Wealth Protection – Opting for Alternative Residence in Investor-Friendly Jurisdictions

In a bid to rebuild their economies, sovereign states are contending for funds from affluent individuals and entrepreneurs and endorsing their residence and citizenship by investment solutions. The multi-faceted volatility that is being displayed in markets and across societies at present underlines how critical it is for governments to adapt, rebuild, and recover at the earliest.

In parallel, high-net-worth individuals and investors are also navigating the tumultuous seas of post-pandemic recovery that are plagued with rising inflation rates, shifting labor market trends, and the ongoing conflict in Ukraine. This has resulted in a surge in demand for alternative residence and citizenship, with Henley & Partners receiving the highest number of investment migration program enquiries on record in the first quarter of 2022 — an increase of 55% compared to the previous quarter, which was itself record-breaking.

Now more than ever, private clients are seeking out the most suitable residence by investment programs in order to protect their families’ legacies and security and safeguard their wealth. To assist investors in the decision-making process, we recently launched the Global Residence Program Index, an interactive analytical tool for investors that assesses residence programs based on a variety of parameters including tax.

Wealth preservation in a post-pandemic world

While applicants for alternative residence programs benefit from greater travel mobility and the optionality of living, working, and conducting business in a domicile of their choice, other factors such as wealth preservation are also driving this bullish appetite for investment migration offerings.

In response to the pandemic, many governments have proposed new wealth taxes, increased capital gains dues, and higher corporate taxes such as the OECD’s global minimum corporate tax, as solutions for restoring wealth equality and replenishing public coffers.

This has encouraged a large number of affluent individuals and successful entrepreneurs to apply for residence by investment programs in the countries listed below that have more favorable fiscal frameworks.

UAE – a wealth magnet in 2022

The UAE is spearheading a surge in interest among affluent investors with its competitive, agile approach to adapting regulations and remains a powerful magnet for capital, talent, and wealth. As the recently released Henley Private Wealth Migration Dashboard reveals, the UAE is projected to see the highest net inflow of high-net-worth individuals (with wealth of USD 1 million or more) globally in 2022, at 4,000. Investors from all over the world continue to relocate to the country either in a private capacity, with their businesses, or both, and many are drawn by its favorable tax regime for investors — with no personal income, capital, net worth, or withholding tax (except for those levied in the domestic banking and oil sectors), and several double-tax treaties in place. In terms of ease of conducting business, Dubai ranks 11th overall on Henley & Partners’ Best Residence by Investment Cities for Business Index, and 1st in terms of tax.

Monaco – the alternative residence of choice on the French Riviera

Monaco has an enviable proposition for high-net-worth individuals who can afford to call this picturesque city-state their home. Strategically situated on the French Riviera, it offers tax-free dividends, zero (foreign sourced) income taxes, and zero capital gains taxes to private clients who can demonstrate sufficient funds to qualify for a residence permit. While it may boast some of the most expensive real estate and rental prices in the world, the tax incentives and quality of life in Monaco are second to none. Monaco ranks 18th overall and 2nd in terms of tax on the Best Residence by Investment Cities for Business Index. A hub for ultra-high-net-worth individuals, many factors make the Principality an excellent location for investors.

Greece – one of the most coveted residence by investment permits

Touted as one of the favorite alternative residence options in Europe, the Greece Golden Visa Program requires an investment starting from EUR 250,000 in real estate to be eligible for a five-year residence permit. Drawn to its Mediterranean lifestyle and scenic beaches, wealthy individuals and expats who choose to relocate to Greece under the Golden Visa program also benefit from numerous tax incentives. Golden Visa investors who decide to transfer their tax domicile can pay a lump-sum tax of EUR 100,000 for 15 years, regardless of the amount of foreign-sourced income they receive, which has drawn many high-net-worth individuals to Greece. Athens ranks 20th overall and 18th in terms of tax on the Best Residence by Investment Cities for Business Index. Athens is becoming increasingly attractive due to its pro-business environment.

Portugal – a gem on the Iberian Peninsula

For clients seeking a cosmopolitan lifestyle in an idyllic and affordable European country, Portugal, ranked 1st overall in Henley & Partners’ Global Residence Program Index, offers the perfect solution with its flexible Portugal Golden Residence Permit Program and favorable non-habitual-resident tax scheme. Golden Residence Permit holders who opt to relocate to Portugal can obtain a 10-year tax exemption on most foreign-sourced income in addition to enjoying zero wealth taxes and exemptions on gifts to their families. Added to that, as Portugal does not currently apply VAT or income tax on cryptocurrencies unless they are derived from professional or business activities, crypto enthusiasts and affluent individuals have been drawn to this Iberian hub of innovation. Portugal’s congress recently rejected two bills that would introduce heavy taxes on crypto gains for individuals. However, the Socialist Party, which gained a majority in January’s parliamentary election, is looking to undertake a comprehensive review of tax legislation soon, and the finance minister has indicated that the country will move forward with the taxation of crypto. Lisbon ranks 14th on the Best Residence by Investment Cities for Business Index and 20th for tax. Portugal’s business-friendly policies and top talent emerging from its universities have seen the city emerge as a popular choice for multinational firms to base their headquarters.

Cyprus – a popular hub between Europe and the Middle East

Investors keen to secure permanent residence in the international trade nexus of Cyprus can do so via the Cyprus Permanent Residence Program by investing a minimum of EUR 300,000 net of taxes in real estate. Alternatively, shares and units in funds are other eligible investment classes. Affluent individuals, entrepreneurs, and investors place great value on the optionality to reside in a jurisdiction of their choice, which is why they find Cyprus’s alternative residence solution so attractive. High-net-worth individuals who spend 60 days a year on the island can qualify for the non-domicile regime for a period of 17 years and enjoy tax-exempt dividends and interest. They can also benefit from no capital gains on the sale of shares (unless the underlying assets are Cypriot real estate), no inheritance or gift taxes, and zero wealth taxes. Limassol ranks 19th overall on the Best Residence by Investment Cities for Business Index, and 8th for tax, as Cyprus has one of the lowest corporate tax rates in the EU.

Italy – la dolce vita forever

The Italy Residence by Investment Program grants visa-free travel in Europe’s Schengen Area as well as the option to acquire Italian citizenship after 10 years of residence under special conditions. To qualify, investors must have either EUR 2 million in government bonds, EUR 500,000 in company shares (EUR 250,000 for start-ups), or EUR 1 million invested in philanthropic or cultural projects. While there is no requirement for permit holders to spend any minimum number of days in the country, those who choose to make Italy their tax domicile can pay an annual lump sum of EUR 100,000 on any foreign-sourced income under the flat tax regime. Rome ranks 16th overall and 21st in terms of tax on the Best Residence by Investment Cities for Business Index and is becoming a popular choice for individuals with considerable financial means who want a favorable alternative residence in Europe.

To explore which residence by investment program is most suited for you or your clients’ particular circumstances reach out to Henley & Partners, a pioneering firm in the residence and citizenship by investment industry that has raised over USD 10 billion in foreign direct investments and has an expansive presence, with over 35 offices globally.