For the last year and a half, American participation in Portugal’s golden visa program and the share of applicants who choose fund investment have both risen sharply. That’s unlikely to be a coincidence.
In the first quarter of 2022, Portugal’s program raised some EUR 125 million (almost exactly the same amount as during the same quarter last year) from 261 main applicants, who invested an average of EUR 478,000 each, the lowest per-investor average investment figure on record. The average family size (2.06) has also reached a nadir in 2022.
Americans have been the top investor nationality so far in the year, accounting for 53 main applicants (19.9% of the total), while the conventionally largest investor nationality, China, counted 43 investors (16.5%). Q1 2022 marks the first quarter of the Portuguese golden visa’s history in which Chinese were not the top applicant nationality.
The American share of the program has risen inexorably since the start of the pandemic, roughly doubling from 2020 to 2021, and is on track to – at least – double once more this year.
Rising American interest in the program has coincided with a similarly precipitous rise in the share of investors who opt for the fund investment route to qualification. Already by the first quarter of 2022, fund investment has exceeded the 2020 total and nearly three-quarters of last year’s aggregate.
Fund advisors with whom IMI has been in touch explain that Americans, more so than most of the other large applicant nationalities, favor the fund category over other qualifying options; US investors are generally more accustomed to investing in securities, thanks to the country’s long history of public trading and its high number of accredited investors. They appreciate the regulated nature of the CMVM-accredited funds and their relative tax efficiency as compared to the roundtrip transaction costs of real estate investment.
Prior to 2022, we had referred to all qualifying investments beyond the historically most popular Subparagraph 3 real estate investment as “alternative investments”. Recent months’ developments, however, have rendered the term less meaningful; Subparagraph 3 real estate acquisitions now, for the first time, constitute a minority of investments and have themselves become “alternative”.
If you like these charts and graphs, you will love the IMI Data Center, in which you’ll find 17 different graphs covering all angles of the Portuguese golden visa program, as well as more than 300 graphs on dozens of the world’s most popular investment migration programs.
Cyprus intends to cancel the passports of four sanctioned Russians that naturalized as Cypriots under the country’s now-defunct citizenship by investment program, the Cyprus Mail reports.
Though the government did not disclose the names of the individuals in question, government sources have confirmed that their names appeared on a list of the EU’s more than 800 sanctioned Russians and Belarusians. Another government source has confirmed to Cyprus Mail that, following a detailed review of Cypriot-Russian/Belarusian citizens, at least 21 individuals have been identified as either appearing on sanctions lists or being dependents of individuals who did. Cyprus is now moving to cancel the passports of all 21.
Note that the government is canceling the passports (a travel document that formally belongs to the state, not the individual), rather than the citizenships, a process that requires a more protracted, formal procedure.
International migration and tax lawyer David Lesperance explains that while governments can revoke a passport at a moment’s notice – a common practice in a variety of situations, such as when restricting the travel of individuals under investigation, individuals who owe taxes or child support payments, or to prevent travel to war zones – the revocation of a citizenship is an elaborate, time-consuming legal process where the government must prove a “revocable basis”.
Revocation of citizenship is no quick affair
“In short,” says Lesperance, “if Cyprus suspects that a given individual possibly did something that might be the basis of seeking to revoke Cypriot citizenship, then they can quickly and easily cancel the individual’s Cypriot passport. If, after investigation, they feel there are sufficient grounds under Cypriot law, then they can start a process of revoking the individual’s Cypriot citizenship.”
Also in such cases, though, Lesperance points out, the affected individual has legal recourse.
“Even the revocation of Cypriot Citizenship brings with it certain appeal rights to the individual whose passport is revoked. However, the passport remains voided if and until the applicant wins that appeal.”
Between 2007 and 2020, at least 2,886 Russians received Cypriot citizenships through the program. Only those now on the sanctions list will be affected by this government action.
On Thursday, Ukrainian President Volodymyr Zelensky addressed the Cypriot legislature via video-link, and called on lawmakers to revoke the passports of Russians naturalized under the CIP.
“Stop Russian golden passports, dual citizenship, except those where there is evidence they do not harm Ukraine,” Zelensky said, according to Greek Reporter.
The Cypriot government, however, is limiting their actions to those who are sanctioned. That is the only reasonable course of action, according to Lesperance.
