Investment immigration opens up a wealth of opportunity for Chinese nationals seeking alternate residency or citizenship. While the United States’s EB-5 program has proven enormously popular with Chinese investors, the American green card is not the only avenue by which mobile Chinese are migrating abroad.
Experienced immigration agents will know that immigrant investors may consider multiple programs before making their decision of where to invest and eventually immigrate. Considerations go beyond the financial cost of the program to include an evaluation of public goods, culture, and overall attractiveness of the host country. Chinese investors who immigrate through EB-5 are primarily concerned with environmental quality, educational opportunities for their children, and the travel benefits of holding a U.S. passport. Investors that ultimately choose other destinations may have different priorities that make immigration to the United Kingdom, Australia, or even Antigua, a better choice for them.
As investors become more and more sophisticated, agents should not rely on investors being willing to accept the first program they are offered, simply because that is what the agent is most comfortable promoting. A minimum baseline of familiarity with all comparable international programs can be a way to boost investor confidence that you understand their needs and are working to match them with a program that is right for them—not just the one that is your favorite. Additionally, with the growing presence of investor advocates (at least in the EB-5 program) investors are asking more and more questions that agents should be prepared to answer. While investors may highly value the opportunities of their prospective host country, all investment immigration programs require a hefty minimum investment amount, and many with no guarantee, so the decision of where to invest is not one that investors will likely take lightly.
The following feature article on global investment immigration identifies and outlines common aspects that investors will consider when examining the immigration marketplace. Introducing examples from various international programs, author Rohit Kapuria illustrates how a program can be perfect for one investor and a complete mismatch for another. Within the article, our contributing authors spotlight three international programs—the United Kingdom’s Tier 1 Entrepreneur Visa, Australia’s Significant Investor Visa, and Portugal’s Golden Visa. The accompanying graphic identifies key facts about popular international programs and situates each within a worldwide perspective.
With the impending visa retrogression, Chinese investors may face new challenges when applying for EB-5. Because of this, they may spend more time considering other options in order to determine if the EB-5 program is truly right for them. Likely, many will decide that the opportunity of EB-5 is worth the wait, especially when considering that EB-5 remains one of the most affordable options internationally and offers some of the most coveted benefits. Nevertheless, agents are well advised to prepare themselves to handle the queries of information-hungry Chinese investors. With the right information, investors will be able to choose the program that is right for them, and hopefully have a higher likelihood of success. Remember that a happy, successful investor is the best advertisement for your business.
Global Investment Immigration
By Rohit Kapuria
In recent years, immigrant investor programs have exploded around the world. Competition has become increasingly fierce as a growing number of countries are tripping over themselves in efforts to attract wealthy foreign investors to their respective economies.
Passport-seeking investors have a lot of options when exploring the immigrant investor market. While demand for the EB-5 program is at an all time high, especially after the government of Canada recently terminated both its federal immigrant investor and entrepreneur programs, investors consider a variety of options when deciding where to seek residency or citizenship. At this time, outside of EB-5, the most popular immigrant investor programs are being offered by: Australia, England, New Zealand, Singapore, UAE, Portugal, Ireland, Greece, Cyprus, Spain, Austria, and the islands of Dominica, St. Kitts and Nevis, Antigua and Barbuda.
While agents may find that their investor clients are highly concerned with the cost of investment immigration programs, savvy investors are considering more than just the price tag. Further considerations include tax liability after relocating, the form of investment, the level of residency or citizenship, the waiting time required, language and cultural differences, and the presence of home country expatriates. Once all the above issues are taken into account, just how appealing is the proposed adoptive country for Chinese investors?
In the face of the competitive advantages associated with each immigrant investor program, this article intends to explore some of the factors that individual investors consider while prioritizing their decision-making processes.
What is the price of a new passport?
