China's dollar millionaires can afford the very best in healthcare and education and have the disposable income to travel widely, and they are often required to do so for business. But when healthcare has not kept pace with the broader transformation of the country's economy, and world class universities are in relatively short supply, it raises questions about what Chinese millionaires' money can buy them outside the People's Republic.
Add to this the rising concern about pollution in China's cities, the immense inconvenience of travelling with a Chinese passport, and high net worth individuals' desire to protect their assets against political upheaval and emigration seems like a more and more sensible path to take.
It is an avenue that innumerable Chinese - not just the super rich - are seriously weighing up. According to a 2011 study by the Bank of China and Hurun Report, as many as 46 percent of Chinese with assets worth more than 10 million yuan (US$1.57 million) are considering a move abroad. Another 14 percent have begun the process and almost a third of the study's respondents already have investments abroad to enable them and their families to emigrate. Economic citizenship, also known as second citizenship or citizenship by investment has become a buzzword among China's high net worth individuals seeking the social - and often financial - benefits of life overseas. Naturally, voicing their opinions about emigration is only a first step and, although they have the financial means to do so, often the crucial decision that these new wealthy face is whether leaving China for good is necessarily better than acquiring a second passport, thereby keeping their options open, so to speak.
China is not known for its lenience where emigration and citizenship are concerned. The government does not recognize the right to dual citizenship and, for Chinese nationals, being a citizen of both an ordinary onshore jurisdiction and their native China may mean forfeiting their Chinese passport to authorities. It is not a decision most take lightly. For those whose primary aim is to safeguard against unforeseen (or deteriorating) circumstances - who are uncertain that they want to leave China permanently - emigration seems very final and the process can be long and stressful. An investment of US$500,000 is required in order to obtain a temporary residence permit for the US - one of the world's most popular destinations for emigration - but this is only the beginning of a lengthy process. After two years of living in the country, applicants are granted permanent residence in the form of a green card, and only seven years later does citizenship become a possibility. Lengthy periods of naturalization such as this are common in Western countries, and the accompanying difficulty of adjusting to life abroad and satisfying language proficiency requirements only adds to people's apprehension. It is no wonder that the process of moving to a Western country remains a dream in China more often than it becomes a reality.
Concerns like these, along with time, convenience and cost are all causing more of China's would-be "émigrés" to look to reputable offshore jurisdictions that meet the Organization for Economic Cooperation and Development's standards when considering a move abroad. The upholding of privacy laws in offshore jurisdictions - and the fact that they allow dual citizenship - counteracts the anxiety of having to renounce Chinese citizenship. Whether or not Chinese nationals choose to report second passports to the relevant authorities in China is simply up to them. Mr Oleg Lemeshko, a consultant for immigration and second citizenship specialist Elma Global explains, "Our goal is to advise them accurately regarding legislation, but the final decision is up the client." For savvy businesspeople, easing their tax burden while reaping the returns on an offshore investment - whether to fulfill the requirements of a citizenship program or simply on its own merits - is an obvious windfall, and is often the defining factor in choosing offshore, rather than onshore jurisdictions. Add to this the fact that, despite the global availability of economic residency programs, there are only two countries in the world that offer bona fide economic citizenship programs as opposed to residency programs, and both are offshore jurisdictions in the Caribbean: the Commonwealth of Dominica and St Kitts and Nevis.
A passport from the Commonwealth of Dominica means visa-free access to the UK, Ireland, most British Commonwealth countries, as well as all the 15 member states that belong to the Caribbean Community (CARICOM). Citizens can live and work in the country at any time and, because the country is a Commonwealth member, citizens are granted certain privileges in the UK too, including studying at a university in the UK without having to obtain a student visa. After graduating from a UK university, young citizens may also take up employment in the UK for two years without having to obtain a work permit. The high value that Chinese place on gaining a foreign education for their children - particularly in an English-speaking country like the UK or the US - significantly adds to the appeal of obtaining a Commonwealth passport.
