An Introduction to Citizenship by Investment and Residence by Investment
The investment immigration industry has seen immense growth in recent years as more and more investors seek the benefits that citizenship and residence by investment programmes bring. At the beginning of 2021, it was estimated that the investment immigration market was worth upwards of US$24 billion.
Both citizenship by investment (CBI) programmes and residence by investment (RBI) programmes involve the making of a significant investment. CBI programmes result in a successful applicant receiving citizenship of a country – that is, the right to live and work in a country, participate in politics and access social services such as primary education and healthcare, generally without the requirement to spend any time in that country. Citizens may also apply for a passport, through which they can travel to any of the countries with which their country of citizenship has signed a relevant treaty. By contrast, RBI programmes result in a successful applicant receiving residence – the right to live (and generally work) in a country. While it is difficult for a person to lose citizenship, residence can be more easily taken away if a resident does not fulfil specified conditions. For example, there are often minimum physical presence requirements attached to a person’s ability to retain residence rights.
Part of the attraction to CBI and RBI programmes is the win-win solution offered both to investors and to host CBI and RBI nations. To investors, their current country of citizenship or residence can often be a great liability, constraining their freedom to travel and conduct business on a global scale, offering little scope for personal and economic development, and/or subjecting them to life under an unjust or unstable government. CBI and RBI programmes therefore provide a means through which investors can determine their rights and duties, and balance the risks and rewards of being a citizen or resident of a nation.
For the nation, CBI and RBI programmes drive foreign direct investment and allow governments to channel investments into areas of need. For some countries, as will be discussed, CBI and RBI programmes have represented a lifeline in times of crippling need.
Citizenship by Investment Programmes
The concept of CBI was established in 1984 by the then-newly independent St Kitts and Nevis, whose CBI Programme has today earned a reputation as the “Platinum Standard” of the investor immigration industry. Neighbouring Dominica followed suit in 1993, and now, in the 37th year of the existence of CBI, the concept has been incorporated into the legislation of a number of countries worldwide.
As of 2021, the Caribbean boasts some of the industry’s most celebrated CBI programmes, including those of industry leaders Dominica and St Kitts and Nevis, as well as Antigua and Barbuda, Grenada and St Lucia. In 2017, Turkey entered the market by unveiling its CBI Programme, which proved extremely popular a year later, when minimum investment requirements were reduced significantly. In the Pacific, the small island nation of Vanuatu claims two coexisting CBI Programmes, of which the Development Support Programme underwent significant reform in 2019 and is accessible to a larger number of investors.
CBI for the Nation – Concrete Examples: Well-managed, robust CBI programmes generate significant value for the countries implementing them. CBI provides a vehicle through which countries can drive socio-economic growth, including through the creation of jobs and enhanced spending across public and private sectors, to the benefit of citizens across society. In the context of island states such as those in the Caribbean, CBI has even empowered governments to respond to the risks posed by natural disasters by fostering the development of climate-resilient infrastructure.
In Dominica, for example, CBI has been the driving force behind the country’s sustainable development goal of becoming the world’s first climate resilient nation. Following the onslaught of Hurricane Maria in 2017, Dominica was left with more than 90% of buildings destroyed and damage worth 226% of the island’s GDP. Thanks to CBI, Dominica was able to “Build Back Better” and EC$582.6 million of CBI-generated funds was spent on restoration efforts including the construction of 6,680 hurricane-resistant homes, the rebuilding of 15 roads, 19 bridges, three hospitals, six healthcare centres and 15 schools. Although recovery was predicted to take decades, with CBI funding Dominica had exceeded even pre-Maria levels of development within a mere two years.
Similarly, in Vanuatu, CBI was instrumental in raising funds to aid the island’s recovery from the landfall of Tropical Cyclone Pam in 2015. The World Bank assessed the costs of Vanuatu’s recovery at US$426 million. Yet, just four years after Cyclone Pam, the International Monetary Fund (IMF) had concluded that full recovery was in sight. Without CBI, such a comeback would not have been possible for Vanuatu, whose government is now channelling CBI revenue into long-term objectives such as embarking on a debt reduction programme.