When compared against other immigrant investor programs, EB-5 investments that fall within targeted employment areas, and thus only require a $500,000 investment, can be considered cheap. In contrast, the United Kingdom’s Tier 1 investment category requires an investment of least £1 million in a mix of government-approved investment funds and money parked in a U.K.-regulated bank, and the country even offers investment opportunities at the £5 million and £10 million levels. Despite greater upfront costs however, the United Kingdom only taxes residents on the wealth contained within its borders, unlike U.S. permanent residents who are taxed on their global income. Investors must, of course, weigh their tax concerns against the value of public goods they expect to receive in the host country after all is said and done.
For those investors willing to spend more cash, Singapore’s program requires $2 million in new (or existing) business or government pre-approved funds. Investors must also prove significant business and entrepreneurial experience as well as a history of high profitability stemming from previous investment forays, rendering the cost perhaps even higher. However, the effective tax rate of 20 percent is lower than that of many other countries offering investment immigration opportunities.
Other expensive options include the New Zealand investor visa (at NZ$1.5 million and up) and Australia (at A$1.5 million and up, depending on the visa category). While both nations have been enormously attractive to foreign investors, they tax at 33 percent and a hefty 45 percent, respectively. Austria, however, takes the cake with the most expensive program. One can either make a charity donation of at least €2 million to an Austrian charity or else make a recoverable €10 million investment into the economy. Even more incredible is the fact that the effective tax rate is 50 percent.
On the other hand, for investors not interested in splurging, the island federation of St. Kitts and Nevis, with its tempting tropical climate and zero personal income tax, allows two relatively cheap alternatives. The first is a $250,000 contribution to the country’s Sugar Industry Diversification Foundation, while the second is a real estate investment of at least $400,000. The twin-island nation of Antigua and Barbuda offers investment options at the same rate. The most attractive option price-wise of all, however, is the island of Dominica, which only requires a $100,000 deposit to the National Bank of Dominica.
The consideration of where to invest goes beyond the price of the passport, as investors typically look the form the investment must take, and the benefits and demands that citizenship will offer. An investor may be willing to pay more for access to a country with characteristics they value.
What is the form of investment?
The most common investment forms are government-backed loans, real estate acquisitions, and bank deposit-type investments. Each of these investment models has differing perks that appeal to narrow groups of investors. Some investors prefer the security of a short-term government backed loan, some would like to acquire real estate, and others still prefer the purchase of securities in the hopes of residency and a return on investment.
One of the chief benefits of the Canadian program was that would-be immigrant investors posted up to CAD $800,000 in zero-interest five-year loans to one of Canada’s provincial governments. The fact that the funds were guaranteed and almost certain to be returned, was extremely attractive. In Canada’s absence, Bulgaria has picked up on the appeal of this model and currently offers a very similar opportunity for BGN 1 million, which is much cheaper than a £1 million investment in the United Kingdom. The security attached to a guaranteed return of funds is in stark contrast to the EB-5 program’s “at-risk” requirement, but it also offers no opportunities for returns on investment.
In a different model altogether, some countries realized that they would not only be able attract capital to their cash strapped economies, but they could prop up their struggling housing markets by capitalizing on the real estate hunger of foreign investors (particularly those that hail from China). In return for a shot at residency, Greece asks investors to spend at least €250,000 on property; the UAE requires at least $275,000 in property acquisition (though this investment form precludes the investor from being eligible to work in the UAE unless the investor opens a business in Dubai’s free trade zone); Cyprus requires at least a €300,000 property acquisition; both the island federations of St. Kitts & Nevis as well as Antigua & Barbuda permit $400,000 property acquisitions; while Portugal and Spain require at least €500,000 in property acquisitions to qualify for their respective programs. Even if the value of the real estate declines because of an economic slump, the investor is not unfavorably penalized as compared with certain job creating programs that may lose the required job numbers.
Residency or passport? And how long will it take?