Apart from the ease of travel and preferential study rights it affords, becoming a citizen of the Commonwealth of Dominica also opens doors for business people who wish to take advantage of the jurisdiction's range of offshore financial structures. Citizens are free to open bank accounts and incorporate companies in the country, which are not subject to income, capital gains, inheritance, estate or profit taxes. International business companies (IBC) in the jurisdiction are exempt from currency exchange controls and, unless you choose to live full time in the country, there is no income tax on your worldwide earnings. An IBC is considered a very flexible offshore vehicle, into which a variety of corporate structures can fit. Offshore companies, funds and trusts within the Commonwealth of Dominica are also practical and secure methods of protecting assets, and wealthy Chinese who wish to guard against unforeseen circumstances - from political instability to divorce to bankruptcy - are increasingly making use of the opportunities that this passport presents.
Previously only known as an offshore jurisdiction that allows people to reduce their tax burden, the Commonwealth of Dominica's reputation as a desirable place to gain citizenship is growing - among Chinese and non-Chinese alike. It may not be a primary motivator, but living in the "Nature Isle of the Caribbean", as it is nicknamed, is an attractive prospect in its own right. Political and economic stability, a common law-based legislation and English as the official as well as the most predominant language all contribute to making the country a desirable place to relocate. Infrastructure and communications on the island - while more than adequate - are constantly improving, thereby adding to the amount of foreign investment in the country, some of which is being channeled from China. While this all paints a potentially promising picture for Chinese citizens who do not want to be caught short with nothing but a Chinese passport during a period of civil or political unrest, cost and speed are, without doubt, the two most prevalent factors that convince people to choose the Commonwealth of Dominica's citizenship program.
Applying for the program begins with making a non-refundable investment of between US$75,000 and US$100,000 to the Commonwealth of Dominica's government. The amount varies according to a family's composition and the age of its members. A married couple with two children under 18 years of age is required to invest US$100,000, while single applicants are only required to make an investment of US$ 75,000. Additional professional, legal and due diligence fees of between US$ 10,000 and US$ 35,000 are applicable, and charged on a case-by-case basis. The entire process of attaining economic citizenship, from the submission of initial documents to receiving a passport takes between five and 14 months, during which a mandatory interview with the main applicant is required in the Commonwealth of Dominica. The jurisdiction's passports are valid for ten years and can be easily renewed upon expiration. Dual citizenship is recognized.
Chinese citizens have high expectations for the extent of visa-free travel that a second passport will afford them. In this respect, St Kitts and Nevis offers more to passport-holders than the Commonwealth of Dominica. St Kitts and Nevis is an independent Commonwealth Realm and its citizens enjoy the same level of visa-free travel to the UK, Ireland, Canada and all European Union countries as citizens of other Commonwealth Realms, such as Australia, as well as privileges like studying in the UK without a student visa. Visa-free travel - and in some cases, residency - in CARICOM member states is also possible with a St Kitts and Nevis passport. It is little wonder that the tiny two island Caribbean nation is attracting more Chinese nationals every year.
St. Kitts and Nevis' is the longest-established citizenship by investment program of its kind in the world, and was initiated in 1984. There are two avenues through which investors and their families can acquire economic citizenship: by contributing to the country's Sugar Industry Diversification Foundation or participating in its real estate investment program. The Sugar Industry Diversification Foundation (SIDF) was originally set up by St Kitts and Nevis' government to support workers who were displaced as a result of the sugar industry's decline, previously the country's dominant economy. The SIDF program uses funds raised to diversity the country's agricultural sector, to develop alternative industries and stimulate economic development. A contribution of approximately US$250,000 to the foundation by foreign nationals makes them eligible to apply for a St Kitts and Nevis passport. A processing period of between three and six months makes this the faster of the county's two economic citizenship programs.