Recently, the effects on the Coronavirus pandemic have led many countries to set up support systems for their citizens with CBI funds playing a large role in upholding their economies. Particularly for small island states, revenue from CBI and RBI programmes has provided relief where the impact of business closures and lack of tourism, due to the pandemic, has been acutely felt.
CBI for Investors: Concrete Examples:
For investors, CBI offers a permanent status that can be shared with one’s family and, generally, passed down to future generations. CBI programmes pave the way to a vast frontier of opportunity, including access to education, cleaner air, and functioning hospitals and clinics. In normal times, CBI also comes with visa-free and visa-on-arrival access to a number of international business hubs, notwithstanding any travel restrictions imposed by Covid-19.
All Caribbean countries with established CBI programmes are member states of the Caribbean Community (CARICOM). Therefore, with citizenship of Antigua and Barbuda, Dominica, Grenada, St Kitts and Nevis, and St Lucia comes access to the CARICOM Single Market and Economy, allowing movement between CARICOM member states for the purpose of economic activity for certain categories of workers. Although free movement between member states is yet to be fully realised, CARICOM member states so willing are expected to move towards free movement during the course of this year.
Eligibility Criteria: All main applicants seeking to obtain CBI must be over 18 and have sufficient funds to make an investment. Most CBI countries uphold the sanctity of the family unit and allow dependents to be included in an application. Family eligibility, however, depends on the country. Certain family members, such as spouses and minor children, are almost universally eligible to be included in an application. Some countries go a step further. Caribbean CBI nations, for example, allow adult children up to between the ages of 25 (and sometimes even 30) to be included in an application, so long as there is a showing of dependency (with some countries being stricter than others on what ‘dependency’ means). Many countries also allow the inclusion of parents and a minority allow grandparents. Dominica even allows the spouses of parents and grandparents to be included in an application, even if those spouses would not normally meet the age requirements otherwise imposed on eligible parents and grandparents. Caribbean nations also allow siblings to form part of an application, with some, like Grenada, requiring them to be adults, others, like St Lucia, requiring them to be minors, and others still, like Dominica, allowing for both adults and minors to be included (so long as other requirements are met).
In addition to age requirements, applicants to CBI Programmes and their accompanying family members must generally demonstrate that they are in good health, for example, by having medical practitioners fill out health forms and by providing basic health screening tests, such as blood tests.
In some cases, CBI programmes also subject applicants to mandatory travel or residence requirements. In Turkey, for example, applicants must obtain a residence permit prior to the grant of citizenship. In the Caribbean, Antigua and Barbuda is the only CBI country to implement travel and residence requirements, requiring travel to the country to take an oath of allegiance and physical presence in Antigua and Barbuda of at least five days within five years of obtaining citizenship. Underage children do not need to fulfil the travel and residence requirement in Antigua and Barbuda until they turn 18.
Due Diligence: An important requirement for most CBI programmes is that applicants demonstrate they are of good character, meaning that they must be reputable individuals without a criminal record and with a clean source of funds. Indeed, thorough due diligence forms the foundation of the CBI industry as countries have a vested interest in ensuring applicants pose neither a reputational nor a security threat (to themselves or to their international allies). Caribbean CBI countries in particular have garnered international recognition for their commitment to stringent due diligence.
