Citizenship diversification - a necessity for global investors in the 21st century

Opinion article by Dominic Volek, Group Head of Private Clients, Henley & Partners

Wealthy individuals from across the world are exploring the most suitable investment migration solutions to alleviate the manifold risks that threaten their capital and lifestyles. They seek to protect themselves and their families from the insecurity that political and economic instability generates by having the optionality to live, work, and do business in an array of alternative jurisdictions. Although historically, citizenship by investment programmes were considered an add-on for globally-minded investors and entrepreneurs, today, faced with so many ever-fluxing triggers on the global stage, this asset class is now deemed a necessity.

Volatility is making optionality a prize possession

There has been a transformation in every layer of our societal fabric instigated by the lengthy pandemic, geopolitical power struggles, and, most importantly, people’s shifting priorities. Historically, affluent individuals would invest in alternative residence and citizenship programmes to obtain greater global mobility, ensure ease of travel, and access a better quality of life. While these remain valid motivations, they are no longer the key drivers behind the surge in demand for investment migration programmes that advisory firms such as Henley & Partners have experienced. People want to surpass the confinements of remaining in the countries of their birth, and those who have the financial ability to do so see the importance of having more than one residence or citizenship. Humanity’s shared experience of lockdowns and global mobility restrictions has created a paradigm shift in society. It has fuelled an appetite for optionality, the right to choose where to reside or invest. This is no longer the exclusive premise of ultra-high-net-worth individuals but rather a necessity for entrepreneurs, senior executives, and investors who want to safeguard their families, their assets, and their right to travel should a future crisis arise.

Risk management and investments

Many governments have responded to the pandemic fallout by proposing new wealth taxes, increased capital gains dues, and higher corporate taxes, such as the OECD’s global minimum corporate tax. This is encouraging a growing number of affluent individuals and successful entrepreneurs to apply for citizenship by investment programmes in alternative jurisdictions that offer more favourable fiscal frameworks. Antigua & Barbuda’s attractive tax regime is a major drawcard for global investors, as the dual-island nation does not impose any income tax on citizens, whether from local or worldwide income and regardless of whether they are non-resident citizens or tax residents (who spend 183 days per year in Antigua & Barbuda). Citizens are also exempt from capital gains, wealth, inheritance, and withholding taxes.

In this era of volatility, having Antigua & Barbuda citizenship in one's portfolio is much more than a valuable additional asset class; it is a safety net against the myriad of threats in the global stage and futureproofs your wealth and legazy for future generations.

Diversification is a time-old strategy used in finance to manage risk, with theoretical tenets that lie in combining a variety of asset classes to reduce risk and deliver long-term yields. By investing in one or more residence or citizenship by investment programmes, particularly real-estate-associated programmes such as Antigua & Barbuda’s, which ranks 11th in Henley & Partners’ Best Investment Migration Real Estate Index, high-net-worth individuals can enjoy the fruits of their diversification strategies. Not only do they get to capitalise on the yields that their real estate investment delivers, but they also build a portfolio of complementary domiciles. This mitigates the risks of political conflicts, fiscal policy changes, and mandates that limit their freedoms and economic exposure.

Unprecedented millionaire migration

Until the pandemic-related border closures were implemented, there had been a surge in the movement of high-net-worth individuals globally. Migration data collected since 2013 has been charted across all key wealth hubs, and those who opted to move to an alternative jurisdiction of their choice for six or more months have been considered in the data for the Henley Private Wealth Migration Dashboard. Based on the analysis, between 2015 and 2019, the number of millionaires who migrated had almost doubled from 64 million to 110 million before crashing to a mere 12 million in 2020 when borders curtailed movement. As we settle into the yet-to-be-revealed post-C19 reality, it is forecast that by 2023 over 125 million wealthy migrants with the option to live in an alternative country will make the move. It is anticipated that this will further boost the demand for alternative residences and citizenships from affluent individuals in Russia, China, India, Hong Kong (SAR China), Ukraine, Brazil, and the UK, among others.

The lure of alternative citizenship in the Caribbean

RCBI firms have been experiencing a growing number of enquiries from across the world, including burgeoning demand from American, British, and Middle Eastern clients interested in obtaining alternative citizenship in Antigua & Barbuda, St Lucia, and St Kitts & Nevis. In 2022, data from Henley & Partners revealed that the Antigua & Barbuda Citizenship by Investment Programme is the third most popular citizenship programme regarding sales and the second in terms of enquiries. Antigua & Barbuda, in particular, is earmarked as offering one of the region’s most coveted alternative citizenships, requiring an affordable US$200,000 investment in an approved property in paradise. Other qualifying options include a contribution of US$100,000 to the National Development Fund or US$150,000 to the University of West Indies, both of which are nonrefundable. Subject to meeting all requirements, it can take between three to four months for applicants to complete the application process and obtain their citizenship. Antigua & Barbuda’s citizenship by investment framework allows wealthy individuals the option to relocate to a secure country that offers a high quality of life, a robust healthcare system, a stable sociopolitical environment, and visa-free or visa-on-arrival access to over 150 destinations globally, including Europe’s Schengen Area, Singapore, and the UK. Being a member of the Commonwealth, Antigua & Barbuda’s citizens are also granted additional privileges in the UK, a bonus which has become more imperative post-Brexit.

The Antigua & Barbuda Citizenship by Investment Programme has been fruitful in generating sovereign equity for the dual-island nation as the foreign investment raised has cushioned the effect that natural, epidemiological, and economic disasters have had on the country. Programme revenue brought in US$115.7 million in 2020 compared with US$98.9 million in 2019 and US$59.7 million in 2018 - a remarkable result despite a 22 percent drop in applications owing to C19. The Hon Gaston Browne, Prime Minister of Antigua & Barbuda, stated, “The significant damage to our economy by the global effects of C19 underscored the importance and benefits of the citizenship by investment programme. As tax revenues fell rapidly and swiftly, it was - and continues to be - that the citizenship by investment programme has helped to sustain our economy.” Programme inflows are responsible for substantial investments in the construction sector that have boosted the tourism and leisure industry. Furthermore, investment migration has been a major driver in the country’s transition to renewable energy, with thousands of solar panels successfully installed on government buildings and land throughout Antigua to produce electricity; a significant part paid for by the citizenship by investment programme. In this era of volatility, having Antigua & Barbuda citizenship in one’s portfolio is much more than a valuable additional asset class; it is a safety net against the myriad of threats on the global stage and futureproofs your wealth and legacy for future generations.