- October 22, 2017
- Posted by: CIP Journal
- Category: Citizenship
On Wednesday, September 20th, we hosted our live event on Citizenship by Investment programs throughout the globe.
We had a distinguished group of panellists who tackled plenty of questions on the field of citizenship and residency by investment programs that were submitted by our community.
A heartfelt thank you to our panellists for taking the time out of their busy schedules to provide us with their knowledge on citizenship by investment programs:
– Laszlo Kiss, Managing Director, Discus Holdings Ltd, Malta
– Andres Gutierrez, Global Business Development Manager, CS Global Partners, UK
– Bruno L’Ecuyer, CEO, Investment Migration Council, Switzerland
– Vasiliki Petrou, Corporate Lawyer, Meridian Trust – Corporate & Fiduciary Services, Cyprus
And here are a few of the event’s major highlights. Happy reading!
How does Citizenship by Investment (CBI) differ from residence by investment and why is CBI a booming industry?
“First of all, obviously, the meaning of residency and citizenship is quite different. Citizenship attachment is much stronger than a residency one. Citizenship means you are attached to a country, either because you were born there, you were nationalized or you chose that country to be part of. Usually, residency is not as strong as citizenship because you can choose many places to go in the world. You can decide where to reside. You can change at any time. Citizenship is obviously much harder to change, and that’s why the attachment is much stronger for citizenship.”
“The industry has been growing tremendously since the advent of the financial crisis of post-2008. I think there are probably two reasons for this. The first is that many economies, particularly the small states, were desperately looking for new sources of foreign direct investment to replace the old reality of the new economy. Secondly, the number of service providers has increased exponentially in the past five to six years. And that creates a strong marketing push on behalf of the agents and all these other service providers, which brings to the attention of potential clients that there is this industry available.”
Given that more and more jurisdictions are offering citizenship through investment programs, how should investors decide which jurisdictions suit them?
“The most important rule for us is to listen, listen, listen, understanding which are the client’s concerns and their goals in particular, understanding whether they have a family or not…For us, the first key is understanding which are those goals and which are those concerns… Based on that, we’ll be able to look at any of the citizenship and resident solutions that are in the market like the Caribbean, Europe citizenships like Cyprus and Malta, UK residence programs and so on and so forth. At the end of the day, we don’t want to advise; we want to give the right and correct advice.”
“Different jurisdictions offer different packages, let’s say, and [their decision] depends on the intention of the clients and the investment options, what each jurisdiction has to offer them. There are no specific criteria.”
BRUNO L’ECUYER: “For agents or client advisors, they need to fully understand two things. First, the motivation of their clients, why exactly they want their residency or second citizenship and, second, understand the pitfalls, the advantages and disadvantages of each of these programs. There isn’t an algorithm, which you tap in the numbers and then you get a result. It is very much based on feeling.”
What is required to keep high standards within the CBI industry?
BRUNO L’ECUYER: “I think we can break this down into four distinctive areas. Firstly, we feel like it is evident that there is very little of that coordinated effort to share information, and there are neither many reliable repositories for data and analysis that agents or investors can access and then governments can make use of when creating their own programs…Secondly, there are so many different countries offering programs and that’s seen a major increase in the past few years…It’s a growing business, it’s very interesting to small states where these large inflows can be significant in terms of the economic and fiscal impact that they have. So there needs to be a better coordination within the industry for everybody to benefit. Thirdly, there are a number of growing industry participants, which means increased competition between service providers and between countries. This is generally good news for consumers, but it also raises a number of questions: Can my advisor be trusted? Is my advisor competent? Is the proposed country safe and offer a long-term opportunity for my family and me? Finally, the perception issues of the industry due to rogue players within the industry and those are the ones generally acting in unethical ways. They damage not only the industry, but they also damage specific programs through bad practice.”
LASZLO KISS: “One very important aspect, which might sound a little bit controversial, but let us not fool ourselves, is that quite a lot of criminals are looking for solutions. Therefore, due diligence must be clear and should be an integral part of any such citizenship program.”
How do CBI programs contribute to the countries offering their citizenship? What sort of benefits do these countries offering CBI programs receive from these sales of citizenship?
VASILIKI PETROU: “Cyprus in 2013 had an economic crisis and the government decided to give more motivation and relax the requirements for obtaining the Cyprus citizenship. And, of course, this contributed a lot to the GDP of Cyprus, and it’s directly related with the service factor here in Cyprus, which is considered the biggest source of income for the island.”
BRUNO L’ECUYER: “What is the macroeconomic influence of these inflows really does depend on the design of each program. We do know that in small states, the large inflows have a significant spillover to other sectors.”
Is it better to invest in citizenship by purchasing property or investing in a business, or is it better to donate to the government as in the case of some Caribbean programs?
LASZLO KISS: “I think it is quite often a psychological type of question, which is that there are certain people who would like to hold in their hands what they have. For them, a donation is money thrown out. It doesn’t make too much sense to argue with them because this is what they feel, this is where they feel comfortable and, if it satisfies the conditions of a citizenship, then why not?”
ANDRES GUTIERREZ: “There are clients that have the profile of an investor, and they say, “I want my villa of 1, 2, half, $3 million, whatever, in Saint Kitts or Grenada.” Another client might understand that they are investing in a passport; basically, that’s a donation to the government. Depending on that, we have many clients that go for the fund option because it is hassle free. These clients don’t need to worry about, in three or five years time, selling the property.”
In terms of tax or wealth management prospects, what are some of the unique opportunities in the Caribbean?
ANDRES GUTIERREZ: “In terms of wealth management and so on in the Caribbean, the usual type of clients that are searching for that is usually the type of client who has a family or is divorced or is 50 years old and is searching to do some succession planning, some tax planning, wealth management and so on. Usually for these purposes, the clients decide to go for the real estate option. They’re usually interested in the Saint Kitts and Nevis program, a citizen platinum standard in the Caribbean, which has really good real estate investment. If they want, the client can live there for as long as they want. And, also, there’s a good and vast array of structuring opportunities.”
What are some of the advantages & disadvantages of the CBI program in Malta?
LASZLO KISS: “Compared to the other Caribbean jurisdictions, I would say that one of the most important advantages is that it gives a EU citizenship and it’s not a wonder that it costs much more than a Caribbean citizenship…Malta also has a very big advantage in that it offers the same kind of system as in the United Kingdom. With Brexit coming up, then that might be a good place for high net worth individuals to consider putting their tax residency.”
What are the main advantages and disadvantage of the Cyprus CBI program and how successful has it actually been in attracting high net worth individuals?
VASILIKI PETROU: “Cyprus citizenship is considered one of the most popular citizenships, especially for Europe, and one of the main advantages of the Cyprus citizenship is the EU citizenship and visa-free travel to 146 countries…Furthermore, we have one of the lowest corporate tax rates in Europe at 12.5 percent. We also have a very low income tax, which range from 0 to 25 according to your annual income. And there is the fact that we are signatories of double tax treaties with over 50 countries.”
BRUNO L’ECUYER: “It’s always been about attracting, not only investments, but also talent, and this has become ever more important with the ongoing negotiations with the European Union and the UK government regarding the terms of the Brexit deal. So, attracting talent is creeping up the value chain…Some of the conversations I’ve had with Cypriots is that this is what it’s about as well in Cyprus; it’s about attracting talent and not simple transactional, one-off transactions of sale of a citizenship.”
Read the full discussion here