In the Caribbean, although processes differ slightly from country to country, all CBI programmes operate a multi-tiered system of due diligence. Firstly, “authorised” or “local” agents – the only entities approved to submit an application for citizenship on behalf of a main applicant – perform know-your-client (KYC) checks to corroborate the information provided in an application. These agents are at risk of losing their licence if they make submissions from applicants who are not deserving of citizenship, and, in some countries such as St Kitts and Nevis, applications are not accepted unless they are accompanied by an agent’s KYC report. Applications are then internally vetted by the “Citizenship by Investment Unit” or “Citizenship by Investment Committee” of the country, whose staff are trained in document review, anti-money laundering and anti-terrorism financing. Applications are also reviewed externally by mandated due diligence firms and international and regional law enforcement partners, such as Interpol and the Joint Regional Communications Centre (JRCC). Mandated due diligence firms assess applications through document validation, checking international sanctions databases, evaluating the media profile of an applicant, and performing on-the-ground checks. This entails physical presence in a person’s country of residence and discreet enquiries with local authorities, business partners and even personal relations. The reports produced by these due diligence firms are then analysed before a decision is made in relation to an application.
The Caribbean – and some other CBI nations – also imposes legislative safeguards. Where due diligence cannot be adequately performed due to instability in a person’s country of origin, Caribbean countries (with some variations) bar citizens of these countries altogether. Dominica, for example, bars applicants from Iran, North Korea and Sudan, except where these applicants have lived away from these countries for at least 10 years and have no substantial assets or performed any business there. Dominica also requires enhanced due diligence for all Syrian applicants.
Furthermore, Caribbean jurisdictions bar applicants who have been denied a visa from a country with which they have a visa-free travel agreement – a move that also protects allied countries.
Countries also maintain the right to revoke citizenship in certain circumstances, with most retaining the right to deprive a person of citizenship if that citizenship was obtained through fraud or wilful concealment of a material fact.
The Caribbean’s robust commitment to due diligence is beginning to be mirrored in other CBI nations. For example, Vanuatu’s Citizenship (Development Support Program) (Amendment) Regulations Order No. 39 of 2020 introduced international specialist firms (that is, globally reputable firms specialised in citizenship and visa due diligence checks) to the citizenship by investment process for the first time. In March 2021 Vanuatu’s Ministry of Foreign Affairs further noted that the “Vanuatu Citizenship Commission continues to move forward with plans to restructure the citizenship programme – with due diligence processes being one of the primary considerations”.
This overarching trend of wanting to improve due diligence is also reflected in the Caribbean. St Kitts and Nevis, a country that attained a perfect score for its due diligence in the 2020 CBI Index (and that has been doing so since the first edition of the CBI Index in 2017), is expected to introduce biometric screening (albeit having been slowed in its plans by the Covid-19 pandemic). Biometric processing will give St Kitts and Nevis the ability to conduct new forms of identity verification to further strengthen its due diligence.
More due diligence, on the other hand, is needed by CBI newcomers such as Turkey, where checks are limited to those performed by the nation internally. The sustainability of Turkey’s CBI Programme will be largely reliant, it is predicted, on its ability to garner international respect from the international community, and, therefore, international investors.
No CBI Programme is the same. Investment types vary, as do associated costs and fees.
The St Kitts and Nevis Citizenship by Investment Programme
There are two investment options in St Kitts and Nevis:
(1) a contribution to the government’s Sustainable Growth Fund; or
(2) the purchase, either as an independent buyer or joint investor, of pre-approved real estate. Independent buyers must hold the real estate for at least five years, while joint buyers must do so for seven years. Real estate investors must also pay a government fee.
Currently, St Kitts and Nevis is running a Limited Time Offer to secure second citizenship by investing in the Sustainable Growth Fund, allowing families of up to four to gain citizenship for $150,000 instead of the previous $195,000. Siblings are unfortunately excluded from the Limited Time Offer.
The Dominica Citizenship by Investment Programme
There are two investment options in Dominica:
(1) a direct contribution to the government (commonly known as the Economic Diversification Fund option); or
(2) the purchase of pre-approved real estate to be held for at least three or five years, depending on who the buyer is. Real estate investors must pay an additional government fee.
The Antigua and Barbuda Citizenship by Investment Programme
There are four investment options in Antigua and Barbuda:
(1) a contribution to the government’s National Development Fund;
(2) the purchase, as an independent or joint buyer, of pre-approved real estate to be held for at least five years;
(3) a contribution to the University of the West Indies Fund (UWIF); or
(4) an investment, either independent or joint, in a business.
