Citizenship & residency by investment: Guide on how to choose a program

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Kristina Ruzhilo 05.12.2018

In this article we will share the insights based on 200+ cases from out practice and will explain how you can choose a residence permit and citizenship by investment program.

In addition to the main criteria such as the cost of the program, duration of application process, the list of visa-free countries, etc., you should also take into account the program effectiveness. Regardless of the status you eventually choose, the main goal is to obtain a document (passport or residence permit) under the guarantee and within the desired time. Therefore, we openly share information so that you could make the right decision.

At the end of the article you will find a link to a program comparison chart, but right now we will look in more detail into the issues which are unfamiliar to a client until they go ahead with the application process.

Realistic time-frame of application process

Despite the fact that the law provides a clear time-frame, in practice, the application process may be significantly delayed. Let’s review the reasons of delays based on the examples of Caribbean countries:

  • Saint Kitts and Nevis

From October to March 2018, St. Kitts had a special offer for obtaining a passport by donating $ 150,000 to the Hurricane Relief Fund. Applications submitted during this period were pending for more than 8 months, since more than 1,200 petitions were submitted, and the CBI agency did not manage to review them on time.

  • Dominica

In 2017, the island of Dominica was almost destroyed by the hurricanes Irma and Maria. After the disaster, the duration of examination of documents in Dominica was extended to one year instead of the 3-5 months stipulated by the terms and conditions of the program.

  • Grenada

Part of the cases filed in Grenada in the summer of 2017 still remains pending in October 2018. The 15-month delay is indicative of difficulties in certain real estate projects and of the ineffective work of the Grenada CBI agency during this period.

Requesting additional documents

Before submitting an application to a citizenship agency, the case is checked by the agency against the exhaustive list of documents provided by law. Still, it’s a common practice among CBI agencies to request additional documents. It happens due to the fact that the due diligence procedure is carried out by an independent detective bureau. The agency may request additional documents regarding the origin of funds, utility bills, a Police Clearance Certificate, affidavits (notarized explanations of disputable situations), confirmation of financial solvency, consent to grant of citizenship to a child from the second parent, etc.

The St. Kitts, Antigua and Barbuda, Grenada, Dominica and Malta CBI agencies often request additional documents. Bases on our own practice, there have been cases of checking the applicant’s residence address, phone calls to the applicant’s partners and clarification of the data provided, etc. As an example, we can refer to a client’s case where people delegated by the citizenship agency arrived at client’s home address while he spent the summer in a vacation home with his family. After they weren’t able to confirm the applicant’s residency address during the visit, the agency employees requested a package of documents confirming the residential address, as well as an explanation why he was not at home at the time of the check. After the documents were submitted, a positive decision was issued by the agency, but this situation proved that a verification can be carried out at any time.

Requesting documents does not mean a refusal to grant citizenship, but it can cause significant delay of the examination process.

Rejection rate and reasons behind it

The main reasons of rejection are deliberate submission of false data, forged documents, the concealment of information about former criminal proceedings.

Sometimes refusals can be due to the fact that the program has just been launched, and officials are not properly prepared. Below is the statistics from official sources.

  • Malta

According to the annual report of the Office of the Regulator for the Individual Investor Program; ORiip), in 2016-2017, there were 83 rejected or withdrawn applications against 422 approved ones, that makes 16% of the total number of cases submitted. During the period from 2015 to 2016, 241 petitions were approved and 52 applications were rejected (17.7%). The average citizenship rejection rate in Malta since the launch of the Malta Permanent Residency & Visa Programme By Investment is 18%.

  • Grenada

According to the government report issued by the CBI Grenada, the citizenship by investment program had high rejection rate in 2016, in particular among 143 applications considered, the citizenship agency had rejected 19 potential investors, which makes 13.3%. The rejection rate dropped to 11.4% in the following year, namely among 219 cases considered, 25 were rejected, however, this figure is still high for the Caribbean programs.

  • Saint Lucia

According to Nestor Alfred, CEO of the Citizenship by Investment Unit (CIU), during 2017-2018 among 279 applications filed under the Saint Lucia citizenship by investment program, 78 applications were approved, that makes only 28% of the total number of applications. Accordingly, the remaining applications either were not approved or the process of their consideration was significantly delayed.

In an interview to “Our Saint Lucia”, Nestor noted that compared to the situation of 2016-2017, the number of issued passports has increased significantly.

Effective process management

Not all programs work equally well. Normally, it happens due to heavy workload and the number of submitted applications. The application processing took longer than expected in St. Kitts during the period of a special offer (October-March 2018), namely when the price of participation was reduced to $ 150,000 (a donation to the Hurricane Relief Fund). At that time, more than 1,200 applications were submitted, and as a result, the Citizenship by Investment Unit of St.Kitts and Nevis did not manage to process them on time.

A similar situation took place in Dominica that was affected by the hurricane Eric in August 2015. Before the catastrophe, the island’s government planned to raise the cost of a passport by investment, but the extent of the damage changed the state’s position, and the price for citizenship remained the same, namely $ 100,000. The investors’ desire to obtain a passport of Dominica and wish to accomplish a noble cause have helped to attract $ 99 million to the country that corresponds to 990 approved cases during the period of 2015-2016. A great flow of applications caused a delay in the processing.