The real estate program requires that single applicants invest a minimum of US$400,000 in government-approved real estate, and an additional US$45,000 for a spouse and up to two dependent children. A larger number of dependents, as well as next-of-kins, can be connected to the main applicant - and granted their own passports - and fees are charged according to their number and age. Future generations are also automatically given St Kitts and Nevis citizenship. Government legal fees and due diligence fees are added to this amount and the process takes between three and ten months, depending largely on the agency that handles the application. Dual citizenship is recognized and there is no personal visit required before passports are processed.
The major advantage of this particular program is that St Kitts and Nevis real estate is a recoverable investment, and citizens who participate in the jurisdiction's real estate program are permitted to sell their property after five years. Elma Global's Mr Lemeshko estimates that only ten percent of applicants have tended to choose the real estate option in previous years, but recent amendments to the program suggest that demand is likely to increase. Previously, the citizenship acquired by a property owner was not transferrable, but as of this year, the property's next buyer will also qualify for citizenship. Henley & Partners, a leading firm that specializes in international residence and citizenship planning - as well as tax planning and other aspects of offshore finance - have noted how stable the growth of St Kitts and Nevis' real estate prices have been over the last 15 years. "Prices are supported by the citizenship option that foreign purchasers of real estate have, which creates an extraordinary stability of the real estate market compared to other countries in the region and beyond," the firm writes of the jurisdiction's property market. Given the current economic downtown, an investment in real estate in St. Kitts and Nevis is a safe investment option, the firm advises.
Property prices aside, buying real estate in St Kitts and Nevis has practical advantages too. Having a second home in the country minimizes the chance of inconveniences at border controls and, naturally, provides citizens with somewhere to live, or simply to holiday. Time spent living outside the country can be used to rent the property out, which is an attractive prospect as citizens' rental income is tax-free. On the whole, tax planning opportunities rank highly within the factors influencing people to consider St Kitts and Nevis' second citizenship programs. The jurisdiction offers citizens tax-free living, specifically no capital gains tax, no income tax and no wealth taxes. Setting up an International Business Company (IBC) or a Limited Liability Company (LLC) in St Kitts and Nevis is also reputed to be a convenient and effective offshore asset protection tool.
Although St Kitts and Nevis and the Commonwealth of Dominica are the only two offshore jurisdictions with direct citizenship by investment programs, Mauritius has a permanent residence scheme that results in citizenship in just two years. Mauritius is a premier international business hub in the Indian Ocean region and there are a number of reasons that it appeals to Chinese businesspeople. The country's extensive DTA network has opened up numerous channels for Chinese businesspeople, and its strategic location at the crossroads of Africa and Asia is only becoming more valuable as Chinese entrepreneurs increase their involvement in Africa. Mauritius has gained a reputation for itself as a highly credible jurisdiction for offshore company formation, offering a range of services to investors through its secure, yet flexible regulatory framework. Offshore companies in Mauritius are most similar to those in the British Virgin Islands or Belize and company owners are not subject to income tax.
Mauritius' offshore industry does have similarities to those of other offshore centers, but the government's approach to granting permanent residence or citizens has several different features too. A minimum of US$500,000 is required for investors to be eligible for permanent residence and, while this may be invested in a Permanent Resident Investment Fund - which is not unlike the procedure in the Commonwealth of Dominica or with St Kitts and Nevis' donation option - the amount can also be invested in a business of an applicant's choosing, provided it falls within a list of qualifying industries. Business activities in the country should continue for at least five years from the time that permanent residence is obtained and the sum invested should not drop below US$500,000. There are a wide range of industries which qualify for this category of investment, including manufacturing, tourism, financial services, information technology and film production.
Investors who become permanent residents under the Permanent Residence Scheme can apply for Mauritian citizenship after two years of residence in the country, provided they meet the provisions of the Mauritius Citizenship Act and Chinese citizens do not need to worry about having to renounce their native citizenship. An investment of US$500,000 allows a primary applicant to acquire permanent resident status for their spouse, children and stepchildren below the age of eighteen, above which an additional interest-free deposit of US$100,000 per child is required.