The UWIF option is only available to families composed of six or more persons and covers the costs of one year of tuition at the University of the West Indies for one family member only.
Unlike other Caribbean nations, Antigua and Barbuda charges Government “Processing” Fees on all investment types, including to its development fund. An equivalent of 10% of the Government “Processing” Fees are due on submission and are non-refundable.
The Grenada Citizenship by Investment Programme
There are two investment options in Grenada:
(1) a contribution to the government’s National Transformation Fund; or
(2) an investment, either independent or joint, in a pre-approved project (most commonly real estate) to be held for at least five years if the buyer is also someone who wishes to apply for CBI in Grenada.
The St Lucia Citizenship by Investment Programme
There are four investment options in St Lucia:
(1) a contribution to the government’s National Economic Fund;
(2) the purchase of pre-approved real estate to be held for at least five years;
(3) an investment, either independent or joint, in an enterprise that creates local jobs; or
(4) the purchase of non-interest-bearing government bonds (with varying hold periods under a Limited Time Offer due to expire on 31 December 2021).
When the selected real estate is an educational institution, government administration fees are waived for the main applicant and a dependant aged 0-17 who has been accepted by the educational institution.
The Turkey Citizenship by Investment Programme
There are five routes to citizenship in Turkey:
(1) a fixed capital investment of US$500,000 (or equivalent), with certification by the Ministry of Industry and Technology;
(2) the purchase of real estate for US$250,000 (or equivalent) to be held for at least three years, with certification by the Ministry of Environment and Urbanisation;
(3) the provision of employment for at least 50 Turkish citizens, with certification by the Ministry of Family, Labour and Social Security;
(4) the deposit of US$500,000 (or equivalent) into a Turkish bank to be held for at least three years, with certification by the Council of Bank Audit and Regulation; or
(5) the purchase for US$500,000 of government bonds that must be held for at least three years, with certification by the Ministry of Treasury and Finance.
The Vanuatu Development Support Programme
There is only one investment opportunity under Vanuatu’s Development Support Programme: a contribution to a local development fund.
Residence by Investment Programmes
Three of Europe’s most successful residence by investment (RBI) countries are Portugal, Greece and Spain, whose programmes officially began in 2012, 2013 and 2014, respectively. Since the inception of these programmes, the RBI market in Europe has grown at a remarkable rate (with Covid-19 somewhat halting this progress in 2020). In 2019, for example, Greece issued 3,504 residence permits to investors, a 266% increase on the number of residence permits issued to investors in 2017. In 2020, however, only 403 residence permits were issued to investors, likely a result of Covid-19 slowdowns. In Portugal, however, the number of residence permits issued to investors remained relatively stable in 2020 despite Covid-19. Portugal, for example, issued 1,351, 1,409, 1,245 and 1,182 residence permits to investors in 2017, 2018, 2019 and 2020 respectively.
RBI for the Nation: Despite the growing popularity of RBI in Europe, RBI schemes generally do not play an integral role in the development of the countries implementing them, but rather provide a lucrative source of additional, non-tax generated funds for local governments.
According to figures released by Enterprise Greece – the government agency responsible for promoting trade and investment in Greece – by the end of 2020, 8,011 main applicants (along with 15,774 of their family members) had obtained residence permits through the country’s RBI programme. Because each main applicant is required to invest a minimum of €250,000, the programme must have raised at least €2 billion during its lifetime. However, this figure is likely to be even higher given that actual investment amounts are in practice around €75,000 higher than the required minimum.
Whereas CBI programmes are mainly driven by contributions to government funds, the RBI programmes of Greece, Portugal and Spain are largely driven by investments in real estate and hence have had far-reaching effects on the property markets of these three countries.