“Despite calls to cancel the passports of all Russians who also have Cypriot citizenship, the government has recognized that this is neither defensible nor politically wise. By limiting discussion of possible revocation only to sanctioned individuals, the Cypriot government has avoided any question of potentially arbitrary passport revocation for the thousands of individuals who have legally obtained Cypriot citizenship.”
He also points out that the government of Cyprus is still in the process of legally revoking the citizenships of clearly transgressing individuals.
“Revocation of Cypriot Citizenship is much more complicated. In fact, Cyprus is already undertaking administrative procedures to potentially revoke the citizenship of some individuals who may have not been granted Cypriot citizenship according to Cypriot law. So far, six months have passed simply on the investigative process. Should ultimately the Cypriot government make a determination that revocation should be invoked, the individual also has significant appeal rights, consistent with the Cypriot constitution and basic rules of administrative law.”
Several national Turkish papers are today reporting that the country’s Cabinet has decided, during a recent meeting of ministers, to raise the minimum investment requirement for its citizenship by investment program‘s real estate option from US$250,000 to US$400,000.
Turkish paper Star reports that the government aims to amend the 20th article of the Regulation on the Implementation of the Turkish Citizenship Law’s paragraph 2, clause B to raise the minimum investment amount for the real estate option. The new rules will enter into force as soon as the changes are published in the Official Gazette, which is expected in the coming days.
The change would bring the real estate option’s capital requirement closer to the fixed capital, bank deposit, bond purchase, and fund investment options, all of which already mandate a US$500,000 investment. Official reports mention no expected changes to the minimum investment amounts for the non-real estate investment options.
Program specialists with whom IMI has been in touch say applicants and practitioners are still waiting to learn whether and to what degree the changes will affect investors who have already made their property purchase at prevailing minimums but who still await their deed transfer (which can take up to three weeks from completing the payment to the seller) or who are still in line to submit their citizenship applications.
IMI will be back with more as the story develops and more information becomes available.
2022 no doubt holds a long list of surprise developments in store for the investment migration market. Here are seven changes we already know are coming:
1 – Portugal’s golden visa reform takes effect
The minimum investments in several categories – from capital deposits to funds to science and research ventures – will rise significantly. The areas in which direct investment in residential property is eligible for the golden visa will be reduced; notably, the country’s hottest real estate markets will be excluded from contention. Read all about the coming changes to Portugal’s golden visa here.
2 – The limited-time offer on donation-based citizenship by investment for families of four in Saint Kitts and Nevis will expire.
Saint Kitts & Nevis’ CIP has had the world’s second-most affordable donation option for families of four since July 2020. That will change on January first as the price reverts to its pre-2020 level. Read more here.
3 – Panama’s golden visa will become more expensive
4 – Russia is likely to finally open its new golden visa program.
Earlier this month, the State Duma adopted, in the first reading, a bill that will set the stage for a new golden visa program in Russia next year. Different minimum investment amounts have been suggested at different times, but it seems likely that a minimum of 10 million rubles (about US$100,000) will apply for business investment and 30 million rubles for real estate. The Ministry of Economy recently indicated it expects about 3-400 people to sign up in the first year before stabilizing at 5-600 after a few years of operation.
“Those terms could prove interesting to citizens of Middle Eastern countries,” said Igor Nemtsov, head of Astons Russia, when speaking to IMI today about the planned program. He points out that the planned law looks to provide a three-year path to citizenship in Russia, and that a Russian passport, while not comparable to most European ones in terms of visa-free travel, is still considerably stronger than most Middle Eastern ones. “Compared to EU golden visas,” said Nemtsov, “the conditions of the Russian one are potentially more surmountable.”
5 – Montenegro’s CIP will expire
One of Europe’s youngest CIPs, unfortunately, will also be one of its shortest-lived. At the end of this month, the program will expire and there is little to indicate it will be revived in the near future. See: Montenegro CIP, We Hardly Knew Ye.
6 – Spain’s new Startup Law, which includes tax benefits for remote workers, will take effect
Spain has historically been unwelcoming of entrepreneurs; taxes are high, labor laws are firmly anti-employer, political rhetoric is anti-capital, and the bureaucracy is preposterously lethargic and characterized by poor customer service.
