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BFI Capital
February 12, 2019

Citizenship by Investment – Why, How and For How Much?

We are repeatedly approached and asked by subscribers and clients what we think of the various citizenship programs around the world. These programs and “second-passport” opportunities have been around for a long time. They are still in high demand in a variety of countries. Scott Schamber was able to hold an interview with Nicholas Stevens, a true expert and early pioneer in the CBI arena.

GG: Could you sum up for us your professional background in the field and your experience in helping clients with investment immigration solutions?

NS: My company, NTL Trust, was established in 1994 in the Caribbean by a Canadian trustee, making us the oldest trust company on the island of Nevis. As trust and company managers, we also work with companies like BFI Consulting to provide trust and corporate services for investors who seek asset protection and inheritance solutions. We started helping applicants with the St. Kitts and Nevis Citizenship by Investment program in the nineties, but the business really took off for us after 2010. Since then, we have opened offices around the world and have been licensed by four other governments as investment immigration consultants.

GG: What are the main benefits of a secondary citizenship and what are the practical advantages for private individuals and for investors?

NS: Citizenship by investment is all about opening doors and keeping them open! The most tangible benefit for many people is the additional visa-free travel opportunities, the ability to get on a plane at a moment's notice, whether it is to sign an important business deal or just to take a trip on a whim. This is particularly important to wealthy individuals who, by accident of birth, find themselves with passports that need visas to go almost anywhere. But even holders of passports from major western countries, such as the US or EU member states, still need visas to go to significant countries like China and Russia, a requirement that can be bypassed with the right Caribbean passports.

I always tell people to look at the big picture. Visa rules can and do change, as do governments. But citizenship is for life and can be easily passed down to future generations. It's about not being beholden to just one government. The world is a very unstable place these days and holding multiple citizenships is crucial in diversifying geopolitical risk. Many people fail to grasp the importance of taking such proactive steps and hedging against these risks. If one doesn’t see the necessity or value of a second passport, then they probably don’t need it. But for today's internationally-savvy investor, diversifying risk and planting "flags" around the world is essential.

The wealthiest countries don’t always offer the strongest passports

GG: What makes a good passport? Is it just about the extent of visa-free access to other countries or is there more to it?

NS: There is a lot more to second citizenships than visa-free access and travel. A lot depends on your individual situation. Whether your passport allows you to travel to 100 or 150 countries may not be really important, especially if those extra 50 countries are obscure places you are never likely to visit anyway.

On the other hand, second passports can provide access to a lot more opportunities in fields like business, education and lifestyle. That's why it's a good idea to sit down and analyze your goals with an expert who is familiar with all the citizenship programs. There is no perfect program and sometimes it makes sense to mix and match, for example by applying for citizenship in one country and residence in another simultaneously.

GG: In the past, the Caribbean was considered by many as the go-to area for CBI schemes. What changes have you observed and which countries would you say offer the most competitive schemes today?

NS: The whole Investment Immigration business is becoming more competitive as it becomes more mainstream. The entry of the EU countries, Malta and Cyprus, was a game changer, but nonetheless the much higher costs of these programs are not within everyone's budget. Some of the new non-EU European programs like Moldova and Montenegro are worth a look. Vanuatu has always been a bit of an outsider but compares very favorably to Caribbean programs in terms of cost and visa-free access, while offering faster processing and access to another part of the world. It's ideal for those clients who want something more exotic and private. The Caribbean, though, still competes strongly with its undeniable advantages of lifestyle attractions and proximity for North Americans and Europeans, at an unbeatable cost.

GG: Since CBI has entered the public consciousness over the past several years, various CBI schemes have been presented unfavorably with news coverage of “golden passports” facilitating tax avoidance or other nefarious activities for the super-rich. How accurate are such reports and do you feel it’s hurt CBI?

NS: There are certain people who seem fundamentally opposed to the concept of residence or citizenship by investment and will do their best to present information that is blatantly biased to support their case. I put elements within the OECD, the European Parliament and Transparency International into this category.

In all countries of the world except the USA, people are not taxed based on their citizenship. Therefore, acquiring a new citizenship has absolutely no tax implications, positive or negative. Neither is tax normally a motivation for those seeking a new citizenship, with the possible exception of US citizens who are seriously thinking of renouncing their US citizenship, which in practice is very rare. American clients often wish to have a Plan B in place but are not going all the way towards renunciation immediately. In theory, yes, somebody could try to mislead their bank about their country of residence to avoid automatic reporting, but they would not have to spend hundreds of thousands of dollars on a new citizenship to do this!

