Why would you choose a Second Citizenship?

Whilst it may once have been the domain of brave and glamorous spies looking to make a quick getaway with suitcases stashed with cash and multiple passports, these days it isn’t secret agents who are longing for a second start in a foreign land, but instead a growing tide of “economic citizens”.

It’s estimated that every year, several thousand people now collectively spend €1.5bn to add a second, or even third, passport to their collection – an option growing in popularity, especially amongst the wealth generators of China, Russia, the Middle East and other parts of Asia.

In an increasingly turbulent and politically unstable world, it’s easy to see why there are plenty of prosperous people in the market for a perfectly legitimate “Second Citizenship”. The chance to escape an authoritarian regime, where there are restrictions on personal liberty, where the safety of one’s family is threatened, where commercial activity is discouraged or blighted by corruption, for many is a price worth paying.

For those with cash to splash, the promise of a new life in a safe haven, providing visa free travel, a secure environment in which to bring up children, the chance to build a successful business and to take advantage of a plethora of investment opportunities – these are all compelling reasons to up sticks.

Welcoming them with open arms are a growing number of jurisdictions willing to provide sanctuary and a permanent home for those with money to invest.

Also called “citizenship by investment”, this is usually the fastest and easiest way to get a second passport. The process is straightforward: a country will confer citizenship upon you, in exchange for a business investment or purchase of real estate in that country.

There’s nothing especially new about second citizenship, but given the uncertain world we live in, the concept is now very much on an upward trajectory.

The idea of a citizenship-by-investment programme (CIP) surfaced in the early eighties, when the Caribbean Islands of St Kitts and Nevis became the first country worldwide to introduce a CIP, largely as a means of stimulating investment in their local economies.  In return for citizenship, the Island authorities request a $250,000 non-refundable donation to a public charity supporting their sugar industry, or a minimum $400,000 investment in real estate in the country. Neighbouring islands, like Grenada and Dominica, have followed suit.

At the other end of the economic spectrum, the United States allows foreigners to obtain a green card under the EB-5 visa if they invest $500,000 in a “targeted employment area” and create 10 jobs. Since 1990, foreigners have ploughed in more than $6.8bn and the US has given out 29,000 visas through the EB-5 programme, although there is a yearly cap of 10,000.

But now attention has switched across the Atlantic. European jurisdictions have warmed to the theme, actively encouraging direct citizenship by investment, or at least offering a route to citizenship for wealthy investors.

Today, HNWIs are spoilt for choice as to where they can put down new roots.  There is growing competition – especially amongst a number of well-regulated, tax friendly offshore jurisdictions in close geographical proximity to the continent of Europe – to attract successful foreign entrepreneurs to their shores.

Malta, Cyprus, the UK, and Isle of Man

As an example, the low-tax regime of Malta provides a citizenship programme which includes visa free travel to 166 countries and territories including the United States, Canada, the entire European Union and the Schengen Area.  Initially costing around €900,000, Malta provided the cheapest legitimate economic citizenship in the European Union. After pressure from EU officials, however, the rule was changed, requiring potential passport holders to reside in Malta, for a year and raising the inward investment level to €1.15m

Cyprus is another EU nation offering a direct citizenship-by-investment route. An active member of the European Union, with a high-income economy and a business-friendly environment, Cyprus has the lowest corporate tax rate in the entire European Union – currently standing at 10%.  For those seeking a new life, their minimum investment level in a Cypriot business stands at €2m.

Although the UK is not an offshore jurisdiction, it does run a well-known Tier 1 Investor and Entrepreneur Visa programme which enables investors to live and work there for varying amounts of investment into the local economy. Visas are granted for an initial period of 40 months, after which a 24 month extension can be applied for. After five years, a successful applicant can plump for indefinite leave to remain and, a year later, apply for full citizenship.

The Isle of Man, a UK Crown Dependency, operates the same Tier 1 Visa programme for foreign nationals looking to live and work on the Island, but comes with the added benefit of taxing most Isle of Man resident companies at zero percent and offering an attractive alternative route to UK citizenship.

To qualify for indefinite leave to remain in the Isle of Man, an individual must spend a minimum of 185 days in the Isle of Man, the Bailiwicks of Jersey or Guernsey or in the UK each year over a five year period. The scope of investment opportunities available to Investor visa applicants is also potentially much wider than those applying through the UK. But, for those granted indefinite leave to remain, a British passport can be obtained.

What does Second Citizenship mean?

Fundamentally, the idea of having a second passport is that no government should have the sole power over your life or your assets. If you are the citizen of only one country, as most people are, you are essentially at the mercy of your government. Legally, ‘citizenship’ indicates the relationship between an individual and a nation state. Normally, the individual is conferred protection by the state, in return for fulfilling certain obligations owed by the individual to the state – like paying tax.

In a benign democracy, most people wouldn’t normally feel compounded to leave. But if the government is corrupt, prone to confiscating assets and throwing its subjects in jail, then that’s when things can start getting difficult.

Giving the current instability in the Middle East, for instance, it is little surprise that wealthy business people from Lebanon, Egypt and Syria are now among the highest numbers of individuals seeking second citizenship, although the largest total currently come from Pakistan.

In applying for second citizenship from another country, if the second citizen meets the criteria set by that country’s government, then he or she falls under its protection with the same rights as all other citizens of that country.

Even so, for many, the word ‘citizenship’ conjures up images of a strong national identity determined by birth, ethnicity, history, culture and upbringing – so the idea of seeking a second passport elsewhere may be alien and difficult to grasp.

What lies ahead?

Nevertheless, in this day and age, it’s not difficult to understand why affluent, hard working men and women would opt for “a new life”. Protecting and nurturing one’s estate for future generations is a basic human instinct which, perhaps more than anything, explains the increasing popularity of second citizenship programmes. If there’s a choice of remaining in a land rife with fear and danger, or relocating to a country providing peace and prosperity – to many it’s a step worth taking.

Given the number of welcoming, business-friendly jurisdictions offering the incentive of affordable investment opportunities and fast-track citizenship processing – you could say it’s a classic case of supply and demand being in perfect harmony.

And so, with the continued anticipated growth over the next 10 years from applicants from the Middle East and Far East, including China, jurisdictions that have already introduced second citizenship programmes look set to be the huge beneficiaries.  They’re well and truly open for business – that’s for sure!

It’s all a far cry from the clandestine exploits of those Cold War era spies!