Residency by investment: what is it?

The most attractive countries for residency by investment

The study for 2018 considered residency by investment programs in 21 countries. The first place was taken by Austria with the highest indicators of the quality of life and reputation of the country. The permanent leader of the past few years, Portugal was in second place.

To get a “golden visa”, you need to pay from 500,000 euros, there are programs from 250,000 euros.

Under the terms of the program in the country must spend at least 35 days in 5 years. During the existence of the program since 2014, more than 6 thousand investors received a “golden visa”. Most residence permits were issued to citizens of China, Brazil, and Russia. In the third position is the new program of Italy. It allows you to get a residence permit of the country through investments of EUR 500 thousand. The United Kingdom with the Tier 1 visa, which is popular among foreign investors, has risen by one position over the year and is now in 5th place.

To use the popular US investment program EB-5 you need to invest from 500 thousand dollars. That’s just the application of the investor will be considered for several years. In Greece, a residence permit is given to property owners, however, it should cost between 250,000 euros.

“In 2017, the demand for a Greek residence permit through investments grew by almost 40% compared to 2016. Most of the residence permits for the year were issued to citizens of China, Russia, and Turkey. Spain gives you the opportunity to get a residence permit for real estate investments from EUR 500 000 without the need to stay in the country. From 2013 to 2016, 2,236 foreign investors received a residence permit in Spain through investments, among investors 685 are citizens of Russia, ”says Irina Simonyan.

For the evaluation of the programs, 10 indicators were used: reputation, quality of life, taxation, visa-free entry to other countries, application review and quality of information processing, complex, investment requirements, general expenses, terms for obtaining citizenship and requirements for obtaining citizenship.

Independent experts from Thomson Reuters, Knight Frank, The Economist Intelligence Unit, Baker & McKenzie, Fragomen LLP took part in the rating. Investors and government officials from different countries were also interviewed. For each criterion, experts scored countries (from 0 to 10), after which the results were summed up.

Whether Kazakhstan will be able to interest investors with benefits and preferences is not yet clear. And it’s not just the bill. To get into the rating of programs for obtaining a residence permit, you need not only to provide foreigners with tax benefits but also to improve the level and quality of life of their own citizens.

“The task of the AIFC – and this applies not only to issues of investment residency and private banking – not so much to compete with developed centers, as fill the emerging niches. The welfare of Central Asian countries is growing, there are people with large capitals who will look for reliable management companies. what is the aim of the AIFC? Another question is what will be the level of trust in the Astana center, how good the exchange will be, how much the legal regime of the center will justify the expectations. It is necessary to understand that investors are feeds to London, not because there is British law and a modern trading platform operates, but because there is, firstly, a predictable and understandable environment, and secondly, a large number of issuers with assets that are interesting to the market, “explains Sergey Domnin.

Now the bill is under consideration in the Government of the Republic of Kazakhstan. Developers are planning to submit it to Parliament for consideration in May-June 2019.

Not so long ago, we mistakenly wrote news about the sale of Kazakhstan citizenship for $ 150,000. Journalists did not interpret the information in this way, and this is not about citizenship, but about foreign investment. This practice is popular in many Western countries that do not give citizenship to all visitors, and investments in the country’s economy make it possible to legally live on its territory.

What will these investments give to foreigners in Kazakhstan? What preferences will they get? What and why do they want to change for them in the legislation of the country?

Who is an investor and what are his rights and benefits in Kazakhstan?

An investor is a natural and legal person making investments in the Republic of Kazakhstan.

The Law “On Foreign Investments” dated December 27, 1994, which had lost its force, had the concept of a national investor – an individual permanently residing in the Republic of Kazakhstan and (or) a legal entity of the Republic of Kazakhstan investing in the Republic of Kazakhstan.

With regard to benefits, under current legislation, tax preferences are granted to investors (reducing the amount of calculated corporate income tax by 100% – 10 years; applying 0 to land tax rates – 8 years; calculating property tax at 0 percent to the tax base – 8 years).