Aside from cost considerations, many investors are concerned with the length of the immigration process. An increasingly common complaint voiced by EB-5 investors stems from USCIS’s processing times and the extended period that investors must wait to be granted permanent residency. Yet, the practice of first granting temporary/conditional residency for a few years prior to authorizing permanent residency and/or citizenship is quite common. The average length of time for this transition ranges between two to seven years, worldwide. As such, the United States’ transition period is competitively attractive. On the other hand, there are a handful of countries that allow investors to purchase fast-track options, and current legislation is exploring such an option for the EB-5 program.
There are even some investment programs that lead to direct citizenship. Malta’s €500,000 investment (into a combination of property and bonds) allows full citizenship after the application is processed. Austria’s €2 million charity donation or €10 million investment similarly provides direct citizenship. The same holds true for islands of Antigua & Barbuda, Dominica, Grenada, and St. Kitts & Nevis. Using these latter models, the investor is theoretically able to “buy” a passport.
Cultural integration
The issue of physical presence and integration is a rather tricky one. Certain countries, such as Spain, require that the investor spend a significant amount of time each year within its borders. Portugal, on the other hand, only requires that the investor spend 7-14 days a year in the country (depending on the residency year in question), but requires a minimum comprehension of the language prior to applying for citizenship.
For example, Chinese nationals make up one of the largest groups of prospective immigrant investors. While Chinese investors typically prize real estate and economic opportunities, they may not be as interested in countries that require integration or lack an existing Chinese population.
Ultimately, just how appealing is the host country?
At the end of the day, once an investor categorizes the most important factors, each program is compared against the overall economic and cultural appeal of the relevant country. The United States has always been synonymous with the American Dream and has generally been one of the most attractive destinations. This holds particularly true in light of the shuttered Canadian program. However, with the rise of competing investor programs and the looming Chinese quota retrogression, the EB-5 program is not the only choice for investors. Agents that understand the international map of investment immigration programs will be better able to advise their clients and guide them to choosing the program that is best aligned with their interests.
Significant Investment Visas
By Rodger Fernandez, Edward C. Beshara, Dominic Yau, and Murray Gerkens
Australia’s Significant Investment Visa (SIV) pathway was introduced by the Commonwealth Government on 24 November 2012 in order to entice investors with substantial assets to apply for business migration to boost the Ausralian economy. It further competes with other similar programs introduced by governments in the United States (EB-5 Immigrant Investor Program), Canada (currently being reevaluated) and New Zealand.
SIV applicants who are successful will be granted a temporary visa (188) for four years and at the end of that period may apply for the permanent visa (888), provided they meet certain requirements.
Significant Investor Stream (Temporary)
In order to be considered for the significat investor visa, applicants must submit an Expression of Interest (EOI) through SkillSelect and be nominated by a State/Territory government, but will not need to meet age or points test assessments required of other categories.
Complying Investments
This stream requires that the applicant invest AUD 5 million in one or more complying investments for at least four years before becoming eligible for permanent residence. The funds being invested must be unencumbered and have been legally acquired.
The types of complying investments include, but are not limited to, the following options:
- Commonwealth, State or Territory government bonds (however described),
- Direct investment into Australian proprietary companies
- ASIC regulated managed funds
There are no restrictions on the type of approvable investment options and the applicant may change between complying investment portfolios as long as they meet the prescribed reinvestment requirements, i.e. the sum withdrawn from one investment must correspond with the sum being reinvested.
It is acknowledged that the value of the complying investment(s) will fluctuate during the periods of the investment(s) and may at times fall below the AUD 5 million threshold. As long as the funds are not withdrawn, the applicant will not be required to deposit more sums to make up the deficit. However, if the value of the investment should rise beyond AUD 5 million, the applicant will not be allowed to withdraw the increased value.
Holders of Significant Investor visas are not required to have a direct involvement in the management of the funds, and can appoint a third party to manage their investments.
