Golden visas, or citizenship by investment (CBI) schemes, have long been an option for expatriates looking to relocate.
Foreign nationals can buy an overseas home or invest in a non-profit initiative, for example, in return for residency or citizenship rights. On the face of it, these plans look like a win-win, with investment visas raising €3.5 billion a year to boost local economies in the EU.
However, the European parliament has instigated legal proceedings to limit and control golden passports, which raises the question of whether such schemes will continue to be available – and for how long.
The Case for Citizenship by Investment Programmes
Golden visas offer a range of advantages for both the country and the investor.
Although the exact contribution rates and qualification criteria vary, the typical approach is to make a governmental donation or purchase a property. Most schemes offer considerable tax advantages, such as a flat rate charge or zero tax on some elements of income, although they can be dependent on a minimum stay.
For example, the Portuguese D7 Retirement Visa allows immediate tax residency and the potential to apply for citizenship after five years. Applicants need to earn at least €705 a month, with €30,000 in liquid assets.
Aside from a comfortable retirement in a low taxation, pleasant climate, many business owners also take advantage of CBI schemes, opening up the option of trading throughout the EU and often paying considerably lower business taxes.
Countries accepting CBI applicants gain economic investment and job creation and attract high net worth individuals or professionals, with long-term returns as expatriates relocate with their families, purchase homes and invest in the local economy.
Citizenship vs Residency by Investment
It’s worth noting that only one EU country currently offers a true CBI with full citizenship attached, following the closure of the scheme in Cyprus. Expats can move to Malta through a scheme called Citizenship for Exceptional Services by Direct Investment.
Investment requirements include:
- Donating €600,000 – €750,000 to the government fund (the higher contribution permits a shorter one-year mandatory residency before a passport is granted).
- Buying property worth €700,000 or above or renting a Maltese home for five years at a rental cost of €18,000 a year or more.
- Contributing €10,000 to an eligible charitable organisation.
Since the original visa launched in 2016, around 2,300 applicants have been granted permits, accompanied by 5,300 family members.
Other schemes in Monaco, Spain and Portugal accept investments but grant residency by investment (RBI) rather than citizenship. The difference is that residents normally cannot vote and do not hold a second passport. They normally need to provide evidence of a minimum income or wealth, cannot use free public healthcare services, but become tax residents and often receive a visa much faster than through other routes.
The EU Objection to Golden Visas
The crux of the EU argument is that successful golden visa holders (whether residents or citizens) receive automatic travel freedoms and are not restricted to the specific country where they have a permit or passport.
While most foreign nationals wish to relocate to enjoy better living standards, lower costs or advantageous tax regimes, there is a risk of manipulation. Examples include money laundering, tax evasion and lenient eligibility criteria, which are seen as a ‘back door’ for individuals with criminal records to legally move to the EU – when they would be refused any other visa.
Some countries have taken note, and Greece has stopped issuing new residency permits, which were previously available with a property purchase of €250,000.
The argument has been ongoing for several years. In 2018 the EU Commission asked member countries to exercise caution and increase security around investor visa background checks. This year, things have moved forward after MEPs voted to introduce laws phasing out golden passports, with new regulations at EU level to control residency permits.
Will Golden Visa Investment Schemes be Cancelled?
Any ban on CBI schemes will take time to implement, and the proposed laws are still in a draft state, with updates expected in the next three years.
Given that CBI and RBI programmes raised over €21.8 billion in investment between 2011 and 2019, it’s also highly unlikely that relevant visa schemes will be cancelled altogether.
Instead, the rules will change to deter applications from individuals, families or businesses without a legitimate reason to move:
- Background checks will increase and include family members, evidence of the source of funds and mandatory checks against EU home affairs and legal systems.
- EU countries will have an obligation to comply with central reporting requirements and standardise their schemes.
- Applicants will need to meet minimum physical residence periods (which don’t currently apply to all programmes).
Most golden visas or investment schemes will continue to exist in one guise or another. But, if you plan to relocate in the near future, it may be advisable to expedite your application while the approval process is quicker.
In the future, EU countries will have the right to object to a golden visa scheme being introduced by another member, and each new programme must go through a consultation process.
Alternatives to Golden Visas
We’ve talked here about EU golden visas since the pending rule changes will not impact other countries – there are extensive CBI initiatives across the Caribbean, as an example.
The EU Commission wants to regulate third-country golden visas, where a passport grants EU travel freedoms, but this seems highly unlikely given the investments made into otherwise small economies.
It is also possible to relocate to the EU, or another region, without a golden passport. That could be through a residency visa with enhanced background checks or a standalone visa process, depending on your reasons for moving.
Our advice is to ensure you have oversight of the available options since many visas have similar rules and provide comparable advantages in terms of tax efficiencies.
For more guidance around planning for a long-term relocation or a move overseas in retirement, please download our complimentary Retirement Planning Guide or contact your nearest Chase Buchanan office at your convenience.