A new wealth report from property group Knight Frank sheds some light on the cost of buying citizenship into some of the world’s best countries – including Singapore, Australia, Canada and the United Kingdom.
According to the report, the cheapest location to buy citizenship is Grenada in the Caribbean, which is unsurprisingly also the most popular destination for wealthy South Africans looking for a second passport.
The Grenada passport comes with international access to prized regions including the UK, Schengen, and China. Portugal is also a top destination for wealthy South Africans, having recently dropped its threshold in 2017.
For the likes of the UK, and Singapore, however, it can cost in excess of R20 million to buy citizenship through a residency programme which, although expensive, can be a mere drop in the ocean for the ultra-rich.
Knight Frank’s data indicates that as many nearly 130,000 people have fortunes exceeding $50 million, including 500 South African passport holders.
Influencing movement among the wealthy, is government action; beyond just taxation, governments attempt to map the extent and movement of global wealth flows in a drive towards transparency.
The Organisation for Economic Co-operation and Development’s (OECD) big idea, the CRS, was launched in September 2017. Almost 50 countries formed the first wave with more joining earlier this year, bringing to more than 100 the number of nations now automatically sharing data on foreign accounts.
“The CRS may be an important step towards revealing where wealthy people, as well as businesses, are placing their investments – but it is only the beginning of the story. The standard does not currently cover property ownership, but the support recently stated by the OECD for property ownership registers suggests that future iterations may well do so.
“Trends at a national and intergovernmental level point towards a more comprehensive shift in the power of governments to identify who owns what. Both the UK and Germany have taken action aimed at providing greater clarity on the ultimate beneficial ownership of trusts and international companies,” Knight Frank said.
In addition, both the EU and the Financial Action Task Force have echoed the OECD’s call for a register of property owners, it added.
“Full transparency and total disclosure is coming. But for now, the desire for privacy remains a factor influencing UHNWI behaviour. In some cases, this is prompting individuals to reconsider their place of residence,” the report said.
Citizenship for sale
Data from Knight Frank’s Attitudes Survey reveals that 34% of ultra high-net-worth individuals already hold a second passport and 29% are planning to purchase one, while 21% are considering emigrating permanently.
“The result has been a bidding war, as more countries seeking new sources of revenue try to encourage foreign direct investment in return for citizenship,” Knight Frank said. Some, including the UK, require a significant level of long-term financial commitment; but there are others with less onerous programmes or which are relaxing their requirements.
In the Caribbean, for example, several islands have recently slashed the level of investment required by as much as 50%, or linked citizenship to one-off contributions to hurricane relief or economic development funds, the report pointed out.
According to Joseph Field, a partner at Withers worldwide, citizenship and residency by investment programmes are big business: currently, the industry is worth an estimated US$2 billion each year.
“However, it is beginning to draw concern and criticism. Some take issue with the very notion of nationality as a commodity, with prospective customers choosing their new country based on price or ‘features’ such as ease of travel, purchasing passports ‘off the shelf’ and, aside from buying a property or handing over a fixed sum investment, making little real contribution to the host country,” he said.
Concern is also growing that the acquisition of a new nationality may be a vehicle to avoid FATCA (Foreign Account Tax Compliance Act), the CRS and various other international efforts to stem tax evasion, he added. “If this idea gathers momentum, it could potentially create problems for the countries involved.”
“Furthermore, there is the fear of terrorists being found to have travelled on a new passport before committing an atrocity. It is not hard to imagine how this could lead to governments being reluctant to accept “purchased” passports, restricting their use or denying access to those who bear them.
“Clearly, there is great – and growing – demand. As the market matures, it would therefore be appropriate for governments to adopt stringent criteria in order to guard against such passports being acquired for improper or criminal purposes,” Field warned.