RBI for Investors: For investors seeking to participate in RBI in Europe, the potential benefits are extensive. With a residence permit comes the right to live, work, undertake business and study in the investor’s country of choice. Residence of Greece, Portugal and Spain also allows the investor coveted visa-free travel across Europe’s Schengen Area. It is worth noting, however, that neither the United Kingdom nor Ireland are in the Schengen Area, and that RBI investors would still need to apply for a visa in order to travel to these two nations.
RBI programmes generally lead to residence status that, unlike citizenship, is subject to renewal every two to seven years depending on the country. The ability to renew one’s residence rights is usually subject to the fulfilment of certain physical presence requirements. However, residence status can still be obtained even while maintaining a permanent place of residence elsewhere.
Additionally, RBI schemes often come with the opportunity to qualify for citizenship after a certain number of years, subject to the fulfilment of supplementary requirements. In Portugal, for example, investors become eligible for citizenship after six years of residence but must be able to demonstrate a certain degree of knowledge of the Portuguese language.
Eligibility Requirements: People who have sufficient funds to partake in an RBI programme must be over the age of 18 in order to become main applicants. In most cases, a main applicant’s family members are also eligible to receive residence rights, though the process for obtaining residence permits for family members varies from country to country. In Greece, for example, family members may be included in an application and can each receive individual residence permits, albeit contingent on the validity of the main applicant’s permit. In Portugal, however, main applicants are only permitted to apply for residence permits for family members after having received residence permits themselves.
Family eligibility also depends on the country. In Greece, Portugal and Spain, eligible family members include the main applicant’s spouse, minor children, children aged over 18 (subject to certain restrictions) and parents. Furthermore, Spain grants residence rights to grandparents, while Portugal grants such rights to siblings aged under 18 and under the main applicant’s legal guardianship.
Additional applicant requirements for the RBI programmes of Greece, Portugal and Spain include possession of a valid Schengen visa, the grant of which demonstrates that the applicant has passed the zone’s due diligence processes, which flag criminal behaviour or listing on any international or regional wanted database. A health insurance policy covering the entirety of the residence period is also required.
The Greece Golden Visa Programme
The most popular investment option for permanent residence in Greece is the purchase of real estate for a minimum value of €250,000. More than one property can be purchased, the total value of which must add up to €250,000 or more. Furthermore, the property may be rented out to third parties. The investment may be performed from the investor’s Greek bank account or by direct wire transfer from abroad.
The Portugal Golden Visa Programme
Applicants can choose between a number of investment options, each with a minimum investment term of 5 years. However, by far the most popular investment option is the purchase of real estate for (1) €500,000, or (2) €350,000 – a reduced minimum amount that applies to properties over 30 years old or located in areas of urban regeneration, and designated for refurbishment.
Purchased properties may be residential, commercial, or agricultural, and can be used to generate income or rent. Under the €350,000 option, refurbishment works are included as part of the total minimum investment amount. For both the €500,000 and €350,000 options, the minimum amount required is reduced by 20 percent where the investment is made in low population density areas, defined as fewer than 100 inhabitants per km2 or having a GDP per capita 75% below the national average.
The investment may be made by the applicant or through a Portuguese or European Union limited liability company of which the applicant is the sole shareholder.
The Spain Golden Visa Programme
Applicants wanting to obtain Spanish RBI can choose between a number of investment options:
(1) An initial investment with a value of:
• €2 million in Spanish public debt securities;
• €1 million in company shares or stock of Spanish capital companies with actual business activity;
• €1 million in investment funds, closed-end investment funds, or venture capital funds constituted in Spain; or
• €1 million in bank deposits in Spanish financial institutions;
(2) The purchase, for €500,000, of real estate (whether one property or multiple properties) in Spain; or
(3) A business project to be carried out in Spain that is deemed to be of general interest by virtue of the fulfilment of at least one of the following conditions:
• the creation of jobs;
• an investment having relevant socio-economic impact in the geographic area where the activity will be carried out; or
• a relevant contribution to scientific and/or technological innovation.
The rate at which the investment immigration industry is growing shows that investors are choosing to invest now rather than later, and to prepare for unforeseen crises by diversifying their rights and assets across borders.