Second citizenship is making waves as a must-have investment item, but the options can be confusing. An online search reveals a minefield of information. Terms are bandied around with little explanation as to what they mean, let alone whether they meet your needs. Enough. In this piece, we demystify the two most popular types of programme – citizenship-by-investment and residency-by-investment – and consider which best fits your specific requirements.
Second citizenship is making waves as a must-have investment item, but the options can be confusing. An online search reveals a minefield of information. Terms are bandied around with little explanation as to what they mean, let alone whether they meet your needs.
Enough. In this piece, we demystify the two most popular types of programme – citizenship-by-investment and residency-by-investment – and consider which best fits your specific requirements.
Citizenship-by-investment vs residency-by-investment: What’s the difference?
Okay, let’s start by looking at each programme in order to understand the similarities and differences between the two approaches.
Residency-by-investment: These programmes offer the right to permanent residency in a given country in return for financial investment. As a resident you’re able to live and work without restriction in that country. Essentially residency-by-investment secures you a guaranteed second home, whenever you need it. That’s a valuable insurance policy against political or environmental changes on your home turf.
Often nations that offer residency-by-investment have an attractive lifestyle with a high standard of living. Take Malta. The European island nation offers three different investment programmes, but the Maltese Residence and Visa programme remains popular due to the country’s reputation as an exceptional place to relocate. Malta is actually ranked as the 10th best place to retire in 2017, according to the Annual Global Retirement Index, and you needn’t secure full citizenship to enjoy the cultured, sunshine-soaked lifestyle the island offers.
Many residency programmes offer advantages in terms of travel too, by virtue of international trade agreements. One such is the Schengen Area, encompassing 26 European countries, which allows residents of any member nation to travel across the entire group as you would a single state. Maltese and Portuguese residents benefit from this.
Although they’re advantageous in their own right, residency-by-investment programmes are often used as a gateway into full citizenship. For instance, if you aspire to European citizenship, the Portuguese residency-by-investment programme can be a fruitful path to take, allowing you to convert residence into citizenship after six years.
Citizenship-by-investment: By far the most common way to secure citizenship is by birth, but we can’t choose where we’re born. Citizenship-by-investment therefore allows you to introduce that choice, and citizenship attained through investment is just as legitimate as that granted as a birth right. These programmes secure you exactly the same rights as natural born citizens, irrespective of your background, language or ethnicity.
The main advantage of citizenship-by-investment programmes over residency-by-investment programmes is the global outlook. As a resident-by-investment, you’ll be treated with many of the same rights as citizens. But as a person with citizenship-by-investment, you’ll be treated with all the same rights as born citizens.
This makes itself especially felt when it comes to travel. You’ll be issued a passport and can travel freely without declaring your original home citizenship, unlocking a whole host of countries without the hassle of long visa delays. For example, the Cypriot passport is the 17th strongest in the world, allowing you to travel to 159 countries on visa-free or visa-on-arrival terms. Citizenship-by-investment undoubtedly goes further than residency programmes when it comes to international travel.
This isn’t the only global implication. Consider any of the citizenship-by-investment programmes in Europe. By virtue of the European Union’s freedom of movement principle, all EU citizens can live, travel and work freely across any of the other 28 member states. You get access to the GBP 16.6tr European Single Market – a lucrative free-trade agreement between EU member countries. Your children could study in European universities without paying additional costly international fees. You can access world-class medical systems, and exceptional social care. In that sense, investment in citizenship in the likes of Cyprus is a ‘28 for the price of one’ type deal – it’s little wonder these programmes are so popular. In fact, the 2017 Nomad Passport Index ranks 15 of the 20 most desirable citizenships as European.
If there is a downside of citizenship-by-investment programmes though, it’s that they can have more rigorous requirements – be that financial or personal. You could claim Bulgarian residency within six months, for instance, but citizenship can take up to five years, or an additional EUR 512,000 (or EUR 195,000 to finance a loan). Portuguese residency takes three months; citizenship takes six years.
Citizenship-by-investment definitely paints an appealing picture – but residency-by-investment might also be a great fit for your needs, without the same requirements. So, on that note, let’s look at which might be a better choice for you.
