Starting in 2018, there was a spike in South Africans looking for second passports, mostly in Europe. This is not unique to SA, as most developing countries experience high migration flows, particularly among the wealthy.
This is something accountants in practice should weave into their service offerings for high net worth individuals and families, says Nicolaas van Wyk, CEO of SA Institute of Business Accountants.
Even during the presidency of Cyril Ramaphosa, the number of applications for second passports shot up. Henley & Partners, a global citizenship advisory firm with 30 offices worldwide, reported a 229% increase in applications from South Africans looking for foreign citizenship or residency in the first half of 2018.
The most popular destinations are Malta, Cyprus, Moldova, and Portugal, which have programmes in place to attract foreigners, making it relatively easy to acquire citizenship and residency.
About 10% of those looking for second passports are retired but a far larger number are self-employed. In terms of age, 80% are older than 45 and 85% are men. One thing they all have in common is money.
The reasons for seeking second passports vary: some are regular business travellers fed up with visa restrictions, but most want a bolt hole in case things go pear shaped in SA. Also of interest, 55% of the applicants are white, which suggests moire black, Indian and coloured South Africans are starting to cast their eyes further afield.
Not all of those looking for second passports are planning to emigrate. They would like to keep their South African passports – maintaining a direct link to family and home – while taking advantage of the benefits of living and working abroad. New amendments to laws allowing SA Revenue Service to tax foreign income over R1 million may prompt many to rethink their plans to hold on to two passports, based on their individual circumstances.
A second passport or permanent overseas residency is now the ultimate luxury item for high-net-worth individuals, says CEO of deVere Group, Nigel Green. His company reports a 45 per cent year-on-year jump in inquiries from individuals across the globe who are seeking citizenship and/or residency outside their country of origin. “Wealthy individuals around the world are now increasingly considering investing in a second citizenship or overseas residency.
“A second passport or elite residency in a host country are now widely perceived by high-net-worth individuals as the ultimate luxury item.
“But perhaps unlike designer jewellery, yachts, supercars, or original artwork, owning government-backed citizenship or residency in another country isn’t merely a status symbol, there are other, further-reaching advantages.”
Green says most high-net-worth individuals and their families wishing to obtain dual citizenship or residency are coming from India, China, South Africa, the Middle East and Russia.
“Typically, they are considering opportunities for citizenship or residency in Europe or the Caribbean.”
He goes on to say: “There are many different reasons why clients are eyeing alternative citizenships and residencies for themselves and their families. These include significantly greater scope for visa-free global travel, political stability, world-class education and healthcare, tax efficiency, and wider business growth opportunities.”
James Minns, head of Global Development at deVere Group says most clients opt for residency in the first instance as it is typically less costly and an easier process to complete – and is a recognised gateway to full citizenship. Plus, some countries like China and India do not recognise dual citizenship, so residency is the only option.
“The investment-for-residency schemes are typically based on real estate investments and start from around 250,000 euros in Greece,” he says.
“Portugal’s programme is proving to be the best option for many clients as it requires only two weeks a year residency obligation. It gives full residency benefits to live, work, open a business and study there with complete access to travel across Europe’s Schengen area. Plus, there is the option of obtaining full citizenship after six years if required.
“This option is a straight real estate purchase of 500,000 euros into a new build property. There are lower property options available, however, they are only for properties over 30 years old and most investors prefer the newer real estate as they typically provide better investment opportunities and are less hassle to maintain.”
Note for accountants: You may want to start building this into your practice for higher net worth clients.