you choose for your investment. Below, I aim to provide you with some important tips.

The Cypriot Residency/ Cypriot Passport deal has been designed by the government of Cyprus to stimulate the property market, after the European housing market collapsed during the 2008 financial crisis. The plan to assist Cypriot businesses is a laudable one, which deserves support. While there are bargains to be had, the Cypriot property industry is no different from the South African one: you have your good eggs and you have your bad eggs.

There are some wonderful properties available to buy in Cyprus. A great advantage to South Africans is that, owing to oversupply, it is a buyers’ market. You can negotiate. But that message has not got through to all the sellers. Chinese citizens, who favour the scenic town of Paphos, have been scammed by one developer, who has charged them €300 000, whether the property has one, two or three bedrooms (a Cypriot permanent residence visa requires the purchase of a €300 000 new property).

Potential purchasers of Cypriot properties need to also be cautious of buying new properties that are mortgaged to a bank. If the property developer accepts your cash, but does not pay off his bank loan, you are left sitting with a home belonging to the bank. So it is necessary have your (British) lawyer go to the local Land Registry Office and make sure that the dream home you wish to buy, is not encumbered by a bank loan. This should be standard practice, whatever country you seek to invest in. Inexperienced buyers need reminding of some of the facts of life.

The Government has assured prospective purchasers of new properties, that once the full purchase price has been paid and the purchaser has in addition made the required investment in a local bank, it will take three months for the new Permanent Residence/ Cypriot Passport to be issued. My advice to all potential purchasers of property in Cyprus, is to find a buyer who has been granted a Passport. You should then find out exactly what company they bought their property from and which firm of lawyers they used. Then do exactly what they did.

Cyprus is a wonderful country with a relaxed Mediterranean way of life. It has a beautiful, long coastline, which architects use to maximum effect. Now would be the best time to invest in a Cypriot dream home, before the market rebounds to 2008 prices. You could come away with a fantastic bargain. All it takes is a little hard work on your part, finding a reputable company with a good track record.

I agree with your comments – BUT in addition Cyprus recently confiscated people’s bank ACCOUNT BALNCES – TO BAIL OUT THE COUNTRY. if they can do this what other tricks can they get up to?

talk about wasted space. last week some guy on thi site was saying that 80% of south Africans who buy property to get overseas citizenship end up losing their money. what hanna said could have been condensed to – if u have liquid overseas money and u want to get an offshore location – head to Australia – for us$5million (invested) you can get an Australian “golden visa”. BUT how many people in sa have access to this type of money – less than 1,000 surely?

have a look at the “Henley & partners” south African web page – spelling errors and won’t accept any email submissions!!!!

Thank you for highlighting the additional banking risk in countries which use the Euro. Cyprus bank depositors lost money in 2013, when two local banks suffered massive capital losses arising from the Greek financial crisis.

A 2012 decision by former French President, Nicolas Sarkozy, and German Chancellor, Angela Merkel, to allow Greece to default on €110 billion of its loans, caused Cypriot banks to sustain a direct €4.5 billion loss. The resulting bank run caused a massive liquidity crisis in Cyprus.

The two Cypriot banks could not cover the cost of withdrawals, most of which were made from their branches in Greece. One bank was closed down and the other bank was restructured. As a result, depositors lost most of their uninsured deposits (amounts above €100 000).

There is a possibility that Greece might default on some of its other state loans, or indeed, withdraw from the Euro. Moneyweb readers should be well aware of the risks.

On September 13th, 2016 Council of Ministers of Cyprus approved a new program of financial criteria for investors wishing to obtain citizenship of Cyprus. The new criteria are more attracting than the previous ones, and the most important change is that the amount of investment has been reduced from € 2.5 million to € 2 million.
http://vizus.com.cy/page/cyprus-citizenship

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