Passport To A Luxury Life: Why Multiple Citizenship Is A Hot Commodity

Wealth

November 1, 2017 | BY Simon Littlewood

More people than ever are seeking second passports, but growing insecurity is rapidly closing doors

The prospect of hassle-free travel and the opportunity to pay less tax have long encouraged the world’s wealthy to acquire new passports. Some long-term US expats are even choosing to give up American citizenship to avoid double taxation.

Agents and intermediaries who facilitate such applications say the number of countries offering second-passport schemes is on the rise.

Says Veronica Cotdemiey, CEO of Citizenship Invest, which has offices in Dubai, Hong Kong and Singapore, “We have clients from all over Asia, including Japan, Vietnam, Indonesia and China. There are numerous advantages to having a second passport, and their relative importance generally depends on where you come from.”

Same old, same old

This correspondent remembers the frantic search for British, Canadian or Australian passports in the run-up to the 1997 handover of Hong Kong to China. In this case, the objective for fearful Hongkongers was to have a back-pocket escape hatch in case Hong Kong “went to the dogs.” It was generally accepted that these people had little intention of participating in the national life of their new countries, much less actually living there—or paying any more tax than they legally had to—for any significant length of time.

With some exceptions, emigrants would stay just long enough to obtain an alternative residence before coming straight back home. New social phenomena emerged during this period. “Astronauts” were the principal breadwinners who remained in Hong Kong to keep the family business afloat and spent time on flights to Sydney or Vancouver to see their spouses and children, who were sitting out their time in “immigration jail” in their intended country of citizenship.

See also: 10 Best Boarding Schools In The US

New seekers

“Today there are also many who do not want to emigrate but want the security of a second citizenship, as in 1997,” says Cotdemiey. In other cases, they seek more freedom to work and travel. Typical clients can include those who spend all their savings in a second place—Palestinians, for example, who are often wealthy but without opportunity in their home country. A second category—and one that has grown hugely in the past few years—comprises others who cannot easily get visas or travel outside their country of origin, either for leisure or work. This would include Syria and much of the Middle East.

The third category consists of high-net-worth individuals who need more flexibility in terms of how they manage their wealth, and seek opportunities to structure and preserve it. And finally, some applicants are simply taking practical steps in case things go wrong. Many Chinese, for example, aim to secure their wealth by getting a second passport.

Growing risk

In the past couple of years some doors have been shutting—countries are more security- and risk-conscious—so people are feeling the need to act now in case it becomes even harder to enter countries without visas. 

The market opportunity for entrepreneurs is also growing. “The overall growth in demand has accelerated because of greater instability over the past five or six years, going back to the Arab spring,” says Micha-Rose Emmett, London-based chief executive of CS Global Partners, which helps clients with applications. “Events are making people sit up and say, ‘I just want to diversify my life and my family’s life for the future because I don’t know what will happen to me.’”

Many intermediaries reported a post-Brexit upturn in interest in the UK’s Tier 1 programme. In the past, the wealthy often bought the nationality of fellow EU member Malta, largely because it allowed them to settle in the UK. Now that it may no longer do so, people are considering the more long-winded process of acquiring British citizenship after the requisite five years of residency and £2 million of investment. It is, in its own small way, yet another unforeseen consequence of Brexit.

See also: What Happens To Hong Kong's Investors After Brexit?

Need to know

No one can fail to spot the increased concern for security affecting the West. Furthermore, attempts to track banking activity to snare tax evasion and ever more complex anti-money laundering regulations are starting to bite—institutions are now liable for swingeing fines and hitherto “safe” jurisdictions are becoming progressively more exposed to scrutiny.

Those worried about their past might therefore find themselves with less choice. In 2015, Transparency International, a non-governmental organisation, deemed it “highly likely” that “substantial amounts of corrupt wealth stolen from China and Russia” have been “laundered into the UK” through Britain’s Tier 1 (Investor) visa, which offers residency as a route to eventual citizenship.

“Make sure you compare what’s on offer,” Cotdemiey advises applicants. “And be honest. Do not just ‘give it a go’ and hope for the best—be honest and forthright.” She adds that when someone applies for citizenship, checks tend to be very thorough. “We check for political affiliations and criminal records, obviously. We use World-Check, which is a system used by banks to share who has been blacklisted or who has come under scrutiny. This is a good time to apply—we expect security controls to get tougher—and the data shows much higher rates of success among those who take advice from an established intermediary.”

See also: Managing Your Legacy: How External Advisers Can Help

Related Stories