Source: www.cfr.org
Published: 21 October 2024
Programs that allow foreign investors to buy residency or citizenship in another country are growing in popularity, but some carry economic and security risks.
What is investment migration?
These programs allow individuals the legal right to live and work in a foreign country in return for making significant, qualifying investments in that country’s economy, often in assets such as government bonds, stocks, and real estate. However, conditions can vary widely among countries, ranging from several hundred thousand dollars to more than a million. There are two types:
Residency by Investment (RBI). Otherwise known as “golden visas,” RBI programs allow foreign investors the right to live, work, study, and receive health-care benefits. Some countries do not require investors to spend much time physically in-country even after receiving a visa; in others, investors can apply for permanent residency or citizenship after a certain period of time.
Citizenship by Investment (CBI). Also known as “golden passports,” CBI programs allow investors to buy foreign citizenship, permanently affording them the various rights associated with the issuing country. In many cases, such programs can provide investors with access to countries with lower taxes, better education and health care, and extensive foreign travel and residency privileges. For instance, those who receive Maltese citizenship can enjoy all the benefits of birthright citizens, in addition to gaining access to the benefits of being a citizen of the European Union (EU), including the ability to live, work, and freely move among other EU member states.
There are also “digital nomad” visas, or temporary resident visas, that allow foreigners to legally live and work remotely abroad for longer than a regular tourist visa would allow. Governments typically use these programs to stimulate economic growth by attracting remote foreign labor—particularly corporate and tech workers. Most digital nomad visas have a minimum income requirement, and in some cases, such as Latvia and Portugal, can lead to permanent residency or citizenship.
Which countries offer such programs?
More than one hundred countries have some type of golden visa, according to the London-based consultancy Henley & Partners. Far fewer have legal provisions in place that offer investors citizenship; as of mid-2023, only about twenty-two countries did.
Many of these programs were born out of economic need. The Caribbean’s Saint Kitts and Nevis was the first country to create a CBI program in 1984 in an effort to bolster its cash-strapped economy amid a drop in world prices for sugar, its main export. Other governments launched programs in response to the 2008–09 global recession and 2012 European debt crisis. Portugal, for example, launched its popular golden visa program in 2012, a year after it received a massive bailout package from the EU and International Monetary Fund (IMF) during a sovereign debt crisis. The United States has had such legislation in place for more than three decades. Congress introduced its immigrant investor program, known as the EB-5 visa, in 1990 to stimulate job creation and foreign investment. The program has since undergone several changes.
Globally, certain countries are more attractive to investors due to several factors, including their cultural, economic, political, and social climate, as well as their geographic location, in addition to any potential tax and travel benefits. Austria, Greece, Italy, Malta, and Portugal have some of the most desirable programs, industry analysts say.
What is the debate?
As their popularity grows among investors and issuing countries, investment migration schemes can be a boon to economies, some experts say. They can help stimulate economic growth [PDF], generate tax revenue, create jobs, attract human capital, and boost development in various sectors, including hospitality and infrastructure. For example, the industry-led Investment Migration Council notes in its 2024 yearbook that the U.S. EB-5 visa has raised more than $1.5 billion since it was reformed in early 2022, while the program generated almost $1.4 billion in capital investment in fiscal year 2023 alone. By some estimates, the investment migration industry generates nearly $22 billion annually.
For many small countries, these programs can be critical. In Saint Kitts and Nevis, recurrent revenue from the country’s CBI program amounted to a cumulative 65 percent of gross domestic product (GDP) between 2017 and 2021, according to a 2023 report by the IMF. Income from investment migration programs can also help countries achieve larger policy goals; in Dominica, CBI revenue is reinforcing the country’s energy, infrastructure, and economy against the impacts of climate change.
Critics, however, argue that such programs can exacerbate inequality in the issuing countries and increase the risk of corruption, tax evasion, money laundering, and even organized crime. A 2023 joint report by the Financial Action Task Force and Organization for Economic Cooperation and Development (OECD) warned that these visa schemes provide illicit actors with increased freedom of movement, expanded business reach, and potential access to multiple banking sources. Other opponents note that enticing wealthy foreigners to invest in or purchase real estate in-country often places additional stress on already squeezed housing markets, as it did in Spain.
What is the outlook on the programs?
Many investor residency and citizenship schemes have been shut down over security concerns, and more could close or be significantly altered in the months and years ahead. Following Russia’s invasion of Ukraine in February 2022, the European Commission called on EU members to repeal their CBI programs due to concerns such schemes could facilitate money laundering and corruption and undermine the integrity of EU citizenship. To crack down on citizenship sales, some Caribbean countries have increased their investment thresholds over growing fears about potential exploitation by criminals.
Other programs have been modified to address their economic harms. In Portugal, the government no longer allows foreigners to invest in or buy real estate to qualify for the program after rent and house prices skyrocketed, exacerbating the country’s housing crisis. Despite these concerns, investment migration has seen tremendous growth in recent years, with more and more countries creating their own residency pathways.