The government now says it wants to change that by introducing its new Startup Law, which will give startups somewhat better terms: Startups will benefit from reduced corporate tax rates (15% instead of 25%) and remote workers in Spain will be eligible for reduce income taxes (a flat rate of 15% for incomes up to EUR 600,000). Read more about the Startup Law here.
The law will reportedly take effect some time during the summer of next year.
7 – New citizenship by investment programs coming online
We know of at least one citizenship by investment program on the European continent planned for launch in the first half of 2022. Professional discretion dictates that we not go into further detail, as this might jeopardize those very plans, but we have this on good authority. Another CIP is planned for Africa, though local political circumstances have made that program’s launch date less certain. We are also aware of at least two firms actively in discussions with a country in the Americas to create an affordable CIP out of what is currently just a residency program.
Investment migration, in 2021, is a $25 billion-plus global industry. That’s big enough to get you noticed. It’s big enough to get you on the radar of powerful people like Ursula von der Leyen. It’s big enough to earn you a target on your back from global regulators and clicks-addicted media outlets.
While Brussels can’t dictate to individual EU countries whom they naturalize, and how they do it, they can make life difficult for the countries offering Golden Visa programs.
Similarly, they can throttle CBI money flows via correspondent banking relationships. And, as a nuclear option, the EU could revoke the visa-free travel privileges of the CBI countries in the Caribbean and the South Pacific. But then who would pay for the reconstruction of Vanuatu and other island nations after every devastating tropical storm?
So, most of these threats and challenges ought to be surmountable. The IMC will keep on lobbying. Regulation will be introduced over time. Bad – and smaller – actors will be ousted, and the industry’s respectability should continue climbing over time.
So, while disconcerting, none of these risks constitute an extinction-level risk for the industry.
But by and large, the RCBI train has kept chugging along.
The bad news?
The good times are not going to last. And the real trouble is approaching from another direction entirely.
Independent means visas are king in a world where applicants are willing to physically relocate
The ascent of the Portugal D7 Visa was merely a harbinger of the Golden Visa’s coming demise.
The D7 Visa has been in existence for a long time, and those of us promoting Golden Visas profited handsomely from its obscurity. Golden Visas, per definition, are backup plans, and they’re very much overkill for people actually seeking to emigrate.
In South Africa, at least, a large percentage of prospective GV applicants have been approaching retirement age for the past 5 to 10 years; they are well-heeled, and liked the idea of having a backup plan, in large part justified by also acquiring a holiday home in Europe.
But with the Great Baby Boomer Retirement now gaining pace, those seeking to actually retire abroad could instead simply choose to obtain a D7 Visa, without any investment or hefty fees, and get on with their lives abroad once they’re ready to move.
And all of this was already coming into play by the time Brexit and Trump hit. The Covid pandemic and draconian government reactions worldwide turned this flame into a conflagration.
Instead of wanting the option to move, masses of people from both the first and developing worlds started getting the hell out of dodge in 2020.
So, to recap:
Golden Visas have very much been a pricey vanity product for the rarified few.
As the pool of eligible buyers starts reaching retirement age, their need for the product is waning.
As the D7 Visa’s reputation grew during the pandemic, the number of people willing to buy a Golden Visa with a view to settling in Europe cratered – virtually overnight.
But it would be a mistake to attribute the D7 David slaying Golden Visa Goliath only to its vastly more affordable price point; the profile of the average D7 applicant is also changing fast.
Instead of being retirees, today, many applicants are younger remote workers seeking a better quality of life. And it’s not just developing nations who are applying; in fact, at D7 Visa, the USA and UK account for the lion’s share of applicants in any given month.
And the reason the Portuguese government is allowing non-retirees to apply, even on the basis of non-pension income, relates to the talent supply-and-demand dynamics at play, both in Portugal and across mainland Europe.
Let’s look at the EU’s population age picture below:
For fairly tiresome, often ethno-nationalist reasons, EU immigration policies have sought to keep the Global South out of the continent for the past couple of decades.
But as the populations of Europe get older with every passing year, we’re watching a reversal of talent supply and demand dynamics in real-time.
The EU needs young, skilled migrants to sustain its economic growth in the next decade and beyond. And there is already a global shortage of skilled tech talent.
