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EXCLUSIVE FEATURE: The Fast-Developing Global Market For "Golden Visas"

Tom Burroughes, Group Editor, London, 16 March 2015

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A new global market is arising - a market for "golden visas" or, in other words, for high net worth residency programmes in dozens of jurisdictions. What are the dynamics? This publication takes a look.

Thousands of Americans want to renounce their citizenship; an equally big number of Chinese persons want to go to the US or the UK. Britons give up the familiar comforts of home to work abroad, while French citizens switch life in the highly-taxed Le Republique for London. Middle Eastern, Russian and Latin American individuals head north, west or east. So it goes on – a swirl of migration of high net worth and ultra-high net worth persons.

While the reasons for this movement vary considerably, one theme emerging from this human stream is what might be called a global “golden visa” market. A number of jurisdictions such as the UK, Malta, Spain and Portugal, among others, have rolled out investment visa and residency rights in recent years, usually where some form of residency is given in exchange for a minimum investment. According to some estimates, up to 70 jurisdictions have such programmes. Some jurisdictions, such as Canada and most recently Hong Kong, have shuttered, or temporarily halted, such programmes, sometimes because they become politically sensitive. They remain controversial: wealthy investors in the UK, for example, can attract hostility for buying luxury properties and allegedly crowding out less affluent locals. Such “golden migration” is a political hot potato.

One aspect of the trend is an attempt by institutions such as private client law firms, banks and other organisations to try and agree on standards for “golden visas” or at least talk over common problems and possible solutions. Last year, the Investment Migration Council, a Geneva-based non-profit group, was set up.

Its structure is an indication of how big the “golden visa” market is, with IMC advisory board members such as Anna Brugnoli, who is a managing director in the UHNW wealth planning international team at UBS in Switzerland, and Boriss Cilevičs, a citizenship and human rights advocate and member of parliament in Riga, Latvia; another is Nadine Goldfoot, partner and head of investor immigration practice for Fragomen in London. IMC’s advisory board conveys the breadth of high net worth investment migration as an industry: one of the members is HE Wendell Lawrence, ambassador, St Kitts; another is François Mandeville, founder and partner for Mandeville & Associates in Hong Kong. There are members from across the globe.

“The purpose of the council is simple and straightforward. It has been created by industry leaders and various governments who have, in the last few years made repeated calls for the industry to introduce concrete structures to elevate public trust, and introduce transparent and reliable regulatory standards,” Bruno L’ecuyer, IMC’s chief executive, told this publication in a recent interview.

“Unlike what [historian] Francis Fukuyama predicted, history has not ended with the fall of the Berlin Wall: the world is a safer place now, true, but it is not a safer and better place for everyone,” L’ecuyer said. “One of the key factors boosting investment migration is (potential) instability at home, besides the prevalent differences between what different nationalities offer in terms of prestige, rights and protections as well as the duties they require their holders to perform. As long as one passport offers visa-free access to 20 countries and another to 200, the interest in investment migration will be strong. This being said, ongoing large-scale conflicts, like the rise of the Islamic State and the crisis in the East of Ukraine, clearly play an important role too.”

Turmoil in Europe
L’ecuyer’s point about such turbulence is understood, for example, by private client lawyers and immigration experts at Berkeley Law, a London-based firm. For example, recent fears of “Grexit” – Greek departure from the euro – have sparked more interest among affluent citizens there in getting out. A reported €25 billion has already been moved out of Greece since the start of 2015 – and that might be a conservative estimate, Nick Rucker, partner at Berkeley Law, told this publication.

There is considerable interest in holding money in Switzerland and the UK. In particular, they are interested in property investment in UK, especially London. “They are very interested in succession planning and ask about retaining management of their money,” Rucker said.

London calling
The UK’s own investment and entrepreneur visa regime is one that has been tweaked and adjusted in recent times to square the tricky balance of political acceptability and financial hard sense. Another example of such a balancing act is how the UK’s non-domicile regime has been tweaked, so that foreign-born “non-doms” who do not want to pay tax on their worldwide income must pay an annual levy. The state giveth – and the state taketh away.

Under the Tier 1 (investor) Visa system, the newest version means that applicants must open a UK bank or investment account before applying for a visa – arguably a tricky task, given that banks typically require proofs of addresses and other data before opening accounts due to KYC and other tests, such as for money laundering. The minimum age for applicants has risen to 18 from 16 and the minimum investment amount has risen to £2 million from £1 million. In a move that seems to be broadly welcomed, there is no requirement to “top up” the £2 million investment if part is sold at a loss but the gross proceeds have to be invested in a new qualifying investment. With equivalent entrepreneur visas, applicants must show they have held the investment funds for 90 days in a row and have to provide a business plan to support their application. There seem few signs yet that HNW individuals are being put off by any changes, judging by recent figures on how many Chinese and Russians have sought these visas, for example.

The number of investor visas granted to Chinese nationals seeking to enter the UK skyrocketed to 357 in the year to 30 September 2014 compared with 178 in the previous 12-month period, while the number of Russian people using this route has also surged. The figures on Chinese would-be wealthy immigrants, from law firm Pinsent Masons, show that Chinese nationals now account for 43 per cent of all investor visas issued by the UK in the last 12 months, the largest share of any country and up by 10 percentage points from five years before.

Regimes attached to the UK in a loose sense, such as the Isle of Man, for example, also see some of this demand to migrate from Asia and elsewhere.

Nick Preskey, high net worth individual strategy manager, Isle of Man, pointed out to this publication that the IoM has a similar regime to that of the UK. The Isle of Man does not have a specific target on immigration, and as far as his personal related targets are concerned, he declined to say what they are. Outside of Europe, the IoM is receiving enquiries from places such as Russia, China and India. "I am fielding a lot of calls and showcasing the island personally to people from these places," he said.

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