As with all investments, there are risks involved. Applicants for this visa are required to acknowlege that:
- they are responsible for their own financial and legal affairs; and
- they will not take action against the Commonwealth for any loss incurred in their complying investment
Significant Investor Stream (Permanent)
To be eligible to apply for the permanent visa (888) under this stream, an applicant must be the holder of a Business Innovation and Investment (Provisional)(188) visa which was granted in the Significant Investor stream or the Significant Investor Extension stream.
Concession on Residence Requirements
To qualify, holders of the provisional SIV (188) must have spent at least 40 days per calendar year in Australia and have maintained their investment as required under their original visa. However, the periods of residence can be accumulative; they do not need to reside in Australia for 40 days each year as long as they satisfy the total number of days required in the relevant period, i.e. for the initial 4-year visa period, they will be required to spend at least 160 days in Australia,
Note, however, that even though the above is the minimum requirement, and that even though the periods of residence on the 188 visa are cumulative, it does not mean an 188 visa holder can reside in Australia for just 160 days (equivalent to four years residence to qualify for the 888 permanent visa) and obtain the 888 permanent visa before the actual four years have passed.
Conclusion
It is understood that, as of 31 July 2014, there were 1,582 Expressions of Interest (EOI) submitted through SkillSelect, 1,312 Invitations to apply for a SIV issued as a result of applicants being nominated by a state or territory government, 1,095 Primary applications lodged, and 343 Primary visas granted. Although the numbers are relatively low, it is still an important pathway for business migrants as well as a relatively important source of foreign investment in Australia.
Major Changes Ahead for UK’s Tier 1 Program
By Mona Shah, Esq
This year has seen major changes to international investment immigration programs; Canada closed its doors to their investment program and in October, the UK Minister of State for Immigration and Security, James Brokenshire, announced that there would be major changes to the UK Tier 1 (Investor) route.
The biggest of such changes involves raising the minimum investment threshold from £1million to £2million. In addition, the type of investment route will be restricted as the United Kingdom government decides on what sort of investment will best deliver real economic benefits.[1]
It is interesting that both the United Kingdom and Canada used similar language when enacting their respective reforms, wondering whether their programs were affecting true economic results. Despite criticisms, the U.S. EB-5 program has delivered real economic benefits to the United States,[2] perhaps because of its at-risk structure and ties to job creation. Whether the United Kingdom and Canada will follow a similar styled program remains to be seen. The rise in the United Kingdom’s minimum investment amount has not come as a major surprise to many, despite the fact that the change is a substantial increase. Further, there has been speculation as to whether the United States will follow suit and raise the minimum investment amount for EB-5.
Like the EB-5 program, the United Kingdom’s investment immigration options are very popular among Chinese investors. Last year, approximately 40,000 people came to the United Kingdom from China, according to the Office for National Statistics. This means that, for the first time, China has provided more migrants to Britain that any other nation. Sammy Yung, vice president of the Guangzhou-based Chinese agency, Intercontinental Group, stated that demand for immigration to the United Kingdom, both under the Tier 1 Entrepreneur Visa as well as the Investment Visa had increased significantly over the last year. Mr. Yung stated, however, that the English language requirement (IELTS score of 4.0) is often a major hurdle.
Although many Chinese immigration agencies deal with European investment immigration programs such as Portugal, very few deal with the United Kingdom, despite the rise in applicants and its continued popularity among Chinese prospective immigrants. This may be partly due to the fact that a record number of Tier 1 Entrepreneur cases were denied last year because of poor documentation and suspicions that the investments were not genuine. In order to protect the UK Tier 1 (Entrepreneur) visa stream from fraud, the U.K. government made an announcement of changes to this visa type in July 2014 to ensure that investments originated from a ‘government approved source,’ not from a venture capitalist.
Despite the higher price tag, for Chinese who prefer Europe to North America, the United Kingdom remains a good option.