So, to remain competitive in terms of human capital, more European nations are adopting immigration legislation that makes it far easier for skilled individuals to move to Europe. And as this trend accelerates, EU nations will find themselves under pressure to “sweeten the deal” with less onerous program requirements, tax incentives, and, critically, shorter minimum stay requirements.
All of this is already undermining the usage case for Golden Visas and providing viable settlement options for people who, a decade ago, would likely have had to opt for a Golden Visa in order to get in the European door.
In combination, these developments, more than any regulation or threat from Brussels, poses a systemic threat to classic, real-estate-based Golden Visa programs going into 2022.
The key take-outs?
The aging – and, in some instances, shrinking – populations of Europe pose a major risk to sustainable economic growth on the continent.
Attracting highly skilled talent is going to be an area of competitive advantage – or disadvantage – in Europe during the next decade.
Whereas the ethno-nationalist emphasis has been on keeping third-country nationals out, there is an escalating urgency around getting foreign skilled workers and entrepreneurs into Europe.
As more and more competing “talent acquisition” visa programs launch in Europe, the tax deals will have to get sweeter. The timelines to permanent residency and citizenship will have to get shorter, and the program requirements less restrictive, in order for existing programs to remain competitive.(Portugal currently sets the benchmark for overall appeal, tax benefits, and accessibility, but Spain looks set to follow suit in the coming year with their recently announced plans to create a startup-type visa program for foreign entrepreneurs.)
Over the next decade, the governments that seize first-mover advantage to reinvent themselves within a “Government As A Service” context, including those already offering settlement visa programs, will be the biggest winners in the race for new talent and economic growth.
As the range of business immigration and settlement visa programs in Europe proliferates, the current commoditization of European residency will only accelerate as a trend.
And as investment requirements, earning requirements, and minimum stay requirements become less stringent over time, big-ticket legacy products like Golden Visas will increasingly become antiquated, outmoded, and impossible to sell.
First mover advantage is everything.
Firms such as Harvey Law Group were among the first to heed their sentinels and start taking Golden Visas off the shelf in April 2019. We, similarly, pivoted from Golden Visas to EU settlement visas and entrepreneurial visas in 2020.
Firms around the world are reporting a slowdown in Golden Visa sales, with many opting to start promoting Portugal’s D7 Visa with a view to stay afloat during the pandemic lockdowns.
So, if none of these emerging trends are impacting your firm’s bottom line yet, it’s only a matter of time.
And If your firm is Golden Visa focused, and your team isn’t sitting down to seriously review your 5-year product strategy going into 2022, it may well be one of the last annual kickoff meetings you hold as a running concern.
The Montenegrin Cabinet reportedly took the decision to extend during a meeting today, and also determined to implement some changes to the program’s terms:
There will be no new approvals of development projects during the period and the government will reportedly require additional bank guarantees for the projects.
“In this way, the government respects the economic activity of the investments and, on the other hand, the principles of the European Union regarding economic citizenship,” Vijesti cites an unnamed source as saying.
Contribution amount doubled
Citizenship applicants, moreover, will henceforth have to make a EUR 200,000 contribution to the government’s fund, rather than the EUR 100,000 required until now.
The same newspaper reports that the decision to extend took place despite the opposition of Ministers of the Interior and Foreign Affairs.
Nuri Katz, President of licensee Apex Capital Partners, confirmed the extension, as well as the increase in contribution amount. “We look forward to working with all stakeholders to bring more FDI to Montenegro under the program,” he commented.
Katz indicates he doesn’t believe the raised contribution requirement will be much of a deterrent to applicants going forward.
“The people applying for Montenegro are a lot less price-sensitive than the people applying for most other programs. So, I think that while it might have an effect it will not be a major effect,” he postulated.
Questioned as to what might have been behind the last-minute extension of the program, Laszlo Kiss of Discus Holdings chalked it up to a desire on the part of the government to make sure the development projects could be completed.
“There’s been a huge increase in applications for the program in the last year, proving that there is enough demand to bring the projects to completion.”
Asked what he meant by a “huge increase” in applications, Kiss said that, while he did not have precise figures, he estimated it was somewhere around 700 in 2021.
