Why demand for golden passports and visas is booming

Most of the world’s population is restricted by circumstances of their birth due to geography, nationality of parents and/or a passport they are entitled to. In these circumstances, it is understandable why most would want to emigrate to seek out a better life.

The price tag for a second citizenship (popularly referred to as a “golden passport”) or permanent residence (“golden visa”) range from $100,000 to $2.5m, the International Monetary Fund says.

Such programmes date back at least to the 1980s, when low tax havens in the Pacific and Caribbean began to attract wealthy foreigners.

Canada and the US were among other early adopters but immigrant investor initiatives have exploded in the decades since, with countries using the funds as a source of foreign investment to stimulate economic development or replenish government coffers after natural disasters.

Programmes have been launched by Austria, Bulgaria, Cyprus, Egypt, Malta, Portugal, South Korea, Thailand, the UAE, the UK, Vanuatu and, most recently, Bahrain, among others.

Some countries require direct donations to government development funds. Others mandate contributions to specific government debt instruments or investments in specific sectors, such as property or construction, while others offer golden visas for those establishing businesses and creating jobs.

Financing terms for such initiatives may include upfront payments, instalments or bank loans.

How the pandemic fuelled demand

Given the sector’s overall opacity, there are few statistics on the aggregate number of people pursuing such programmes, but companies that help in making such investments have reported an increase in demand for second passports — particularly during the pandemic.

Requests from high-net-worth individuals (HNWIs) in advanced economies have risen sharply, with demand further fuelled by discounts offered by some countries, the IMF noted.

Even before the pandemic, the market was growing at 23 per cent a year, according to IMI magazine’s estimates.

This crisis has given people quality time to reflect about essential issues, about their lives and in what position they want to be if this was to happen again.

People have realized that they strongly need a Plan B — no matter if they have solid jobs or businesses, as this goes beyond financial security.

Many HNWIs found themselves trapped in their home countries during the pandemic and were unable to take their families to countries with better infrastructure and amenities because they did not have the requisite visas.

Their passports did not allow them to move. This has triggered the sense of urgency in many people and they are finally taking the plunge to acquire a second citizenship and passport so as to never be in this situation again. The power of having a strong passport in times of crisis is the ultimate insurance policy.

Travel, education, health — and tax benefits

Rising up the global passport pecking order can have significant benefits.

In terms of travel alone, Iraq, for example, ranks 90 on a real-time Passport Index created by the investment migration agent Arton Capital in Canada. That means an Iraqi citizen needs a visa for 161 countries.

By contrast, St Kitts & Nevis is placed 24th and its citizens require visas for only 73 countries.

A five-year residence visa for Spain, on the other hand, offers the holder and their immediate family the right to travel anywhere within the EU and the associated Schengen nations of Iceland, Norway, Switzerland and Liechtenstein.

But there are also education and healthcare advantages to levelling up in the golden passport game. Spanish residents are eligible for lower university tuition fees for some courses and across the EU, for example.

Similarly, the UAE was among the first to make coronavirus vaccines available to its residents, for example.

As Covid spread, states locked down their borders. But almost all of them continued to allow entry by citizens [and in many cases permanent residents as well].

So, dual citizenship now has value even to those holding premium passports. It has emerged as a kind of insurance that has value regardless of one’s primary nationality. In the pandemic context, it also acted as a health insurance. The more citizenships one holds, the more diversified one’s insurance will be.

The number one priority for applicants from the Middle East is freedom of mobility — a statistic that chimes with reports from other agencies.

But those looking to acquire a second citizenship or residency put a premium on safety and security, wealth preservation and low taxes, reliable governments and quality of life.

Tax considerations are perhaps the major reason for seeking a new nationality. Some investment migration jurisdictions appeal because of low rates of income tax.

In other cases, where minimum residency requirements do not apply, investment migrants may be able to enjoy non-domiciled status by declaring their permanent home to be outside their new country.

Countries which offer a second citizenship by investment have certain characteristic advantages, for example, they do not impose income tax unless the person becomes a tax resident of the particular country of citizenship.

The mere fact of having the citizenship does not make them liable for taxation, otherwise these programmes would not be attractive.

For the dual citizen, at least, those benefits come with several drawbacks — such as the expense, the potential for double taxation, possible revocation of nationality and being bound by the laws of two nations.

Whether the disadvantages outweigh the benefits remains a personal decision.