Now that the EB-5 Reform and Integrity Act has revised the U.S. investor immigration program and the U.S. Citizenship and Immigration Services (USCIS) is slowly refining its new requirements, it is interesting to consider where the EB-5 program stands in terms of competing with other golden visa programs. It appears to be gaining stature in the world of investor immigration options.
Back To Basics
For the unanointed, it may help if we start off with some basics. A so-called golden visa is a way a government attracts foreign investors to immigrate by offering them either residence or citizenship in exchange for investing in the country. The investment can be either in a government fund used to promote some public purpose, such as building a hospital, or in real estate or financial offerings. The benefit to the investor can include the ability to live and work in the country, access tax advantages, using the new passport to travel more freely, including for example accessing visa-free zones such as the Schengen area in Europe, and accessing the country’s healthcare and education systems. The benefit to the country is that issuing golden visas is a way to stimulate economic improvement and prosperity.
Canada Started It All
The first modern-day residency by investment program was the Canadian federal Immigrant Investor Program established in 1986. It quickly became one of the most popular immigration programs in the world. The passive investment program offered Canadian permanent residence in exchange for an investment of $ 400,000 for a period of five years. It closed down in 2014 when the federal government concluded investors were not maintaining strong enough ties to Canada and were paying too little in taxes. A similar provincial Quebec investor program opened up in Canada alongside the federal one but it also closed down for renovations a few years later. One popular feature of both programs was that Canadian financial institutions were willing to finance these investments for a smaller one-time payment by the investors. While there are no immediate plans for the federal Canadian program to reopen, the Quebec program is expected to open again in April 2023 primarily aimed at French speakers who wish to live in that province.
Tremendous Growth Followed By Caution
Since 1986 over 100 countries have implemented some form of similar investment migration legislation. The programs have by and large been very successful everywhere, at least for a while. Then a few years ago, the EU started holding discussions to limit golden visas. The reasons were:
1. Money laundering and corruption
Golden visa programs provided opportunities for foreign investors to launder money or invest illicit funds in a legitimate way. Corrupt officials could also exploit the programs to accept bribes in exchange for granting visas to ineligible applicants.
2. Lack of due diligence
Some countries did not conduct sufficient background checks on the applicants, leaving the door open for criminals or people with extremist ideologies to obtain residency or citizenship.
3. National security threats
There were concerns that golden visa programs could be exploited by criminals, terrorists, or other individuals who posed security risks.
4. Tax evasion
Some golden visa programs allowed investors to avoid taxes in their home countries or in the host country, which could negatively impact the economy and undermine public trust in the government.
5. Real estate bubbles
Some golden visa programs, particularly those that required investments in real estate, were thought to contribute to real estate bubbles and drive up housing prices, making it difficult for locals to afford housing.
6. Criticism from the European Union
The EU argued that these programs undermined the principle of free movement within the EU and could thereby lead to abuses.
7. Public backlash
Some golden visa programs faced public backlash and criticism for their perceived elitism and preferential treatment of wealthy individuals.
Pressure To Change
Overall, governments came under increasing pressure to ensure that their golden visa programs were transparent, fair, and not open to abuse. The result has been that some countries were forced to close their programs altogether. These included the programs in Cyprus, the U.K., Portugal and Ireland. Spain appears to also be on the verge of closing its program now. After facing scrutiny from the EU, Malta revamped its program in 2021 to it more stringent and now advertises it as the most exclusive citizenship-by-investment program in the world. Following this path, the United States recently introduced legislation that limited access of citizenship-by-investment investors, such as those with passports from Grenada and Turkey, to access E-2 visas to invest in the United States when their country of nationality did not enjoy such a trade relationship. Even those countries that still do operate golden visa programs now require applicants to undergo extensive criminal and security background checks, provide proof of the legal source of their investment funds, show the path of funds and demonstrate a genuine link to the country of investment.
Some Countries Are Still In Business
There are still a few countries in Europe that offer residence to investors, such as Italy, Greece, and Germany. And there are still citizenship by investment programs available in the Caribbean, such as those in St. Kitts and Nevis, Dominica, Antigua and Barbuda, and others. It is important also to note that the closure of a golden visa program does not necessarily mean that the government is no longer interested in attracting foreign investment. Instead, governments may be simply trying to change the requirements or structures of their programs to address any concerns and maintain the integrity of their programs. That is what the United States did with its EB-5 program and that is why it is rising in stature today.