Spain approved 232 golden visa applications (main applicants) in the first half of 2021, according to statistics released late last month. The figure represents a 43% increase on the preceding six months, during which 162 golden visas were issued. though still considerably below the same six months in 2020, when Spain was approving golden visas hand-over-fist thanks to its rule on “positive silence”.
Spanish law uniquely favors residency permit applicants by mandating that applications be either approved or rejected within a 20-day period, barring which an application is considered approved by default, or tacit assent (silencio positive). In the first half of 2020, as Spain was still reeling from the sudden onset of the pandemic and most government bureaus remained closed, a majority of applications went unaddressed and, consequently, ended up being approved by tacit assent.
Indeed, the government admitted as much in its biannual report issued some six months ago; the number of tacitly approved applications had been reduced by 55% thanks to an improvement in capacity. That sent approval volumes plummeting in the second half of 2020. In 2021, however, they have begun a steady rise once more, though they remain depressed compared to the pre-pandemic period.
On a cumulative basis since the program’s opening in 2014, Chinese investors account for the largest share of applicants: 32% of the total. Similar to what’s been observed in both Portugal and Greece, however, Chinese dominance has waned markedly in recent years. As late as in 2018, they accounted for some 40% of approvals.
Russian applicants remain the second-largest investor group, making up a full quarter of all approvals since the program opened.
During a meeting yesterday in Roseau, Dominica’s Prime Minister Skerrit and Chinese Ambassador Lin XianJiang signed a visa-waiver agreement between the two countries, making Dominica the second CBI-country (after Grenada) to gain visa-free travel to China for its passport-holders.
Dominicans can now travel to a total of 144 countries without arranging a visa in advance, including, as WIC News pointed out, four out of the world’s six largest economies (China, Germany, UK, and France).
Calling it a “significant milestone in our diplomatic journey”, Prime Minister Skerrit said he looked forward to an extended friendship with China.
“This is significant on many levels given that China is the fastest rising economy in the world and a market that every business wants to engage,” said Caribbean CBI specialist Kenneth Green of Advance Global Partners.
“It also signifies the explicit opening of a gateway between the two countries for trade, tourism, and other avenues of cooperation. In Chinese parlance, it is truly a win-win.”
He characterized the agreement as an endorsement of the Dominican government’s long-term goal of deepening ties to China.
“I would not look at this from a CBI angle but as a path for seamless economic bi-directional flows. From there all the other benefits will follow.”
El Salvador’s golden visa to cost US$100,000 – not ฿3
In El Salvador this weekend, President Nayib Bukele announced plans to build Bitcoin City, a virtually tax-free, planned city near its Conchagua volcano on the country’s coast, financed by sales tax and the world’s first sovereign bitcoin-denominated bonds.
Barely noticed amid the flurry of excitement was Bukele’s confirmation of his previous plans to open a residence-by-investment program with a path to citizenship in five years in exchange for a US$100,000 investment. This summer, when it became clear El Salvador would become the first country to make bitcoin legal tender, Bukele had indicated he planned to open a residence-by-investment program requiring a minimum of ฿3. At the time, that amount of bitcoin roughly equated to US$100,000, and we questioned whether he really meant to fix the price in bitcoin, rather than in dollars.
During his appearance over the weekend, however, Bukele appeared to confirm that the program, which he called “citizenship by investment” with a five-year term, would require a minimum investment of US$100,000; not ฿3, which, at the time of this writing, amounts to some US$169,000.
Moreover, the new Volcano Bonds – Bitcoin City will be powered by the nearby volcano – will be a qualifying investment for the residence by investment program. When it’s issued next year, the USD-denominated bond will have a coupon rate of 6.5%, about half the yield El Salvador’s 10-year treasuries are trading at today. Following five years of legal residency, the investor will be eligible for citizenship.
In reality, these were predictions based on experience. We are not from Portugal, but we have been managing investments for the last 20 years in multiple markets and have been noticing a pattern. Any FDI program based on citizenship and residency starts with real estate because it’s the low-hanging fruit. But then, after a couple of years, it opens the way to fund investments, real business investments creating jobs, and attracting capital into the capital markets.