Saint Lucia CBI program has been ineffective since its launch. During the first year after its launch, less than 10 people were tempted to obtain the citizenship of Saint Lucia. Despite the attractiveness of the option of investing in Saint Lucia’s government bonds, not every investor will want to deal with the bonds of the country whose credit rating leaves much to be desired.

Process confidentiality

Most countries do not publish information on the grant of a second citizenship and do not provide data on obtaining a second passport to the applicant’s country, however, there are exceptions. In particular, a list of people who received a Maltese passport was published online by the Government of Malta. The news quickly spread through the Russian media, who noticed famous Russian businessmen on the list of new Maltese citizens.

Therefore, those who are concerned about confidentiality should consider other programs and initially receive a reliable answer from experts on whether the country is revealing information on the issued passports or not.

Requirement to confirm the source of funds

In most cases, it is sufficient to provide the documents on salary, dividends or other sources of income, tax data, information about the available assets, etc. At the same time, Caribbean countries, as well as Malta, often request additional documents after receiving applications for citizenship, which can also result in the extension of the case examination time.

 

Obtaining additional documents

Often, clients are interested in a possibility of obtaining additional documents (a driver’s license, registration address, tax certificates or social insurance numbers, etc.) requested by international banks and other organisations. Therefore, when choosing a program, it is important to consider if it’s easy or not to obtain such documents in a country of new citizenship. For example, citizenship of St. Kitts, Grenada or Dominica can be obtained without personal visit, however, in order to obtain a driver’s license you will need to book a flight to the island.

While all citizenship application processes are well in place, processes for obtaining additional documents need more attention and work on a “case by case” basis. For example, if you have obtained a Dominica passport, you should keep in mind that visiting the island is quite challenging since there is no international airport in Dominica. You can get to the island only by local Caribbean airlines or by sea. Thus, obtaining a driver’s license can cost $ 10,000-15,000 and take more than a week of the applicant’s personal time, given the necessity to visit the island (perhaps, more than once).

Adding family members in the future

In most programs, in order to add family members in the future, it is required to make an additional contribution, the amount of which varies from $ 20,000 to $ 50,000 + the cost of the services of a certified agent. Not in all countries the citizenship is inherited. At the same time, some countries allow to add the main applicant’s brothers and sisters into the application. For example, such an option was added to the Grenada CBI program in September 2018. According to the changes introduced into the Grenada citizenship by investment program, the unmarried brothers and sisters of the main applicant now fall into the category of dependents.

Obtaining citizenship via real estate purchase

Caribbean real estate

If you read most companies’ brochures, you may arrive at the conclusion that obtaining citizenship through investing in real estate is a very profitable option. However, descriptions provided by real estate websites/booklets/etc. are often far from the reality. When looking upon the real estate in the Caribbean, it is worth considering the following factors:

  • The danger of hurricanes

Almost every year, the Caribbeans are hit by hurricanes. For example, Dominica suffered from the hurricanes of category 3-5 three times in the last 5 years, namely the hurricane Erica in 2015 and hurricanes Irma and Maria in 2018, which completely destroyed the island’s infrastructure. There is also a number of projects that was not completed at all or went bankrupt.

  • The real estate market is overvalued

The real estate market in those Caribbean countries selling citizenship is significantly overvalued. It is likely that in 5 years the object will be sold at half the price, which gives no room for any income-related possibilities. In such a case, making a donation to the fund is much more profitable since you do not freeze money for 5 years and do not risk selling property much cheaper. Sometimes even a house located remotely from the beach, which is included in the list of properties approved for obtaining citizenship and sold with local tenants, can be a more profitable and safe investment than buying a share in a hotel.

However, this does not mean that there are no decent options on the islands. We only emphasize that choosing an object requires very careful approach. When choosing a property, you should pay attention to the following factors:

  • the cost of a similar object in the secondary market;
  • whether a new owner can obtain a passport on the basis of this property (this rule does not apply in all jurisdictions). If this is possible, the chances of selling an object increase;
  • by what mechanism is the investor’s income guaranteed;
  • is the object insured against natural disasters;
  • what is the occupancy rate of hotels in this region, how well developed is the tourist infrastructure;
  • how reliable is the developer, does the developer have successful experience of putting objects in commission in the Caribbean.

European real estate

In Europe, the most popular destinations for obtaining citizenship and residence permit through buying real property are Greece, Spain, Portugal and Cyprus.

The European real estate market is more liquid and predictable, however, each program has its own subtleties. For example, in Greece it is impossible to sell the object while maintaining the status, and in Portugal it is not only possible to sell property after 5 years of ownership, but also initially buy several objects, the total value of which meets the program requirements. We recommend that you familiarize yourself with the case of obtaining residence permit in Portugal through the purchase of real estate, where calculations and comparisons with other programs are provided.

How to choose the most effective program?

First, you should consult with an expert who has extensive experience working with all programs and will be able to assess possible risks before preparing the documents. By asking specific questions, some of which have been described in this article, you can understand whether the consultant is an expert in this sphere or just wants to sell you a program to make money. The investment immigration market is a new industry, which is about 6 years old, so it still has plenty of non-professional players who do not possess the necessary knowledge and experience.

