According to a joint report presented by Wealth-X and Arton Capital, Europe is the most popular region in terms of second residence and citizenship applications, accounting for 56 per cent of the total number of applications.
Be it for the sake of a second passport, or for the actual relocation to a European country, the ultra-rich from around the world find plenty of opportunities in the investment programmes of Europe, where both residency and citizenship would automatically lead to visa-free travel across the Schengen zone.
The first country in Europe to introduce residency in return for passive investment was the UK, which kicked off its programme in the mid-90s. In 2009, Bulgaria followed with its citizenship by investment programme and soon many other countries followed, realising that the concept could form a major boost to the local economy.
With the large array of opportunities the decision to opt for one of these programmes has not become easier. However, each programme will appeal to the specific criteria of each different investor. According to Arton Capital, there are a set of main criteria that define the attractiveness of a country and determine the preference of an investor.
One of the main criteria is whether the programme offers direct citizenship, or permanent residency that could eventually be turned into citizenship, explained Arman Arton, President and CEO of Arton Capital.
Furthermore, criteria such as the overall cost, the speed of the procedure, visa-free travel options, the quality of life, and the simplicity of the programme determined by factors such as physical presence in the country, language requirements, and financing options are important tools to judge whether the country offers what the investor is looking for.
In an interview with Emirates24|7, Armand provided an overview of the current investor programme landscape in the continent.
Bulgaria and Hungary
The investment programmes with the lowest investment threshold are Bulgaria and Hungary. Whereas Hungary requires a minimum investment of €250,000 in government bonds, Bulgaria requires a similar investment of €500,000.
“One of the factors that make these countries attractive is the fact that the investment can be financed,” explained Armand. In Bulgaria, the investor can apply for a loan at a set pre-paid fee of €180,000 that will be used to finance the €500,000 investment. Because the investment is made in the form of a bond, the applicant will retrieve the full amount after the required five-year-period and in reality only pay upfront the interest rate of the loan.
“The finance option is very successful among sophisticated business men. Instead of locking half a million euro at a zero interest rate in real estate, not knowing what is going to happen to the market, they would prefer pay the interest for a loan upfront to satisfy that loan, so they can spend the rest of their money in a business that might double this amount. I can say that 90 per cent of our applicants think that way.”
While Bulgaria has been on track for many years, Hungary is relatively new on the market and about to adapt its programme requirements soon. A major change is the waiver of the language requirements. Furthermore, a fast-track option is in the making, knows Armand.
The fast track option is specifically attractive to the wealthy investor, and means as much as pay more, wait less. “The wealthier the person, the less he is likely to actually relocate, as he is mostly seeking citizenship. For this person time is money, and if there is an option to get the citizenship faster he will do it.”
When Bulgaria first kicked off its programme, it did not look the same as it does now, he narrates. “They realised very well that Bulgaria is not the UK, and you cannot force people to spend much time inside the country. So, applicants were given the freedom to leave. Consequently, the language requirements were waived off. Changes like these demonstrate how a country has to adapt to the reality of demand.”
The UK programme
The oldest and most established investment programme in Europe is that of the UK, which was launched in the mid-90s. It has been considered as one of the most requiring programmes, but owes its popularity to the reputation of the country, says Armand.
There are several options corresponding to different fast tracks. For an investment of GBP1 million, permanent residency can be acquired after six years, while this is reduced to three years when investing GBP5 million and to two years when investing GBP10 million.
Financing the investment is an option, although the rules slightly changed in 2012 when offshore financing options were scrapped. Furthermore, the UK is the first and only country that offers an investment scheme compliant to Islamic rules, says Armand.
Although fast-track options are available, physical presence in the country is detriment. On order to obtain a permanent residency, the person must not have spent more than 180 days outside the UK in any 12 consecutive months. Depending on the time frame towards the residency, this time must be spent living in the country. After one year of acquiring the permanent residency one can apply for citizenship.
“A UK passport is still one of the best passports,” comments Armand. “Yes, you have to live there, but some people would actually love to live in the UK. Yet, only a small portion of the total number of UHNI invests in the UK. We are speaking of a couple of hundred of applicants, whereas the thousands go to other European countries, where it is cheaper and easier to get citizenship.”
Cyprus and Malta
The two newcomers to the European stage are the islands of Malta and Cyprus. Both programmes are geared towards the ultra-rich, with the intention to provide citizenship against a costly but easy to realise investment.
“Malta has the intention to provide direct citizenship, but it was not held back by the EU,” notes Armand. Currently, the programme offers residency against the minimum investment of €150,000 in bonds or shares, and €350,000 in real estate.