While Mauritius has substantial appeal as a destination for investment, wealthy Chinese who apply for permanent residence must be highly motivated to remain in the country for two years in order obtain citizenship; a Mauritian passport is a valuable travel document. Mauritian citizens enjoy the benefit of visa-free travel to all EU member states as well as a large number of African, South American and Asian countries. Add to these the extensive travel privileges the country's natural beauty, a high standard of living, political stability, efficient public services, modern infrastructure and telecommunications services - and the fact that English is the official language - and it is easy to understand why more and more wealthy Chinese are considering a move to the Indian Ocean island.
Those that do make the move are often pleasantly surprised at the extent to which Chinese culture has survived in multi-cultural Mauritius. Mauritius is ethnically very diverse and today its Chinese population amounts to roughly three percent of the country's total. This Sino-Mauritian population speaks a combination of Mandarin, Cantonese and regional Chinese dialects, and Chinese language media has a relatively broad reach: three Chinese language newspapers are published in the country, as well as a monthly news magazine that was launched in 2005. Chinese gastronomy also abounds in Mauritius, everywhere from exclusive Sino-Mauritian owned restaurants serving delicacies like abalone soup, to street side vendors where freshly steamed dumplings are sold. Aspects of everyday Mauritian life like food may seem insignificant in the context of a weighty decision about immigration, but would-be émigrés' apprehension about adjusting to life outside of China - wherever that may be - is often at the center of their reluctance to commit to a move abroad and there is plenty of evidence to suggest that familiar food and the ability to communicate in your mother tongue go a long way toward helping people feel at home in a new country. Permanent residents and citizens also have the right to buy property in Mauritius for residential purposes: a second home to live in with their second passport.
Mauritius' focus on attracting foreign capital to develop its economy is bearing plenty of fruit; its Permanent Residence Scheme promises to follow suit. The number of Chinese who have recognized the need to safeguard against worst case scenarios at home has grown steadily in recent years, as have the channels through which precautionary investments can be made. There is a growing market for second citizenship but, unlike other markets, profit doesn't come from knowing when to buy or sell. Where second citizenship is concerned, "sooner rather than later" is, perhaps, the most prudent advice anyone can give. Missing the boat on an investment of this nature is, unfortunately, considerably more serious than missing out a few stocks. And, while nobody wishes an uncertain future on China - or on any country - in reality, it is impossible to know when "later" may arrive.
St Kitts and Nevis (Real estate program).
- Real estate purchased with the aim of obtaining citizenship must be government-approved;
- When selling a property, owners incur a transfer tax of twelve percent of the sale price. No capital gains tax is payable;
- The Comptroller of Inland Revenue assesses a property's market value and levies an annual property tax of 0.2 percent on its market value;
- Total real estate acquisition costs, including conveyance and legal fees, amount to approximately three to four percent of a property's value;
- Real estate bought under the citizenship by investment program cannot be resold within the first five years of purchase. As of 2012, the next buyer also qualifies for citizenship.
Source: https://www.henleyglobal.com/countries/st-kitts-nevis/real-estate/
Commonwealth of Dominica (Citizenship by investment program).
- All applicants must provide a clean personal record, including a criminal check record, a comprehensive resume, background information about their business, as well as impeccable references;
- One interview with the primary applicant in the Commonwealth of Dominica is compulsory and cannot be waived;
- The interview commission meets on a monthly basis, which can lengthen the process of scheduling an interview.
Source: https://www.henleyglobal.com/countries/dominica/citizenship/
Mauritius (Permanent Residence Scheme, leading to citizenship)
- Investors will be issued with a multiple entry visa valid for a period of up to one year pending the grant of permanent residence status. Investors and their dependents who are granted permanent residence status under the Permanent Residence Scheme are exempted from the requirements of a work permit under The Non-Citizens (Employment Restriction) Act.
- Investors are permitted to buy either a flat or portion of land or immovable property not exceeding 1.25 arpents at least 100 meters away from the coastline. Property must be for residential use only.
- An International Company and its shareholders and beneficial owners are treated as "protected persons" under the International Companies Act of 1994. All information or documents concerning them or their activities is confidential.
