Citizenship is a concept that has always been tied to economics, even at its inception back in the days of the Greek city-states. Never before has it been as commoditized as it is now, however, with the rise of the citizenship by investment programs. This guide covers how those programs came to be, how they work and what their pros and cons are.

Some context

It is 1984 and the small Caribbean island nation of St Kitts and Nevis has just lost its free association status with the United Kingdom, the last to achieve independence in the Americas. To say that things are dire is quite the understatement. Its main industry, sugar, has been facing a severe long-term decline and the government has been struggling to replace it with something more sustainable. A number of natural disasters have also trashed the nation’s infrastructure, affecting economic growth.

Desperate for a solution, the government has come up with a novel idea. One that will change everything for this small nation. It will put its citizenship for sale, at a fixed price, and will accept any buyer provided they can pass a simple background check.

Foreign governments have reacted to the idea with anger, claiming that the new program will help criminals and terrorists move money and people undetected. Locals have reacted with disgust at the idea of selling their national identity. There is also the worry that the program will destroy the country’s reputation. Despite the criticism and fear, however, the government is going ahead and will launch the program.

Fast forward to today and the program now accounts for nearly 20% of the country’s GDP, making it a clear success from an economic standpoint.

This has obviously attracted the attention of a number of other countries, many of whom have even launched their own programs. We are not only talking about small island nations but also well known European countries such as Cyprus and Malta. A number of countries have also launched hybrid programs, offering citizenship in exchange for an investment and short stay in the country. The list is expected to continue growing over the coming decades, especially as technology improves the way due diligence checks are done, reducing the risk of fraud and improving transparency.

This is great as the industry has been sorely lacking competition, resulting in high prices. This was especially apparent when the launch of St Lucia’s relatively cheaper program resulted in many of the existing programs slashing down their own prices, sometimes by as much as 50%.

Not all is rosy, however, in the land of economic citizenship programs. Many of the concerns initially voiced by foreign governments and local citizens have been proven true and this has already resulted in a number of countries revoking visa-free access to the passport holders of some of the program countries. Some banks and financial institutions have also become wary of opening accounts for those who cannot produce their “real” passport in addition to their “bought” passport. In 2018, the OECD went as far as to release guidelines for financial institutions regarding the treatment of passports and residency cards issued by program countries.

The programs have also raised serious questions about the future of citizenship. It will be interesting to see where this all goes and what new opportunities will open up as a result.

How the programs work

While the application process and pricing vary (see the country-specific guides below for more details), the economic citizenship programs are nevertheless very similar in terms of how they work.

Once you have decided on a program, your first step will usually involve gathering a number of documents and filling in an application form. Your next step will be to go through a background check and attend an in-person interview. This is usually done in the program country although in some cases, it is possible to do the interview in a major city such as London or Hong Kong (at an extra cost obviously). A few months after the interview, you will receive a letter of either approval or denial. If approved, a citizenship certificate will be issued and you will be invited to make your investment. Once the government has confirmed receipt of your investment, you will be able to apply for a passport, driver’s license etc.

In most cases, you will have to apply via an authorized agent as few governments accept applications directly. I recommend Henley & Partners as they are the most reputable and trustworthy player in the field.

Pros and Cons

The pros of acquiring a new citizenship are fairly numerous and range from life-changing to incidental. While they also apply to purchasing a new citizenship, you have to be more careful due to the nature of the countries involved and the stigma surrounding the programs (not to mention the higher cost of acquisition).

The most valuable pro is definitely having the ability to live and work in a new country, as a local. This is especially true if you actually intend to live in the program country. Other pros include being able to access new destinations visa-free, being able to benefit from more flexibility tax-wise, gaining access to a new identification document and potentially being able to renounce your other citizenship(s).

You may also gain access to an entire region thanks to freedom of movement agreements (EU and CARICOM countries). This opens up interesting arbitrage opportunities. For example, if your goal is to gain access to Germany you could do so by making use of Malta’s program.

The cons are also fairly numerous, unfortunately, and definitely worth taking into consideration. The most significant one is the reputation risk that comes with being associated with one of the program countries. Best case scenario, your home country never learns about your new citizenship and nothing comes of it. Worst case scenario, you end up on a permanent tax audit list. Cost is another one as the programs tend to be very expensive. For most people, acquiring a new citizenship in a high reputation country using a more traditional immigration route may end up being cheaper even when factoring in a few years of income tax payments.