However, a lump-sum contribution of €650,000 must be made to the Maltese government, raising the cost to be one of the highest in Europe. Citizenship can be acquired after one year of residency, which does not imply physical presence in the country.
On the contrary, direct citizenship is offered by Cyprus in return for no less than a minimum investment amount of €5 million, making this the costliest programme in Europe. However, also Cyprus has made concessions to make its programme more attractive.
While an individual investor must meet the mentioned threshold, the amount can be shared by at least five people, bringing down the threshold for the individual. Furthermore, when the €5 million investments is made as a bank deposit, financing options are available.
In a period of three months the passport can be obtained, making it the most straightforward route to citizenship in Europe. “The country has been exempted from residency requirements by the EU because of the high investment amount,” notes Armand.
Spain, Portugal, and Greece
There are a couple of countries where the emphasis is on residency in return for a passive investment, most notable being Portugal, Spain and Greece.
The cheapest option among the programmes is offered by Greece, where a minimum investment of €250,000 in real estate is required. A minimum investment of €500,000 in real estate is required in Spain, and the same counts for Portugal.
However, it is not the investment amount that is most significant in these programmes, points out Armand. “In most of these countries the immigration laws have not been changed since the inception of these programmes.”
As a result, there are major hurdles on the way to citizenship. For example, a minimum knowledge of the Portugese language is required in Portugal, whereas Spain requires the resident to stay a minimum of 183 days per year in the country.
In contrast, residency can relatively easily be obtained. “What worries us a little bit is that some companies say that when you invest in these countries you will get citizenship in six years. This is not guaranteed, because according to the existing law you still have to live in the country, or learn the language. You can get residency without these requirements, but when citizenship is not linked to these benefits, there will be bad surprises down the road.”
In comparison to citizenship in a European country, there are many benefits linked to the residency too. Visa-free travel in the Schengen zone, for example, is a benefit that can be enjoyed with the residency of a European country alone.
Citizenship is beneficial when you face certain restrictions as a citizen of a country, explains Armand. “It makes a big difference when an Iranian who has just obtained Bulgarian citizenship wants to open a bank account.”
However, it is time for people to realise that this kind of security is one shared by most European countries, he concludes. “Today in Europe it does not matter what kind of passport you have. All European countries that offer residence towards citizenship programmes give you the same rights. People are not yet aware of this and not yet convinced.”
Be it for the sake of a second passport, or for the actual relocation to a European country, the ultra-rich from around the world find plenty of opportunities in the investment programmes of Europe, where both residency and citizenship would automatically lead to visa-free travel across the Schengen zone.
The first country in Europe to introduce residency in return for passive investment was the UK, which kicked off its programme in the mid-90s. In 2009, Bulgaria followed with its citizenship by investment programme and soon many other countries followed, realising that the concept could form a major boost to the local economy.
With the large array of opportunities the decision to opt for one of these programmes has not become easier. However, each programme will appeal to the specific criteria of each different investor. According to Arton Capital, there are a set of main criteria that define the attractiveness of a country and determine the preference of an investor.
One of the main criteria is whether the programme offers direct citizenship, or permanent residency that could eventually be turned into citizenship, explained Arman Arton, President and CEO of Arton Capital.
Furthermore, criteria such as the overall cost, the speed of the procedure, visa-free travel options, the quality of life, and the simplicity of the programme determined by factors such as physical presence in the country, language requirements, and financing options are important tools to judge whether the country offers what the investor is looking for.
In an interview with Emirates24|7, Armand provided an overview of the current investor programme landscape in the continent.
Bulgaria and Hungary
The investment programmes with the lowest investment threshold are Bulgaria and Hungary. Whereas Hungary requires a minimum investment of €250,000 in government bonds, Bulgaria requires a similar investment of €500,000.
“One of the factors that make these countries attractive is the fact that the investment can be financed,” explained Armand. In Bulgaria, the investor can apply for a loan at a set pre-paid fee of €180,000 that will be used to finance the €500,000 investment. Because the investment is made in the form of a bond, the applicant will retrieve the full amount after the required five-year-period and in reality only pay upfront the interest rate of the loan.
“The finance option is very successful among sophisticated business men. Instead of locking half a million euro at a zero interest rate in real estate, not knowing what is going to happen to the market, they would prefer pay the interest for a loan upfront to satisfy that loan, so they can spend the rest of their money in a business that might double this amount. I can say that 90 per cent of our applicants think that way.”
While Bulgaria has been on track for many years, Hungary is relatively new on the market and about to adapt its programme requirements soon. A major change is the waiver of the language requirements. Furthermore, a fast-track option is in the making, knows Armand.
