A mounting number of high-net-worth individuals are looking to acquire a second passport or a permanent residency overseas.
Broadly viewed as the ultimate luxury item by HNW individuals, much more so than fancy cars, boats or designer jewelry, there are extensive benefits to being in possession of a second passport or residency in another country, far beyond just being a status symbol.
Particularly for U.S. citizens residing overseas.
Indeed, when it was rolled out in 2014, the Foreign Account Tax Compliance Act, FATCA, led to a record high number of American expatriates renouncing their U.S. citizenship.
These Americans residing abroad felt they had no choice but to relinquish their citizenship. Typically considered more trouble than they are worth by foreign financial institutions, they are forced to abide by the excessively complicated and costly reporting requirements.
As a result, many U.S. citizens living abroad cannot hold a bank account in their country of residence.
Therefore, these U.S. expats can potentially escape the grip of FATCA by pursuing a second passport or residency overseas.
As well as U.S. citizens, the majority of HNW individuals and their families looking into a second passport or residency are from India, China, South Africa, the Middle East and Russia, usually seeking opportunities in Europe or the Caribbean.
Some of the principal benefits to a second passport or overseas residency include more opportunities for visa-free travel, tax efficiency, political stability, world-class education and enhanced healthcare possibilities, as well as far-reaching business growth possibilities.
Of course, there is a significant difference between citizenship and residency, however both options offer numerous advantages to the holder. The key difference is citizenship, which provides a passport, cannot be retracted, unless it was granted by fraudulent means.
In the case of residency, these so-called ‘golden visa’ programs offer residency in return for investment, chiefly real estate. Such investments start at approximately 250,000 euros in Greece; 300,000 euros in Cyprus; and approximately 500,000 euros in Portugal.
Each country will have different rules and regulations within the investment scheme, such as the number of days that must be spent in the host country. However, there are certain obligations that are present in all programs, including the ability to verify the legal origin of funds, and the holder not having a criminal record.
Typically, the majority of HNWs will initially choose residency as it is usually less expensive and easier to complete. Moreover, it is a well-known way to obtain full citizenship in the long-term.
Although these ‘golden visa’ programs have received criticism, in the main they are viewed as positive for their domestic economies.
As an example, Cyprus’ Finance Minister Harris Georgiades said his country’s scheme has added 1.2 per cent to economic growth over the past three years. He also said the recovery of the construction and real estate sector in Cyprus is due to the residency for investment program.
Elsewhere, in Portugal, Eurico Brilhante Dias, secretary of state for internationalization said the program was drawing substantial interest to the country.
In the case of Portugal, this is becoming the ideal option for a large number of HNW individuals. Resident obligations are only a fortnight a year, full residency advantages are granted, permitting the holder to live, work, study and open a business, with access granted across Europe’s Schengen area. Additionally, the option of gaining full citizenship is available after six years.
These HNW individuals are global citizens looking for more opportunities for themselves and their families in a host country. This trend, particularly as the FATCA hold over U.S. expats overseas continues, is forecast to grow considerably over the next few years as the world becomes even more globalized.
Nigel Green is founder and CEO of deVere Group. One of the world’s largest independent financial advisory organizations, de Vere does business in 100 countries and has more than $12 billion under advisement.
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