Secondly, you should define your goal and provide reliable information (on the origin of income, the availability of criminal record or bankruptcies in the past, visa denials, etc.). Based on the information received, an expert will be able to offer several options relevant to your request, and you will choose the one which is most suitable for you.

What programs are most effective today?

If we consider the citizenship programs in the price segment up to $ 300,000 (this category encompasses 5 Caribbean programs and Vanuatu), we can note that our customers give their preference to the Vanuatu program.

Key differences of the program:

  • A simple procedure for a fund confirmation;
  • Fast examination period: from 1 to 2 months. In this case on Vanuatu citizenship, we provided examples of documents required for the application process;
  • A due diligence check takes only 10-14 days, in contrast to the Caribbean programs, where the examination period takes from 3 to 8 months;
  • Effective process management;
  • Zero refusal rate;
  • Possibility to add family members in the future;
  • Possibility of payment from any account and in a cryptocurrency through a certified agent;
  • Obtaining additional documents (a driver’s license, registration address, etc.) takes several days, but a personal visit is required.

Expert opinion

The Vanuatu Consul to Lebanon and Special Envoy to the Middle East, H.E. Mr. Azzam Makhlouf, “The Government of Vanuatu have performed a deep restructuring of the Vanuatu CBI to enhance the screening process and to reduce the amount of paperwork which is significantly lesser than in other countries who offer second citizenship in exchange for investment. While the law was still in draft stages, the government studied the negative experience of other countries and tried to make the program as investor-friendly as possible. I can now proudly say that we managed to do exactly that. The most important indicator is the application processing speed. On average, it takes 4-5 weeks. Also, if an application is rejected, this takes place at screening stage, so investors lose no time and no money during the application process. Thanks to the effectiveness of our CBI program, we were able to attract over USD 150 millions of direct investment in relatively short period of time.

There’s also the fact that Vanuatu’s CBI program is better known in the Asia region than, let’s say, in Russia and European countries because of Vanuatu’s geographical location in the Pacific Ocean, near Australia. At the same time, the program is very popular in the Middle East, thanks to activities of the Consulate of Vanuatu in Beirut. I can say that there we have quite good applicants from China, the US, South Africa and European countries. I’m sure that more and more people will start applying for Vanuatu passport in the nearest future. After all, the advantages of second citizenship of Vanuatu are obvious when compared to those of other countries, plus a Vanuatu passport is quite powerful.”

The best programs in Europe in 2018

In Europe, there are 3 citizenship by investments programs – in Malta, Cyprus and Bulgaria. Montenegro and Moldova programs are expected to be launched in 2019, but these countries are not in the EU, so they are significantly behind Cyprus and Malta in terms of benefits (a UK visa is required, stay in Schengen countries is up to 90 days per 180 days, not 365 days a year, etc.).

We should note that the program of Bulgaria is not operating properly. The process of obtaining citizenship after getting permanent residency is not smooth-running, and permanent residency itself does not provide any advantages other than living in Bulgaria itself.

When comparing these 2 programs, we can note that in 2017-2018, our clients preferred the Cyprus program. As of early 2017, more than 2,000 investors from non-European countries took part in the Cyprus program. While 566 investors received passports within the Malta program.

Key features of the Cyprus program:

  • There are no non-refundable donations (in Malta € 650,000 must be donated to a fund);
  • Real property can be sold after 3 years without loosing a citizenship (at the same time, the applicant should keep ownership of the property worth € 500,000);
  • Examination period is 6 months, whereas in Malta it is more than 14 months;
  • Almost zero rejection rate, while Malta has a very complicated due diligence procedure and the rejection rate is 18%;

At the same time, Malta has a rather weighty “trump card” in the form of visa-free travel to the United States, with the right to stay in the country for up to 90 days without a visa.

Residence permit and permanent residency in the EU for investments - which program is better?

As far as the so-called “golden visas” are concerned, which are offered by Spain, Malta, Greece and Portugal, the most cost-effective and interesting option is offered by Portugal.

Key differences of the Portuguese Golden Visa program:

  • The only residence permit program in the EU, where you can get a passport after 6 years (this term can be reduced to 5 years in the nearest future);
  • In addition to a residence permit, you can receive income from liquid real estate with the possibility to sell the object in 5 years while maintaining the status;
  • It’s a good time to invest in real estate in Portugal;
  • The possibility to become a tax resident and get a tax holiday for 10 years;
  • Adult children can be granted status along with the main applicant;
  • Portugal has high living standards, political stability and low crime rate;
  • A Portuguese passport is among the five “strongest” passports in terms of freedom of movement – visa-free access to 186 countries (5th position out of 106 in the rating of passports according to freedom of movement).

From October 2012 to September 2018, almost 18,000 Portuguese Golden Visas were issued, of which 6562 residence permits were granted to main applicants and 11,125 to their family members.

From 2015 to 2017, Hungary’s program of permanent residence by investment was the most popular in Europe, however, it was closed on March 31, 2017.

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