The fast track option is specifically attractive to the wealthy investor, and means as much as pay more, wait less. “The wealthier the person, the less he is likely to actually relocate, as he is mostly seeking citizenship. For this person time is money, and if there is an option to get the citizenship faster he will do it.”
When Bulgaria first kicked off its programme, it did not look the same as it does now, he narrates. “They realised very well that Bulgaria is not the UK, and you cannot force people to spend much time inside the country. So, applicants were given the freedom to leave. Consequently, the language requirements were waived off. Changes like these demonstrate how a country has to adapt to the reality of demand.”
The UK programme
The oldest and most established investment programme in Europe is that of the UK, which was launched in the mid-90s. It has been considered as one of the most requiring programmes, but owes its popularity to the reputation of the country, says Armand.
There are several options corresponding to different fast tracks. For an investment of GBP1 million, permanent residency can be acquired after six years, while this is reduced to three years when investing GBP5 million and to two years when investing GBP10 million.
Financing the investment is an option, although the rules slightly changed in 2012 when offshore financing options were scrapped. Furthermore, the UK is the first and only country that offers an investment scheme compliant to Islamic rules, says Armand.
Although fast-track options are available, physical presence in the country is detriment. On order to obtain a permanent residency, the person must not have spent more than 180 days outside the UK in any 12 consecutive months. Depending on the time frame towards the residency, this time must be spent living in the country. After one year of acquiring the permanent residency one can apply for citizenship.
“A UK passport is still one of the best passports,” comments Armand. “Yes, you have to live there, but some people would actually love to live in the UK. Yet, only a small portion of the total number of UHNI invests in the UK. We are speaking of a couple of hundred of applicants, whereas the thousands go to other European countries, where it is cheaper and easier to get citizenship.”
Cyprus and Malta
The two newcomers to the European stage are the islands of Malta and Cyprus. Both programmes are geared towards the ultra-rich, with the intention to provide citizenship against a costly but easy to realise investment.
“Malta has the intention to provide direct citizenship, but it was not held back by the EU,” notes Armand. Currently, the programme offers residency against the minimum investment of €150,000 in bonds or shares, and €350,000 in real estate.
However, a lump-sum contribution of €650,000 must be made to the Maltese government, raising the cost to be one of the highest in Europe. Citizenship can be acquired after one year of residency, which does not imply physical presence in the country.
On the contrary, direct citizenship is offered by Cyprus in return for no less than a minimum investment amount of €5 million, making this the costliest programme in Europe. However, also Cyprus has made concessions to make its programme more attractive.
While an individual investor must meet the mentioned threshold, the amount can be shared by at least five people, bringing down the threshold for the individual. Furthermore, when the €5 million investments is made as a bank deposit, financing options are available.
In a period of three months the passport can be obtained, making it the most straightforward route to citizenship in Europe. “The country has been exempted from residency requirements by the EU because of the high investment amount,” notes Armand.
Spain, Portugal, and Greece
There are a couple of countries where the emphasis is on residency in return for a passive investment, most notable being Portugal, Spain and Greece.
The cheapest option among the programmes is offered by Greece, where a minimum investment of €250,000 in real estate is required. A minimum investment of €500,000 in real estate is required in Spain, and the same counts for Portugal.
However, it is not the investment amount that is most significant in these programmes, points out Armand. “In most of these countries the immigration laws have not been changed since the inception of these programmes.”
As a result, there are major hurdles on the way to citizenship. For example, a minimum knowledge of the Portugese language is required in Portugal, whereas Spain requires the resident to stay a minimum of 183 days per year in the country.
In contrast, residency can relatively easily be obtained. “What worries us a little bit is that some companies say that when you invest in these countries you will get citizenship in six years. This is not guaranteed, because according to the existing law you still have to live in the country, or learn the language. You can get residency without these requirements, but when citizenship is not linked to these benefits, there will be bad surprises down the road.”
In comparison to citizenship in a European country, there are many benefits linked to the residency too. Visa-free travel in the Schengen zone, for example, is a benefit that can be enjoyed with the residency of a European country alone.
Citizenship is beneficial when you face certain restrictions as a citizen of a country, explains Armand. “It makes a big difference when an Iranian who has just obtained Bulgarian citizenship wants to open a bank account.”
However, it is time for people to realise that this kind of security is one shared by most European countries, he concludes. “Today in Europe it does not matter what kind of passport you have. All European countries that offer residence towards citizenship programmes give you the same rights. People are not yet aware of this and not yet convinced.”
Emirates247
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