Rights and obligations of investors with second citizenship or residency
New opportunities open up for investors after obtaining second passports or residence permits. They can relocate to another country, get treated abroad, provide children with opportunities for quality education, and travel visa-free. But where are rights, there are obligations, too.
Learn where an investor should pay taxes, how to save money on treatment and education and which countries allow investors to work and do business.
Participants of citizenship and residency investment programs get new rights, for example, to freely travel to countries that used to be available only with a visa. However, new duties may arise alongside the new opportunities.
Investors’ rights depend on the status they’ve obtained.
Citizenship provides the maximum rights within the chosen state: citizens can live, work, study, do business, buy properties, and count on social support. Investors exercise the same rights as other citizens with the only exception: participants of citizenship programs cannot be elected to posts at governmental authorities.
A residence permit allows its holder to live in the chosen country and visit it visa-free anytime until the permit expires. Other rights are limited. For example, there may be a prohibition on getting employed, doing business, or purchasing real estate in the country for residents. Restrictions depend on the country and type of residence permit.
Foreigners with residence permits cannot hold public office and freely travel to all states that have visa waiver agreements with the country of residence.
Malta permanent residence allows investors to visit only the Schengen countries without visas. At the same time, Maltese citizens travel freely to 185 states, including all the EU and Schengen countries, the UK, the USA, Canada, and Australia.
Investors’ duties depend on the obtained status and conditions of the particular investment program.
The investor must live in the country for at least 183 days a year if they obtain a residence permit as a financially independent person, for example, in Austria or Switzerland. Residency incitement programs usually don’t require participants to live in the chosen country permanently.
Portugal and Spain require investors to spend at least 7 days a year in the country to maintain residence permits. Visiting the country once every two years is a mandatory condition of the Cyprus permanent residence program. There is no obligation for investors to reside in Greece or Malta.
Residents must meet some other conditions: obey the law, have a registered address and health insurance at all times, and don’t apply for state allowances. Violations may lead to problems with the renewal of a residence permit or obtainment of the following status, namely, permanent residence or citizenship.
There are fewer requirements imposed on citizens. They don’t have to live in the country permanently after getting their passports and rent or own real estate. Citizens can qualify for social benefits and free healthcare.
The rights and duties of a person with multiple citizenships depend on whether they have dual or second citizenship.
One can get second citizenship by investment. Second citizenship means that each country considers the person to be only its citizen. In some cases, it may lead to various issues: for example, a person can be drafted into the army in both countries of citizenship. However, it’s not the case for investors as neither they nor their family members don’t have to serve in the army of the country of second citizenship.
Some countries require citizens to notify the state about getting second citizenship or a residence permit. Suppose a person fails to inform the authorities in time or hides the fact of becoming a citizen or a resident of another state. In that case, there might be administrative or criminal liability.
If an investor purchases real estate or spends most of the year in the country, the obligation to pay taxes arises.
Practical Guide
Comparison of citizenship and residency by investment programs
Where to pay taxes?
Taxes in Europe, the USA and the UK are usually relatively high. If an investor becomes a tax resident of the state, receives income and owns property on its territory, they must pay taxes at local rates.
Becoming a tax resident usually requires spending at least 183 days a year in the country. But there are exceptions: for example, a tax status can be obtained after 60 days of residence in Cyprus and simultaneously with an investment residence permit in Malta.
One can become a tax resident in the UK if one lives in the country for at least 183 days a year. But there is another option: an investor becomes a tax resident if they own property only in the UK and spend at least 91 days in total and at least 30 days during the tax year.
It is enough to obtain a Green Card or an Individual Taxpayer Identification Number to become a US tax resident. Also, people who have spent 183 days in the United States over the past three years are considered tax residents.
Income tax in European countries, the UK and the USA
Portugal — 14.5 to 48%
Greece — 9 to 44%
Malta — 0 to 35%
Spain — 19 to 45%
Cyprus — 0 to 35%
Austria — 0 to 55%
Switzerland — 0 to 48%
Turkey — 15 to 40%
UK — 0 to 45%
USA — a federal tax of 10 to 37% and an additional tax in the chosen state
Companies pay corporate tax if they do business in the country. The rate and opportunities for tax optimisation depend on the country. For example, the corporate tax rate is 35% in Malta, but shareholders can return up to 100% of the tax paid. In St Lucia, international business companies pay taxes only on income generated in the country.
Property taxes must be paid if you buy and own residential or commercial real estate in the country.
How to optimise taxation with a second citizenship
Purchasing a property implies paying various taxes. For example, one must pay stamp duty, transfer, and land tax if the plot is on a long-term lease in Malta. When selling, the transfer tax is paid.
In many countries, property owners pay an annual tax. For example, in Portugal, the municipal tax rate ranges from 0.3 to 0,8% of the property value.
How to save money on healthcare?
Medical services in the EU and the UK are provided to citizens on preferential terms. A citizen receives a European Health Insurance Card (EHIC). With it, one can get medical assistance under the same conditions that apply to citizens of the host state: free of charge or cheaper than for foreigners.
The card is valid for emergencies and chronic diseases.
EHIC does not cover flights, scheduled medical treatment, or services of private clinics. However, it is possible to undergo planned treatment on preferential terms in the country of citizenship or another EU state.
Maltese citizens and investors who have obtained citizenship by naturalisation in other EU countries may get EHIC cards. Any residence permit program implies purchasing health insurance with full coverage.
Foreigners pay for treatment in the USA. Investors with E‑2 visas can buy health insurance to offset the cost of future treatment.
How to save money on education?
The European Union, Switzerland, Iceland, Norway, and Liechtenstein set preferential terms for their citizens. They study at schools and universities free of charge or at a reduced cost.
In many EU countries, residents’ children can study for free. For example, in Malta, children of foreigners with residence permits study free of charge at public schools if the parents have got work permits. Children are given textbooks and stationery; there is a free transfer to the school.
In the UK, residents’ children under 18 can get an education free of charge. There is a reduced cost of studying at universities for British citizens, too. If a foreigner pays £29,500 to £39,010 per year for an undergraduate program at Oxford, a British citizen will pay £9,250 per year for the same course.
Children holding second passports from St Lucia, Dominica, St Kitts and Nevis, Grenada, or Antigua and Barbuda can study in the UK on preferential terms because these countries are part of the Commonwealth of Nations. Citizens of these states are eligible for specific Commonwealth scholarships for UK universities
Countries to register a company or get employed in
If you get citizenship, you can work and open companies in the selected country. A passport of an EU country, for example, Malta, Portugal, or Greece, allows a citizen to work in other EU states, too.
Investors can work and do business with a residence permit in some countries, but not everywhere. This point should be considered when choosing a program if the goal is employment or doing business abroad.
Investors can work and do business in their country of residence if it’s Portugal, Spain, or the UK. Participants of the Malta Permanent Residence Programme are allowed to do business in the country but need a permit to get employed.
A residence permit doesn’t provide the right to work and do business in Greece. Cyprus permanent residence allows the investor only to be a shareholder of a Cypriot company and hold an unpaid director position. The main condition for obtaining a residence permit for financially independent persons in Austria or Switzerland is to receive all income from abroad and not to work or do business in the country of residence.
Material prepared by Vladlena Baranova, Head of Legal & AML Compliance Department, CAMS, IMCM
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