“At the same time, the number of investments in fixed assets must be at least two million times the monthly calculation indicator (as of the date of filing the application established by the law on the Republican budget). Investment preferences are provided for priority activities approved by the Government of the Republic of Kazakhstan No. 13 of January 14, 2016 “, – says the official response of the MID of the Republic of Kazakhstan to the editorial request.

What they want to change in Kazakhstan

According to this program, it is proposed to allow foreigners to obtain a residence permit of the Republic of Kazakhstan through investments and receive tax preferences.

The concept of “investment residency” in Kazakhstan was not previously. In order not to amend all the laws of the country, the developers proposed to launch an investment residence on the legal framework of the AIFC. That is, permission to reside in Kazakhstan to investors will be granted on the basis of an application from the administration of the financial center. The concept states that both the investors and their family members will be able to receive a residence permit.

To obtain a residence permit a foreigner must invest at least 150 thousand dollars:

  • in one or several investment funds registered in accordance with the regulations of the AIFC and managed by one or several management companies that have the relevant licenses of the AIFC regulatory body;
  • in securities traded on the AIFC;
  • to purchase real estate within the approved territory of the AIFC;
  • in any combination of the above options.

The developers believe that this program will help attract investments to the country.

“The estimated amount of investment is relatively small, which makes the program competitive. A special tax regime can be a major advantage of the program. There are several dozen investment programs in the world, and the investment requirements of each program differ significantly from each other. To obtain an investor visa in the UK, 2 million pounds, in the United States – from 500 thousand dollars, Portugal – from 250 thousand euros. The formation of the cost of the program is a complex process in which interests of the country and the realities of the investment immigration market “, – explains Irina Simonyan.

Economist Sergey Domain notes that the draft does not speak about obtaining Kazakhstani citizenship, but only about resident status. However, for citizens of some countries, it is not too difficult to obtain the status of a resident in Kazakhstan – for example, for Russians.

“Kazakhstan is positioning itself as a haven for investors and is trying to use all the tools to attract capital. Actually, this was the idea of the AIFC – to attract capital into the country by all available and legal means. Investment residence is one of the most common ways of raising capital in developing countries. One of the activities of the AIFC is private wealth management (perhaps, Kazakhstan’s residency will be a part — let’s call it that — a packaged product; Dealing with those foreigners who will become clients of the AIFC. Apparently, in the segment of private banking in the AIFC, they are primarily focused on clients from neighboring countries, including those who for some reason have been denied access to the European and Asian markets.

An employee of the Zertteu Research Institute, Sholpan Aytenova, supports the idea of creating a legal framework for investment residency. But he believes that it is necessary to change not only the legislation.

“This practice is common in the Baltic countries, Europe. Legal conditions should be to attract investment residency. But another question is whether foreign residents will be interested? Is Kazakhstan such an attractive country for such residency? At the moment, countries with a good investment climate are more interesting, with good conditions for doing business. On the other hand, judging by the Doing Business rating (in the Doing Business 2018 of the World Bank, Kazakhstan ranked 36th, in the Doing Business 2017 rating – 35th. – Auth . ) si This situation is improving, but there must also be other institutional conditions: economic, political, business conditions. “

Hidden Threat. What problems threaten European passport buyers

On Tuesday, October 16, the Organization for Economic Cooperation and Development (OECD) officially published a list of 21 jurisdictions that grant citizenship, residency or special visas for investments.

Without waiting for the recommendations of the European Commission regarding EU citizenship or residency programs for investments, the OECD, as the main fighter with tax evasion and offshore companies, was forced to admit that the effective result of its ten-year work to create a single reporting standard (CRS – Common Reporting Standard) and, finally, a real-life technical solution for automatic exchange may threaten the presence of individuals of several nationalities or residences. After all, an additional passport or residency allows the taxpayer to become a tax resident in a convenient jurisdiction solely for the purposes of bank compliance and not to pay taxes at home.

