Second Citizenship by Investment (CBI) and Golden Passports: A Comparison

Looking for Direction

In a globalized economy, the permission to work and reside in more than one jurisdiction is key to success.

It is no wonder then, that over the recent years, citizenship by investment (CBI) programs (also known as economic citizenship programs or "golden passports") have attracted the attention of a growing number of entrepreneurs and investors as a way of improving international mobility, tax planning, and family security.

As Ayelet Shachar pointed out, "access to citizenship operates as a distributor (or denier) of opportunity on a global scale".

However, naturalization rules happen to be unclear, or their application is subject to sudden changes. Knowledge of the global policy environment and local immigration practice is essential to minimize risks and ensure compliance.

Astrantia Consulting is known in the market for its precise approach to documents and good working relationship with government authorities. In addition, we closely monitor policy developments at the national and supranational levels.

In particular, for a re-location to be considered effective, EU case-law (here) requires the existence of a genuine link with, and continuity of presence in, the host state. This is because CBI programs on offer by EU Member States automatically confer EU rights to third-country nationals, such as (i) visa-free travel in the Schengen area (here) for 90 days in any 180-day period (ii) the right to vote in EU elections (iii) consular protection outside the EU and (iv) access to the EU Single Market.

It is true that the European Parliament has called upon EU Member States to phase out all investor schemes and the European Commission will continue monitoring, via its expert group, whether the CBI programs still offered in the EU comply with Union law, in particular by implementing a common set of risk management measures (security, AML, anti-avoidance), transparency (statistics), and governance (anti-corruption).

Noblesse oblige – freedom of movement brings scrutiny and "reason to doubt". The 5th EU Anti-money Laundering Directive - AMLD5 (here) subjects EU CBI/RBI applicants to enhanced due diligence by gatekeepers (banks and other "obliged entities" such as accountants, advisors, notaries, trustees, estate agents, art dealers).

Similarly, the OECD (here) qualifies most CBI programs as a potential risk to the effective functioning of the automatic exchange of information (AEOI) under the Common Reporting Standard (CRS). In 2018, the OECD singled out 16 high-risk countries offering both (i) personal tax below 10% on foreign income and (ii) physical presence requirements under 90 days and advised banks to challenge, and further investigate, the self-declared tax residence of residents coming from those countries, in particular by applying the 90-days rule.

On the other hand, we believe that global citizens spending less than 90 days in any particular jurisdiction are still able to structure their affairs around a tax-efficient center of vital interests.

Our Services

We help our clients find the right immigration strategy and implement it.

Our strategic naturalization services include:

• Review of citizenship eligibility
• High-level tax advice, involvement of local counsel where needed
• Collection, preparation, and processing of naturalization and citizenship applications
• Immigration status tracking

Our applicant due diligence includes:

• Sanctions, PEP, and AML background checks
• Close coverage of media exposure including exhaustive index of press articles (where needed)
• Cross-validation and determination of source reliability
• Comprehensive description of the applicant’s source of wealth, in addition to the source of the funds to be transferred to the CBI/RBI program

Due diligence (here) is at the core of the investment migration industry. Our enhanced due diligence reports are nonintrusive and draw on a variety of materials derived from open-source intelligence (OSINT) and proprietary databases.

They provide government agencies in charge of CBI programs with a sound basis for assessing and managing (i) money-laundering (ii) sanctions, corruption, crime and (iii) reputational risks when reviewing residency and citizenship applications.

In-house compliance allows us to protect our clients’ confidentiality and determine an application’s success potential at an early stage, thereby avoiding surprises further down the immigration road.

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References

Atossa Araxia Abrahamian (2015) The Cosmopolites: The Coming of the Global Citizen (Columbia Global Reports)

Jelena Džankić (2019) The Global Market for Investor Citizenship (Palgrave Macmillan)

European Parliamentary Research Service (2018) Citizenship by investment (CBI) and residency by investment (RBI) schemes in the EU. State of play, issues and impacts (here)

European Commission (2019) Investor Citizenship and Residence Schemes in the European Union (here)

Oxford Analytica (2020) Due Diligence in Investment Migration. Best Approach and Minimum Standard Recommendations (here)

Oxford Analytica (2020) Due Diligence in Investment Migration. Current Applications and Trends (here)

Ayelet Shachar (2009) The Birthright Lottery: Citizenship and Global Inequality (Harvard University Press)

Ayelet Shachar, Rainer Baubock (2014) Should Citizenship Be for Sale? (Robert Schuman Centre for Advanced Studies Research Paper No. 2014/01) (here)

Ayelet Shachar, Rainer Bauboeck, Irene Bloemraad, Maarten Vink (2020) The Oxford Handbook of Citizenship (Oxford University Press)

STEP (2021) Global Mobility of Ultra-High-Net-Worth Individuals (Globe Law and Business) (here)

Transparency International, Global Witness (2018) European Getaway. Inside the Murky World of Golden Visas (here)

Xu X., El-Ashram A. and Gold J. (2015) Too Much of a Good Thing? Prudent Management of Inflows under Economic Citizenship Programs (IMF Working Paper) (here)