That’s the way the business usually evolves, so it wasn’t a prediction really. It was just what we have expected to happen
The fund option’s ascent was inevitable
In Portugal, we have seen that Golden Visa capital has inflated the residential prices in the main city centers as a result of EUR 6 billion being invested into apartments, one by one. Just imagine if the EUR 6 billion selling apartments wasn’t invested into apartments directly but was invested in different sectors and industries, including real estate, but also hospitality, technology, or other growing markets. It would be much better for the Portuguese economy as a whole.
So that was our prediction. We said it would change one day, and we should be the first ones to move in this direction. So, in 2017, we structured our first fund. Our first Golden Visa eligible fund, LIG1, managed by Lynx Asset Managers, had only 16 investors and EUR 8 million in equity.
While the total investment made was substantially smaller than our future fundraising efforts, the proof of concept was there. Our experiment paid off and we decided to go all-in on the fund investment route. While we were doing our initial test, there were no direct competitors as this was before the reduction of the minimum investment from EUR 500,000 to EUR 350,000 for the fund route, back in 2018.
But then, in 2018-2019, our second fund, NEST, was able to raise EUR 52 million euro – during the pandemic – from 149 investors. So, things have started to change very quickly when we have been able to show the market that it worked. But it took two years, give or take, for the market to accept that this route was something to consider.
And, as we had predicted, the government made the announcement of some changes in the Golden Visa program three years later to enable the program to have a more widespread effect on the economy. While we were making trails with NEST, we started seeing some additional action with 3-4 funds competing in the same markets in which we were doing fundraising.
We believe this was a good decision on the part of the government. At the end of the day, the program in its current form helped a lot of contractors and developers make money and created some jobs but the impact was limited to a few players making revenues on the program.
This change came as a shock and a surprise to many people in the business. But not to us. So, in retrospect, it’s safe to say our initial predictions materialized and, when we look at the total competition trying to get their hands on the GV-induced FDI for their funds, we can see the market is starting to become a red-ocean, with 35-40 funds competing, while the CMVM is in the process of approving at least three times as many.
Now, let’s talk about what I predict for the coming two years.
First of all, I believe the fund route will continue to grow and will attract more and more investment. And, of course, the share of this route will increase at a steady pace.
Second, in the Golden Visa market, the touristic apartments business will gain popularity, but it will be much more regulated than before. We will see real touristic apartment projects emerge, but also the so-called touristic apartments, which, in reality, will be residential projects converted by developers just for the sake of selling apartments. These will remain serviced apartments in name only and will run into regulatory trouble sooner than most people expect.
But the real touristic apartment projects, compliant with the legal framework, bringing high hospitality service levels, and adding brand value, will make a difference. That’s exactly why, since 2017, any project we engage in has a touristic apartment license. And our last three projects were structured either as a touristic apartment project or under an apart-hotel license.
While most competitors converted their residential sales business into a fund, we went the other way to become compliant with city-center investments that still qualify for the GV. We truly believe our brand Prima collection will be performing in the service-apartment business, not only in Portugal, but also outside Portugal. So, our strategy is to make this hospitality brand a success and, as a result, create value for Golden Visa investors.
So, I expect that the future Golden Visa trends will target touristic apartments on the one hand and venture capital funds on the other. Those two markets are the ones where we’ll be very present in the next three years.
In recent years, we’ve been quietly investing in and developing multiple enterprises in the background to combine the best of two worlds for the Golden Visa. And right now, we are uniquely situated to become the market leaders for a previously undefined segment. We have three enterprises forming the backbone of the future-proof system we have built:
Of course, our pillar OptylonKrea, which identifies, advises, and sponsors innovative funds in collaboration with reputable asset managers. OptylonKrea is also responsible for seeking out truly unique properties for development.
Prima Collection, our hospitality brand that has been the go-to choice of luxury-loving global citizens in Lisbon for their short-term stays for the past three years. With properties consistently scoring top grades on platforms such as booking.com, Airbnb, etc., Prima Collection brings our “financial moat” when compared to a developer just jumping into the serviced apartments business just because the legal situation changed.
And finally, the war-machine humming in the background that gives us an unprecedented edge in property management, LovelyStay, which is a property management company like no other in the market, taking advantage of an increasingly complex in-house algorithm to optimize the occupancy rate and yields from Prima Collection properties.
With the combination of these three unique competitive advantages, we are establishing the future of Portuguese Golden Visa investments.
