Golden Passports: Investment Money for Visas?

| February 19, 2019


This year (2019), EU officials are to investigate so-called golden visa schemes, purportedly a gateway to Europe for corruption and money laundering. In the latest European Travel Information and Authorisation System (ETIAS) and Schengen visa zone developments, the investor residence schemes that operate in some twenty EU countries will come under increased focus. Similarly, investor citizenship arrangements also look set to receive extra official scrutiny. 

Here, we examine how this news will affect residence and citizenship applications, as well as individuals with plans to travel to and within the European visa zone. Additionally, we discuss the possible effects on crossing borders into neighbouring countries outside the Schengen visa zone.

Residence for Investors

Valid residency permits granted by an EU member country that is a member of the Eurozone give third country nationals the right to reside in that country, i.e. within the EU, as well as unfettered travel rights for up to ninety days. 

What concerns immigration and security officials, however, is that this type of residency permit is not subject to regulation at European level. Instead, such control is currently meted out only on a national basis.

Citizenship for Investors

Whereas investor residence schemes entitle applicants to obtain a residence permit and live in the new country, investor citizenship allows high net worth individuals to naturalise in a country of their choice. Significantly, the nationality of an EU member state confers rights: visa-free travel inside the Schengen visa zone, access to the EU internal market and the right to participate in elections as a voter and as a candidate for political office. 

In an address, Vera Jourova, the EU Commissioner for Justice, Consumers and Gender Equality, emphasised the need for more cooperation inside the zone. Commissioner Jourova also called for proper transparency on internal processes when member countries grant nationality. To prevent weak links within the EU, she affirmed, people who applied for an EU nationality had to have a valid connection to the state concerned.

Problems Perceived

Different from citizenship schemes, investor residence schemes grant a three-year visa. Nonetheless, in many cases, they eventually lead to the right to apply for citizenship too. Consequently, concerns have centred on money laundering, tax evasion, corruption and security. 

In a recent interview, the European Commissioner for Migration, Home Affairs and Citizenship, Dimitris Avramopoulos, stated that the right and privilege to reside within the EU or Schengen area was not to be abused. Checks and balances apply, and national investor residence schemes should not be exempt. 

In presenting his findings during a meeting of the commission, Commissioner Avramopoulos emphasised the need to avoid jeopardising the achievements of the past few years, namely: enhanced security, strengthened borders and better information sharing. He went on to mention that his department would continue to monitor full compliance with EU law.

Points to Watch

By the end of this year (2019), the Commission will have collated information on the number of applications received under financially related schemes. They will also analyse applicants’ countries of origin, the level of investments and statistics on the granting or rejection of permits. The intention is to establish common checks and effective risk management protocols. 

In the meantime, people who currently travel with a visa to Europe are unlikely to notice a direct effect. Conversely, depending on their circumstances, investors who plan to settle in Europe may wish to fully inform themselves of developments and citizenship or residence concessions in the country of their choice. 

Apart from the usual obligatory and systematic border and security checks, new applications for investor residence and citizenship receive scrutiny under EU anti-money laundering (AML) rules. According to a European Commission factsheet, exchange of information should reduce the risk of tax evasion. Continued and perhaps even more rigorous application of the financial transparency regulations and measures introduced in 2015 looks likely, therefore. These rules oblige advisers to notify the authorities about cross-border sales and possible tax obligations in other member states. 

Financial transactions which receive close attention include:

  • Advice on tax planning that is standard, available to more than one taxpayer and not customised.
  • Income or capital fund conversion into products or payments that are not subject to automatic information exchange.
  • Usage of jurisdictions that have an inadequate or weak AML regime.
  • Arrangements involving the transfer of intangible assets that are difficult to value.
  • Linked companies or legal entities with little or no substance and circular transactions between them.
  • Arrangements that use losses to reduce tax liability, under certain conditions.
  • Provision of and fees for tax avoidance services.

Neighbouring Countries

In countries that are just outside the Schengen zone but share a border with it, we can surmise that immigration officials will be monitoring developments closely. It is likely that they will maintain a watchful eye on travellers arriving, while also keeping track with application and take-up statistics for the metaphoric (though aptly named) golden passports issued by their neighbours.