First and foremost, a Happy New Year to all our readers. May 2011 be full of wealth, health and peace for you and your family. Before I get on to the topic of new citizenship and residency opportunities (specifically in Latvia, Hungary and Montenegro) I would like to say a few very important words.
We have been extremely busy helping clients here at Q Wealth and we haven’t had time to update this blog as much as we would like to, but rest assured we will keep posting updates here throughout this year and beyond. The 2011 edition of our Practical Offshore Banking Guide is in the final stages of preparation and will be released shortly. It contains many updates. And if you like what we read, the best way to move things forward is to subscribe, read our material and – most importantly of all – make yourself known to us!
One issue we constantly come up against here is the situation in the USA. We often get e-mails from readers complaining that our articles have a bias towards the USA and there is not enough information applicable, for example, to Europeans. The fact is, the tax rules in the ‘land of the free’ are more draconian than anywhere else in the world. I doubt even Obama would argue with us on that one, though I suppose he might put a positive spin on it by claiming the IRS are the most efficient tax authority in the world… 🙂
The fact is, a growing minority of Americans – the ones who can see beyond the propaganda – are very scared. One e-mail that arrived an hour or so ago from a long-term reader is typical of the comments we receive every day: “The World, and the USA in particular, is starting to get really crazy…” Many of our readers are hard-working and honest American citizens just looking to protect what they’ve achieved so far, and go on working productively, peacefully and unmolested.
We are also seeing a lot of interest in Q Wealth from places like Ireland and Spain, countries where entrepreneurs have built up substantial portfolios over the years only to see them evaporate. The other side of the coin is that we are seeing a lot of interest from Germany… Germany has been doing surprisingly well lately, but Germans are rightly concerned about being the biggest bailer-outer country.
I would say to our European fans that any advice we give to Americans basically applies to you to… but you have one big advantage. While Americans have to acquire a second citizenship then renounce their first – a lengthy, expensive and emotionally charged process – all you Europeans have to do is move to another country… you can do it tomorrow if you want. As I said in my last article, you might be surprised, but life is often better offshore!
Even given more flexible tax systems in Europe, the days of hiding money offshore are well and truly over. Corporate structures like LLCs, trusts and foundations can still provide strong legal asset protection if used properly (read those last 3 words again!) but ultimately, the way things are going, it will be almost inevitable at some point that if you don’t think taxation in the country you live in is fair, you will have to vote with your feet – by getting up and going. For this reason, we’ll be focusing more and more on residence and citizenship programs in 2011.
The 1st of January this year saw an interesting new fast track to European Union citizenship. Hungary’s new naturalization law is designed to make it much easier for anyone with a few drops of Hungarian blood to acquire citizenship in this EU country. Hungary, having fought on the losing side in the first world war, lost a lot of its territory in a division that remains highly controversial to this day, leaving at least half a million ethnic Hungarians in bordering countries like Slovakia and Ukraine, who have not been counted as Hungarian citizens for generations. The political motivation behind this new law was to help these ethnic Hungarians reclaim their ‘national identity’ (Hungarians being nothing if not proud, even as this same government has just blatantly seized private pension funds to help stave off national bankruptcy)
What does this mean for you? People from these countries emigrated by the boatload to places like the USA, Canada and Australia. Previously, a direct line of descent from a Hungarian citizen was required in order to reclaim the citizenship right. This just got a lot easier. Let’s say your Great Uncle Arpad was born in Ukraine but was an ethnic Hungarian (who spoke Hungarian language for example) then you might well qualify for this expedited Hungarian naturalization procedure. You can read the Hungarian government’s statement on the matter, in English, here.
As this procedure is only a few days old, we have to see how it works out in practice. For example, how toughly will the requirement to speak Hungarian be enforced? But if you think you have a little Hungarian in you, you might want to look into this opportunity sooner rather than later. We’ll be following up on it more depth in a forthcoming issue of The Q Wealth Report. Q Wealth members are welcome to contact the office for referrals to our contacts in Hungary.
Another program that has been receiving publicity lately is Latvia’s residence program. This has generated quite some controversy. Whilst not leading to citizenship (but not ruling it out either) this grants instant residency in the Republic of Latvia to anyone investing a few hundred thousand euros in a bank deposit, or buying a property there. Riga, a regional trade hub well known for its art nouveau architecture, may not be everyone’s cup of tea (cold and wet in winter) … though the seaside resort of Jurmula is quite trendy and is within easy reach of Riga airport, one that is surprisingly well connected for such a small country.
The real point about Latvian residency, however, is not spending time in Latvia. Latvia is in the Schengen Area. Wealthy non-Schengen nationals (Russians and Chinese to give two examples, but also Americans or Australians) will find this a very attractive way of establishing a low cost base in Europe that allows them to move completely freely around the Schengen zone. Germany and Spain are already concerned about the huge influx of new immigrants this could bring… people theoretically resident in Latvia but living as quasi-permanent tourists, even carrying on cross border businesses quite legally, in their countries.
Latvian taxes, while theoretically high, can probably be mitigated by a bit of careful pre-immigration tax planning. So Latvia could turn into an easy and cheap alternative to Monaco, Andorra or San Marino, to rival the roles currently filled by the residence programs of Cyprus and Malta.
Finally for now, an update on Montenegro. Back in August 2010, while all the European top brass was on holiday, the government of Europe’s newest country, Montenegro, announced an economic citizenship program, priced to rival the existing St Kitts and Nevis citizenship. Several options were outlined, involving payment of around EUR 200,000 to the Montenegrin government for an almost instant second passport.
Soon after that announcement I attended a small meeting of offshore professionals in the beautiful Montenegrin resort town of Herceg Novi. I was taken aback by the temperate climate and the outstanding natural beauty of the country. There is serious investment pouring in too: for example the huge Porto Montenegro development, down the road from where we met, is being spearheaded by Barrick Gold’s founder Peter Munk and by other people who know about good investments: do the names Rothschild and Bernard Arnault ring a bell?
Details of the program, however, proved elusive, as the government kept stalling. Finally, in November, they announced that the citizenship program had been ‘frozen’ until further notice, by request of the European Union.
However, my few days on the ground there convinced me that this announcement is only part of the reality. The website of Henley and Partner, for example, claims that “in the interim, citizenship will be decided on a case-by-case basis.” Anyone who shows up with a serious investment – my guess, half a million upwards – would still receive a warm welcome I think. I was impressed with Montenegro’s possibilities… given the choice between living in St Kitts and Nevis, and Montenegro, I would go for Montenegro – a couple of hours from London, Paris, Milan or Barcelona – any day. I’m pretty sure I’ll be back there. So it’s another one to watch in 2011.
Still, we are beginning this year with a more traditional focus on citizenship and residence programs in South America: we still like Paraguay and Uruguay. Myself and members of the Q Wealth team will be in South America meeting with clients and experts later this month. There’s still time for you to join us. Either in person, or by signing up to Q Wealth Report.