The other segment of the market that will also thrive in the coming years will be residential real estate in less populated and rural areas (EUR 280,000 apartment investment minimum). It will also continue to become one of the main drivers of the Golden Visa.
However, in these rural investments, it will be very difficult to create value for investors. Therefore, it will still be driven by the intermediation industry. But those companies who “get it right” have the capacity to process a substantial amount of investors while creating value for low population density regions as well as
All in all, I predict that Golden Visa-related investments will be distributed into one-third investment funds, one-third touristic apartments, and one-third rural residential investments.
To conclude, we’ve noticed that the industry is becoming more professional, with an increasing number of blogs, research, and transparent data being published. My advice to both investors and immigration consultants is to select the right products for the long-term within sustainable sectors.
Because of that, we will start seeing the demand shifting to better products that can deliver better returns, and, in the end, the market’s performance will greatly benefit from this increased transparency.
In any case, the Portuguese people will be the ultimate winners because more capital will enter their capital markets. More money will be invested into high-employment building niches like serviced apartments. So, the entire hospitality industry will benefit from this, just in a more professional way than before.
And, finally, there will be more investments in rural areas. So, even though the shift has been considered a threat for the industry, in the end, not much will change in the medium or long term. We shouldn’t be afraid of these changes, which will come into effect at the end of this year.
On OptylonKrea’s side, we have spent the last year getting ready to face the legislative changes. We are predicting a steady three years of growth for our company, and we are keen to share our philosophy and experience with anyone interested. After all, I think the most important thing is to aim for global and sustainable growth in the industry. This is how Portugal will remain competitive internationally. And I think the only way to attract more capital is to work on delivering real services and great returns to our investors.
Be warned. The Golden Visa is important, but not as much as the investment you make, because you can get a Golden Visa through different routes, but you can’t preserve the capital of your family in all of them. This may seem overwhelming but rest assured; our team is there to provide you with the best advice for your investment. We can propose different alternatives based on how much risk you are willing to take and what level of returns you expect to receive.
The European Parliamentary Research Service (EPRS) – the European Parliament’s in-house research department charged with providing objective analysis and background material for MEPs – last week published a 159-page study on investment migration programs in the EU that aimed to explore “possible legal bases on which the EU could act to address” IM programs.
Note that the report is not a policy document; it should not be interpreted as representing any official position within the European Parliament. It aims merely to assist MEPs in their work and has no legislative bearing in itself.
The report aims to support the European Parliament’s Committee on Civil Liberties and Home Affairs in its drawing up of a legislative-initiative report on RCBI schemes. The report is made up of a European added value assessment (EAVA), accompanied by two annexes – a review of the possible legal bases for EU action and a research paper prepared on commission by Dr. Kristin Surak.
The study considers the European Parliament’s chief reservations about such programs and then proceeds to suggest the means by which the European Parliament might address the same. The chief issues cited are:
Issue 1: Risk of violating the principle of sincere cooperation,
Issue 2: Risk of commodification of EU citizenship and residence,
Issue 3: Risks of violation of the principles of fairness and discrimination,
Issue 4: Risk of weak vetting and due diligence,
Issue 5: Lack of sufficient safeguards for macro-economic governance.
The five horsemen
The ERPS identifies five broad policy options for possible EU action on investment migration programs:
Policy option1: Phase out CBI/RBI schemes. This policy option considers a phasing out of CBI/RBI schemes in the EU. On CBI, this possibility will be investigated separately from RBI, due to the different legal basis requirements and the potential consequences and impacts.
Policy option 2: Tax CBI/RBI schemes. This policy option would regulate CBI and RBI schemes via a tax to uphold fundamental rights and rule of law, which are enshrined in the Treaties. The tax can aim to ‘compensate’ for the negative externality and/or discourage the use of these schemes.
Policy option 3: Regulate conditions, guarantees and safeguards of CBI/RBI schemes. This policy option would regulate CBI and RBI schemes by requiring Member States that implement them to introduce measures to promote transparency, consult and facilitate audits at EU level. The schemes would be regulated in four general areas:
Regulation of the service providers’ value chain;
Regulation of approvals and approval procedures (e.g. setting a cap on the annual number of approvals, strengthen due diligence procedures on applicants, strengthen tax transparency measures);
Regulation of investments and capital inflows related to the schemes (e.g. in line with anti-money-laundering (AML) requirements);
Information and consultation with the EU when schemes are established and modified, and EU level audit of the schemes. This policy option is the most complex in terms of the number of elements and the different legal bases to support them.