Then there are the fear mongering campaigns and the scare stories of terrorists entering Europe. However, the detractors of RCBI (Residence and Citizenship by Investment) that promote this narrative conveniently forget to mention that many of the terrorist attacks on European soil have been carried out by holders of European citizenships acquired through traditional channels, such as birth. According to official EU statistics, nearly a million people received EU citizenship through normal, non-investment channels in 2016. Citizenship by investment, on the other hand, only accounted for a thousand or two.

Getting back to your question, though, I don't think these reports are accurate at all. The vast majority of CBI applicants are just peace-loving people looking for freedom and security for their families. The unintended consequence of all this publicity is that more and more people are becoming aware of Citizenship by Investment programs and the various benefits they’ve been missing out on. So, no, I don't feel it hurts these programs at all. For everyone who objects to it, there is probably another who thinks, "Hey, that sounds like something I should look into!"

Most accessible CBI/RBI programs in Europe that grant the most rights

GG: What are the key differences between Citizenship by Investment (CBI) and Residency by Investment (RBI)?

NS: Well, both are "by investment", but residency and citizenship are two very different things. Residency is simply the right to live in a country, which is generally granted for a certain period of time. Citizenship is a deeper connection, that entitles the holder to a passport and can generally be passed down through the generations. Citizenship does not generally require residence in the country, or even a visit. It is a right acquired in other ways.

I think Portugal originally coined the phrase "Golden Visa”, while Thailand branded a new program "Elite Residency”, even throwing in airport transfers in chauffeur-driven limos for its holders. Basically, these terms are now used interchangeably for Residence by Investment for High Net Worth individuals (HNWIs).

GG: What are the main risks or traps one has to look out for and consider in going through a CBI process?

NS: It is best to work with a reputable, licensed and regulated consultant. If you do that, you can't go too far wrong. There is one point that should be obvious: never get involved in anything illegal! If someone offers you a deal that does not correspond with an official program, run a mile! There have been recent examples of unscrupulous agents in the Caribbean promoting, mainly in China, so-called real estate investments with a huge kickback, where the client doesn't really get a title to any real estate in the end. Agents selling these schemes have been caught and persons involved risk having their citizenships revoked. It’s important to note here that it is legal to borrow money to fund a real estate investment for citizenship and there are companies that help clients arrange this, that are not to be confused with the scams.

GG: You’ve been in this business for 25 years. Have you seen the profile of a typical “applicant” for CBI change over time?

NS: I don't believe there has been too much change in the profile of applicants. Our firm traditionally had a more North American and European client base. Over some years we have branched out more into emerging markets, starting with an office in Hong Kong covering China, one in Latvia covering Russia and more recently in Dubai and Istanbul. Of course, we are seeing more clients from those markets, but I think it is more a result of our marketing than a change in the profile of applicants.

What I have noted, though, is much more awareness of CBI. Clients often come to us with a much clearer idea of what they want. We don’t have to explain the concept from the beginning, like we sometimes had to in the past.

GG: Any predictions about the future of CBI? Is there anything coming down the pipeline that might make CBI even more attractive?

NS: There are many rumors of new CBI programs, but nothing is for sure until it happens! Nonetheless, I certainly expect to see more new programs in the future. Entrepreneurial HNWIs are ultimately desired by all countries as they enrich the economy.

Looking into the more distant future, I see citizenship becoming less important in business and travel. Traditionally, individuals have been grouped together by nationality, but now with big data it is easier to treat people as individuals when it comes to travel privileges. This is exemplified by the US ESTA program, Canada's equivalent, and the one to be launched soon in the EU, whereby travelers can enter without an old-fashioned visa, but instead apply online for permission to travel. These programs are likely to be expanded to more countries.

We also see other countries that restrict or extend visa-free travel depending on factors such as country of birth or religion, with less regard to the country of citizenship. This is definitely a double-edged sword and has huge ramifications for personal freedoms. Imagine that your travel plans could be dictated by your religion, or because of your social media profile or lack thereof... Well, it is already happening!

If citizenship becomes less important, residence certainly will not. There will be fierce competition to live and do business in pleasant, safe and prosperous environments. And before we reach this stage, we will see a lot more instability. Bearing this in mind, I strongly believe that anyone who has a chance to plant a flag in a new country, whether by citizenship or residence, should do so. It is something that can only create upside!

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