Which option best suits you?
Whether residency- or citizenship-by-investment is right for you will depend entirely on your priorities. Here are some of the most common.
Global mobility: If freedom to travel is your major concern, you’ll tend to find citizenship-by-investment programmes more appropriate. For instance, citizenship-by-investment programmes can unlock 120+ countries on hassle-free terms so you don’t have to struggle through arduous visa processes to travel. The Cypriot and Bulgarian programmes could be of particular interest – passport holders can travel to 150+ countries with either. Saying that, European residency in Schengen member states entitle you to visa-free travel across the group, so you would still be looking at significant travel advantages with this route.
International standing: There are instances when you might prefer not to declare your original home citizenship. Second citizenship allows you anonymity about your home citizenship, as you can travel exclusively on your new passport. If this is a major concern, you’ll likely want to consider the European citizenship-by-investment programmes as a first port of call, to capitalise on European prestige. Residency-by-investment doesn’t include a passport, so if this is a priority then you’ll be more drawn to second citizenship.
Business benefits: Both residency-by-investment and citizenship-by-investment programmes can offer significant advantages in terms of taxation, often allowing you to capitalise on various reliefs and international tax loopholes. Complexities vary by country (and by country of origin) but the principle remains: second residency or citizenship can ensure you pay less tax than you would otherwise. For instance, St. Kitts and Nevis is one of the most popular tax havens in the Caribbean, imposing no direct personal taxes, no local taxes, no income, capital gains or withholding tax and no inheritance or gift taxes.
Desire to relocate: If you’re primarily interested in relocating, or having the option in the future, residency-by-investment can be a great fit. If you have capital to invest, residency can be a relatively minor investment that sits quietly in your portfolio – ready, should you ever want it. While the same applies to citizenship programmes, you wouldn’t need to pursue full citizenship to have the right to relocate. In this instance, it could be worth playing the long game for the eventual benefits of European citizenship.
Time vs cost: If you need to move quickly, some programmes will suit you better than others, but it depends what you’re willing to invest and what you want to achieve. The Caribbean citizenship-by-investment programmes are generally fast – taking around three months – but if you’re drawn to Europe then residency-by-investment is usually a faster option. For instance, you can secure Portuguese residency in only a few months but can only apply for citizenship after six years.
To attain European citizenship faster, you should expect the cost of investment to increase. For example, you can secure Bulgarian residency for around EUR 512,000 within six months, then apply for Bulgarian citizenship for no additional cost after five years. However, you can fast-track the programme for an additional EUR 512,000, to attain citizenship within one year. Alternatively, the Cypriot citizenship-by-investment programme is as fast as the Caribbean programmes but you’re looking at an investment of EUR 2m. It comes down to how quickly you need to act, and what capital you’re willing to invest.
Investment type: If how you invest is a concern, you’ll want to consider the different investment options available under each programme. For instance, the Bulgarian fast-track offers an attractive balance of time/cost but with only one investment option: government bonds. Compare that to Portugal, which offers multiple investment options including real estate, bank account deposit and cultural investment. Programme type has little bearing on investment type though, so assess this on a programme-by-programme basis.
Home country restrictions: For some investors, citizenship-by-investment programmes aren’t an option because dual nationality isn’t permitted by your home nation. In these instances, residency-by-investment is generally the more appropriate choice, allowing you many of the same advantages without forfeiting home citizenship.
Residency versus citizenship: no bad choice
Both residency-by-investment and citizenship-by-investment programmes are an investment in freedom – but it depends which types of freedom are most important to you. The European citizenship-by-investment programmes probably offer the greatest potential ROI, but they generally represent a larger investment of time and money. The Caribbean citizenship-by-investment programmes offer great returns, often for a lower investment and smaller time commitment. Then there are the residency-by-investment programmes in Europe which, while more limited, have many advantages and can be a fantastic gateway to full citizenship in their own right.
Next Generation Equity is a government-approved provider of second citizenship and residency programmes tailored to the individual needs of discerning clients across the globe. To learn more about our programmes, please sign up for a free consultation via the form below.