Policy option 4: Introduce minimum presence requirements for RBI schemes and amend the scope of the Long-term Residence Directive (2003/109/EC). This policy option focuses specifically on RBI schemes and could be implemented together with policy options 2, 3 and/or 5.
Policy option 5: Regulate access to the EU for third countries with CBI/RBI schemes. This policy option differs from policy options 1-4 and can rather be understood as an action that could be taken in parallel focusing on the EU’s external relations. Its design could mirror EU policy changes with respect to policy options 1-4. These actions would include:
Regulation of access to the EU by participants in investment migration programmes in countries undergoingthe accession process;
Regulation of access to the EU for participants in CBI programmes in other third countries that have visa-free agreements with the EU.
IMC: ‘No’ to phase-out, tax, and physical presence requirements but ‘yes’ to regulation
Reacting to the report, the Investment Migration Council has issued a statement in which it commends EU institutions for “properly addressing investment migration rather than making sweeping political statements with little regard to EU law.”
Commenting on the five policy options suggested in the report, the IMC said it disagreed with Policy Options 1, 2, and 4, while supporting Option 3.
“[…]phasing out of any of the two types of programmes would mean lower financial inflows to Member States with such programmes, as well as heightened demand for other, similar, migration channels,” said the IMC about the first option. “Investment programmes are legal pathways to residence and or citizenship and bring benefits to Member States when properly managed.”
Framed as a way to both discourage RCBI programs and to have them compensate for the “negative externalities” they supposedly give rise to, the second policy option would involve direct taxation of the programs. The IMC rejects this suggestion and contests the premise on which it’s based:
“[…] the IMC is of the opinion that investment programmes should not be discouraged but encouraged due to the many benefits for EU Member States. It is the bad management, lack of transparency and absence of harmonised due diligence standards that should be discouraged, not the investment programmes themselves.”
The IMC further dismissed Policy Option 4 (mandating minimum physical presence requirements for participants in the programs) as undesirable because it would make the programs less attractive to foreign investors who, they said, “are usually busy people with dynamic lifestyles.” The report, of course, suggests this policy option precisely because it makes the programs less attractive.
On Policy Option 3, however, the IMC is more amenable.
“There are solid legal bases in EU law for such regulation of investment programmes. Furthermore, this would minimise inherent risks of investment migration programmes, allowing for increased transparency and EU oversight and higher due diligence standards,” said the IMC’s statement about Option 3, which it characterized as “the most beneficial and legally correct option”.
Confirming that it supported Option 3, the IMC also pointed out that it had been “restlessly working on the strengthening of the standards under which investment migration programmes operate” but that their efforts to implement and enforce their recommended standards had been hampered by the lack of regulation on an international or supranational level”.
The IMC said it had, on several occasions in the past, proposed to cooperate with the EU on the “strengthening of minimum due diligence standards and regulation of the investment migration programmes.”
Regulating access to the EU for participants in third-country CIPs
Policy Option 5 should raise eyebrows in the Caribbean and Vanuatu, as well as on the Balkan peninsula. It suggests restricting visa-free travel to the EU for participants in third-country CBI programs:
The report said the EU could regulate access to the Union for CBI program participants in “countries undergoing the accession process” and in “other third-countries that have visa-free agreements with the EU”.
On Policy Option 5, the IMC did not indicate agreement or disagreement, stating merely that the policy was “primarily meant for non-EU countries with investment programmes rather than for EU Member States and, as such, is insufficient in itself.”
In his final comments, IMC CEO Bruno L’ecuyer indicated his organization was generally pleased with the report:
“All in all, the IMC is satisfied that EU institutions are now properly addressing investment migration rather than making sweeping political statements with little regard to EU law. We expect that all our calls for regulation of investment migration programmes will continue to be heard and actioned at EU level. We welcome the report and whilst noting a number of significant errors in the contents, the European Parliamentary Research Service (EPRS) has for the most part delivered a balanced analysis of the Avenues for EU action on investment migration.