Over the years several trends have been seen in the offshore world. A certain herd mentality to make a beeline for specific jurisdictions, setting up foundations, setting up trusts, setting up protected cell companies, increased due diligence from governing authorities, etc. there is always a pattern or set way in which investors seem to operate in the offshore world. The current trend seems to be the rising need to seek change in residency or look at alternate residency options.
A change in residency might be sought by investors for various purposes like:
- Lowering burden of taxation
- Asset protection – Some jurisdictions offer various specific asset protection benefits, like – creditor protection, protection of assets held in a properly structured business entity, etc.
- To enjoy a more stable political environment
- Lower cost of living or more affordable lifestyle
- Better weather – A huge factor for immigrating to a new destination is weather conditions. People are looking to move to a place where the weather suits their age and lifestyle.
Given below in no particular order are a few popular residency / citizenship programs:
The Cypriot Citizenship Program is a very powerful tool, which provides a high level of personal flexibility. The program offers an interested client and his entire family an easy and visa free access to roughly 170 countries as well as the ability to live, work and study in all member states of the European Union. There are no physical residency requirements in Cyprus and it allows dual citizenship.
The Cypriot Government has established a number of incentives to attract foreign direct investment.
- One of these is a citizenship-by-investment program that grants full Cypriot citizenship full Cypriot citizenship full Cypriot citizenship to those that invest more than EUR 2.5 million in real estate and who meet certain other requirements.
- Another important requirement that applies, regardless of the investment option chosen, is the purchase and life-time possession of a property in Cyprus that will be declared as the applicant’s residence in Cyprus, declared as the applicant’s residence in Cyprus. The purchase price of the particular property should be at least EUR 500,000 plus VAT.
A passport from Malta is considered one of the best in the world. To get a passport from Malta, you must live on the islands for a year, spending at least 183 days there over a 12-month period. Once your residency is complete, you may apply for citizenship. The requirements for a second passport from Malta are as follows:
- The main applicant, is required to donate €650,000 to Malta. Dependents, including your spouse, must each contribute €25,000; unmarried children between 18 and 25 and dependent parents must contribute €50,000 each.
- Buy a home for at least €350,000 or enter a rental contract for at least €16,000 per year. You must maintain the home or keep the rental for a minimum of 5 years.
- You are to invest at least €150,000 in government bonds and hold those bonds for at least 5 years.
Other benefits of a second passport from Malta:
- No inheritance or death taxes, no estate duty, No net worth / wealth taxes
- No municipal taxes, rates or real estate taxes
- A passport from Malta gives you visa free access to 168 countries and territories
- A passport from Malta will allow you to live just about anywhere in the EU
- Malta will usually only tax it’s citizens on their Malta sourced income. This means, if you hold for your investments outside of Malta, you will not be taxed on capital gains.
For around $3 million, investors are eligible to become residents of Gibraltar. Residents under the territory’s investor-friendly Category 2 visa pay a maximum tax of approximately £29,000 per year in exchange for permission to reside on the tip of the Mediterranean. Similar to London’s “non dom” program, Category 2 residents can escape Gibraltar’s progressive tax rates. While nil tax is a fleeting dream, residency in a highly respected European jurisdiction for a flat rate is assured.
The Cayman Islands
The Cayman Islands is meant for the rich and famous. Just as Cayman financial authorities have gone to great lengths to make incorporating into their country expensive, immigrating there requires some serious net worth. A Grand Cayman life requires an annual income of roughly $145,000 and an investment of $600,000 into real estate or Cayman Island companies. After eight years of residence in the Cayman Islands, investors can apply for permanent residence.
Vanuatu is a lesser known tax haven where one can get residency relatively easily, all based on how much money they are willing to invest. One of the few tax-free countries where obtaining second citizenship is possible, Vanuatu offers a very straightforward residency program that rewards those who invest more. Foreigners can invest about $89,000 for a one-year residence visa, renewable annually. Invest more and longer period visas are available. Government fees for Vanuatu residence are higher than the world average, but considering the low investment and the variety of interesting property investments, it’s worth considering island life in the South Pacific.
Notes of Caution
However, there are few red flags that an investor seeking dual citizenship needs to keep in mind:
- Dual obligations: As a dual citizen, you are bound by the laws of both countries.
- Double taxation: For e.g. USA imposes taxes on its citizens for income earned anywhere in the world. For someone who is a dual citizen living abroad, he might owe taxes both to the United States and to the country where the income was earned.
- Complicated process: Sometimes dual citizenship happens automatically, as is the case when a child is born in the USA to foreign parents. Other times, however, the process can take many years and can be extremely expensive.
Dual citizens enjoy certain benefits, however, there are certain drawbacks, that include potential double taxation and the fact that investors become bound by the laws of two nations. Pros and cons of dual citizenship are not always clear. At the same time, there are certain financial and legal obligations that must be carefully considered before finalizing any arrangement.
Since dual citizenship is complex and the laws of citizenship vary from one country to another, it is always advisable to consult with qualified experts before taking the plunge.
(Compiled by Chaitanya G. Kirtikar, Senior Manager, Structuring Services Department.)