Europe’s Golden Beacon Beckons
By Courtney Creedon
Portugal’s Golden Resident Permit Programme offers prospective immigrants the chance at Portuguese residency through property ownership, funds transfer or job creation. Since the beginning of the program in 2012, Portugal has granted nearly 1600 investor resident permits, the majority of which were earned through real estate purchase. Spain initiated a similar structure in 2013, and other countries in Europe, such as Greece and Cyprus, have followed suit. Europe’s golden visa programs are fueling the Chinese hunger for real estate and alternative residency options, all while maintaining a relatively simple immigration structure.
The Portuguese program differs from the EB-5 (and many other international programs) in that it grants residency for simple property acquisition—a provision that is noticeably absent from the U.S. program. Though such an option may be more desirable for many investors, it comes at a higher price tag. The minimum required investment amount in Portugal is €500,000 in property, or $638,000. The higher cost may, however, be an easy trade off for the peace of mind that real estate purchases offer over job creation requirements or even higher investment amounts in other countries.
Real estate acquisition is not the only pathway to Portugal’s “golden visa,” though the alternative options remain much less popular. Instead of real estate, investors can transfer at least €1 million ($1.276 million) in capital, or create at least 10 jobs in Portugal. Since 2012, only 74 investors have chosen to transfer capital, and only 3 have gone the job creation route—leaving real estate as the preferred route with 1487 participants. Of the total 1564 permit recipients, 1249 of them came to Portugal from China.[3]
No matter the investment method, investors must qualify as “third state citizens” (non-EU nationals) and maintain their investment for a minimum period of five years. Applicants must prove capital transfer, job creation, or real estate acquisition in order to receive the residence permit. The Portuguese program has proven attractive for many investors partly because of the extremely limited residency requirements—seven days the first year and 14 days during each successive two-year period. Successful applicants are granted renewable temporary residence permits and are eligible for permanent residency after five years and citizenship after six.
The golden visa entitles holders to travel freely though the Schengen Area and, should they choose to pursue citizenship, benefit from freedom to work and reside anywhere within the European Union. Like in the United States, and most other countries, immigrants through the program are eligible to bring dependent family members to Portugal.
Despite growing popularity of the program, especially among Chinese migrants, the golden visa has experienced some backlash. According to a BBC article on the topic, some in Portugal are concerned that the program will allow criminals to buy their way into the country. Officials insist that all applicants are heavily scrutinized and Chinese investors interviewed expressed their desire to diversify and protect their assets and send their children to European universities.[4]
Portugal is yet another shining option in the international immigration marketplace and agents will likely recognize characteristics such as a relatively low investment amount, lax residency requirements, and a focus on real estate as being very attractive to their Chinese clients.
[1] United Kingdom. Home Office. Immigration Act Commencement and Statement of Changes in Immigration Rules. By James Brokenshire. Gov.UK, 16 Oct. 2014.
[2] A 2014 IIUSA report on the economic impact of EB-5 spending found that the program supported an average of 42,000 jobs and contributed $3.39 billion to GDP in FY 2012.
[3] Portugal. Governo De Portugal. Golden Residence Permit Programme. Servico De Estrangeiros E Fronteiras.
[4] Mendonca, Susana. “The Allure of Portugal’s Golden Visa.” BBC News. N.p., 19 Mar. 2014.
Rohit Kapuria
Rohit Kapuria, vice chair and partner of Saul Ewing Arnstein & Lehr LLP’s Global Immigration and Foreign Investment Practice, handles private offerings under the EB-5 investor visa program. Kapuria regularly represents EB-5 lenders, EB-5 borrowers, banks, regional centers, real estate developers, investors working on direct EB-5 projects, and migration brokers. He has worked on over 500 EB-5 transactions, with a combined capital development cost in excess of $7.5 billion. He has received regular recognition for all of his efforts from the EB-5 industry at large and was also named Top 40 Illinois Attorney Under 40 to Watch in 2021.
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