Over the last decade we have seen a constant increase in the number of residence -by-investment
(‘RBI’) and citizenship-by-investment (‘CBI’) programmes launched in various countries. The trend is that these programmes will continue to increase in the coming years as various countries continue to open new RBI and CBI programmes.During the last 10 years revenue from investment migration programmes has increased threefold. The industry is now a $20b market, growing at least 20% per year.
But why do countries launch such programmes, and more importantly, why is there such a high demand for them?
Looking at it from the countries’ perspectives, the main reasons are twofold: (1) Raising revenue, either as a result of the direct investment that these programmes require, or also as a result of indirect investment of these programmes, and (2) attracting the right pool of talent and knowledge to the country. These two reasons are not mutually exclusive, and we have seen a number of countries manage to increase their direct, and also indirect, revenue as a result of new investment migration programmes, whilst at the same time managing to attract the right pool of talent and knowledge within specific industries of their economy.
Naturally, a country cannot simply decide to open a CBI or RBI programme without understanding what it brings to the table, particularly because these programmes come at a high cost and investment. Also, in view of the increase in the number of programmes world-wide, it has become a very competitive industry, providing investors with various options depending on their personal and business needs.
From an investor’s perspective, individuals seek to invest in RBI or CBI programmes do so for a number of different reasons, and through our experience in this industry we can say that no case is identical to another. Changing once’s residence or obtaining a second passport is not an easy decision and is one which brings together the business and personal needs of the client and his/her family. Each case varies from the other, and one needs to closely understand the needs of the family, and the long-term plans of the children apart from the business needs, before determining which investment migration programme is ideal in each particular case.
The following are some of the main reasons as to why the demand for these programmes has been so high:
Visa free access
Both CBI programmes and also RBI programmes could result in the beneficiary obtaining visa free access to certain countries which he/she didn’t have access to, or would have required lengthy, and at times costly, visas, prior to obtaining a second passport or a new residence. As the world becomes smaller, individuals will continue to seek less barriers to travel, whether for leisure or business reasons.
Access to better healthcare and education
As a citizen or a resident of a state, individuals have access to healthcare and education, whether at an additional cost or, in certain countries, this is provided free by the state. We have seen a number of individuals and families invest in RBI or CBI programmes in order to provide better schooling for their children, whilst at the same time having access to better-quality and more sophisticated healthcare for their needs.
Market opportunities
As countries seek to attract the right talent by opening RBI and CBI programmes, they cannot hope to do so in a vacuum. They need to create the right eco system to attract these individuals. We have seen a number of successful RBI programmes which have matched both the counties’ needs to obtain this knowledge and also the needs of the investors looking for new business or employment opportunities.
Tax
As with most transactions, tax plays an important role. Typically, tax is not the primary motivational factor when deciding to invest in a CBI or RBI programme, however, the tax implications of such an investment could sway clients from one programme to another. Tax plays an important role not only in understanding the implications of the country to which the individual or family are relocating to, but, and sometimes more importantly, the tax implications of exiting their existing residence or citizenship jurisdiction.
Access to political stability and security
Individuals and families look at investing in these programmes, and relocating to a new destination, to live in a more politically stable jurisdiction than the one they currently reside in or are citizens of.
A number of African countries have looked into the possibility of opening new RBI and CBI programmes. In order for these programmes to be successful, they cannot be done in a vacuum, and these must be part of the larger economic vision of the country. However, if implemented correctly, they could be extremely beneficial, not only in raising revenue which could be spent on developing the country even further, but also in attracting talent to the country. The attraction of the right talent could lead to the transfer of knowledge to the local population to develop certain industries in line with the country’s economic vision.
Nicky Gouder is a Partner at Seed Consultancy based in Malta.
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