Citizenship by Investment is a development from growing globalization. Encouraging high net worth individuals to settle and invest with the reward of citizenship can be a boon to a struggling country’s budget and reduce debt and dependence on other countries. However, with the outbreak of COVID-19, restriction of movement between countries, and uncertainty about the future of the pandemic, will the Citizenship by Investment industry survive?
The Growth of Citizenship by Investment
Citizenship by Investment or CRBI (Citizenship and Residence by Investment) has doubled since 2011 and is now a $25 billion a year industry. There are now 100 programs, half of which were started after 2000.
Citizenship by Investment, is an arrangement in which a country offers certain citizenship rights to individuals who agree to invest a certain amount of money. The rights provided and the amount required depends on the country. The program can help wealthy individuals travel for business and pleasure without requiring a visa. Without second citizenship, business opportunities may fade during a lengthy application process, which in some cases, can take up to 60 days.
Citizenship Investment and COVID-19
There may be different sets of data from individual CRBI firms, but the consensus is the industry is not only surviving the pandemic, but may find new pockets of profitability. Henley & Partners, a London CRBI firm saw an increase in activity for the first two quarters of 2020 in spite of the pandemic. Rather than avoiding CRBI plans, many individuals decided to obtain passports from countries that were not as hard hit by the crisis and offered better quality healthcare.
In fact, the COVID-19 crisis addresses one reason individuals may seek second citizenship in the first place—to protect themselves against adverse developments in their own countries. As participants are finding new areas to invest, the CRBI firms, such as Arlon Capital, that did see a decline during the beginning of the COVID-19 crisis are now witnessing a rebound in interest in places that have the pandemic relatively under control. Accordingly, request for passports from Germany, Australia, New Zealand and Portugal, countries that have dealt with the crisis well, have increased.
Conversely, applications from countries that were once considered valuable passports but have been besieged by COVID-19, such as the United States and the United Kingdom, have increased dramatically as wealthy American and British citizens look for places to escape the pandemic. Requests from Americans rose an astonishing 100% in the first six months of 2020. However, opportunities for the United States may be shrinking, since U.S. citizens are allowed to travel visa-free in 86 countries, down from 171 the previous year.
The Future of Citizenship Investment
The future of Citizenship Investment seems healthy even as trajectory of the pandemic is uncertain. This makes sense since the concept of CRBI is partly based on providing a safety net to people of means during upheavals. Rather than deciding whether or not to invest, participants will now select safer countries or those with better resources.
Regardless of the path of COVID-19, CRBI is here to stay. The International Monetary Fund expects the Citizenship Investment trend to remain strong: “These programs are increasingly being mainstreamed, as high net-worth individuals consider citizenship/residency as a means to improving international mobility, tax planning, and family security while also seeking investment opportunities.”