The OECD believes that it is the acquisition of citizenship or residency for investments that is the main threat to automatic exchange, since, unlike the procedures for obtaining a second passport or residence permit in the usual manner, this method takes much less time.

The question of the speed and ease of obtaining citizenship or residency for investment is, of course, debatable, since in some cases the state, when naturalizing or obtaining a residence permit in the usual manner, may make more modest demands. What can we say about “awarding” citizenship in a special manner to outstanding individuals whose earnings or welfare may be much higher than those who wish to acquire citizenship or residency under an investment program?

When a foreign passport is appropriate

The OECD recognizes that most often the interested persons pursue legitimate goals, for example, someone wants to start a business in a new state of their permanent residence, someone to expand their capabilities for visa-free travel, to provide the best education to their children. Finally, many want to move to a country with political stability.

Thus, if the person concerned really moves after permanently obtaining citizenship or residency for permanent residence in the state of its issuance, losing, for example, the tax residence of Russia, then, in that case, there is no question of any abuse of speech.

Many will ask the question: is there any obligation to notify the competent authorities about the loss of the status of a Russian tax residency? The answer is no. But it is better to withdraw from the permanent registration at the place of residence in the local unit of the competent internal affairs authority, which will automatically transfer the information to the tax inspectorate in order to remove the departed person from tax accounting.

In a more interesting position are people who obtain the citizenship of an EU member state, allowing them to freely live, work or conduct other economic activities in any country of the European Union. In this case, the situation for banks in terms of determining tax residency becomes more complex, and it is required to track where exactly this person lives.

Some states may indicate in their passports the place of permanent residence, but this does not always correspond to the real state of affairs due to the lack of physical borders within the EU.

Claims in essence

The OECD explicitly states that the main type of abuse of interested parties by their new citizenship or residency is issuing it for a single place of permanent residence, excluding another tax residency, usually in high tax jurisdictions, where they can also live a long time sufficient for them to be recognized by taxpayers with all the ensuing consequences.

The fact is that, according to CRS, in order to reveal the country of tax residence of a client of a bank (or other financial institution) to automatically transfer information about such a client to it, the applicant himself must honestly inform the bank in the form of self-certification whose taxpayer he is.

Thus, providing the new bank with a new passport, a new certificate or certificate of residency, the client, according to the OECD, may mislead the financial institution as to exactly where he should send the tax information he has.

Of particular concern to the OECD are states and jurisdictions that provide interested parties with the opportunity to pay personal income tax or personal income tax at a rate below 10%. For example, in Monaco and the UAE, there is no income tax for individuals at all. There are also claims to states that do not require to remain in their territory for at least 90 days in a calendar year to obtain the status of a local tax resident. A similar regime exists in Cyprus for persons who are 60 days in the calendar year on the island but not staying anywhere else in a particular country for more than 183 days.

How to solve the problem

Most banks already now assess their clients with the presence of permanent addresses, including the legal basis for their identification, as well as the presence of local telephone numbers of the country that the client indicated as tax jurisdiction.

Banks can also take into account the place where a significant number of transactions are performed by their customers, their frequency and the location of the counterparty. Data on actual water or electricity consumption, utility bills may be suitable for assessing the reality of a particular person in a particular place, and in some states, it may be public video tracking devices, such as this is possible in Monaco.

The OECD recommends that banks, in the presence of reasonable suspicion, ask four simple questions:

– Has the client of the bank received citizenship or residency for investments?

– Does the client have the right to reside in other states?

– Did the client live more than 90 days in another country in the previous year?

– in which jurisdiction did the client submit his tax return in the previous year?

In this regard, it is worth noting that, as a rule, people interested in acquiring citizenship for investments seek to achieve legitimate goals, therefore recommendations, of course, can be adopted by a number of banks, primarily in Switzerland.

It is known that, on the advice of a number of well-known Russian lawyers, many foreign banks even check the stamps on the entry and exit from the territory of Russia from Russian citizens in order to calculate their risks for the purposes of automatic exchange. Moreover, the practice includes a request for the provision of previously filed tax returns from individuals.