UHNW individuals wishing to move or change their citizenship most commonly come from countries that do not have high asset security. Lebanon, Syria and Egypt, for example, have all experienced unrest in the last few years, and are places where rich people are likely to want to resettle.
However, not all UHNW individuals seeking second citizenship are coming from unstable countries. The U.S., for example, is the fifth most significant country in terms of the number of UHNW individuals applying for other citizenships. There are three factors that would help explain why the U.S. ranks high in this category:
• The United States has by far the largest UHNW population, so even a small percentage of citizens moving elsewhere will generate relatively high totals. For example, UHNW individuals from Syria are 300 times more likely to apply for a second citizenship than those from the US.
• There is greater transparency in the U.S., which issues a monthly, public list of those who have given up their citizenship. This makes it impossible for Americans to renounce their U.S. citizenship “under the radar.”
• The global taxation system can make it very expensive for UHNW individuals to maintain their U.S. citizenship, especially if they are living in a lower taxed jurisdiction such as Switzerland, Dubai or Singapore. The annual savings in capital gains tax alone for an average UHNW individual could reach almost $1 million (assuming an average UHNW individual receives 5 percent of his or her net worth in income a year, and 90 percent of this is subject to a capital gains tax rate of 15 percent).
Russia is also near the top of the list in terms of people renouncing their citizenship, with London a popular destination. Much like in the Middle East, billionaires in Russia have a disproportionate share of the country’s UHNW wealth, controlling 55 percent of the total.
As of 2015, over 20 nations offered citizenship by investment programs and as Figure 2 shows, most nations offering citizenship by investment programs are located in Europe and the Caribbean.
Figure 2: Where The World’s UHNW Population Has Applied For Second Citizenships
In addition, a number of nations offer programs where residency or citizenship can be gained via investment in local business interests. Especially in nations where these programs are paired with attractive tax regimes, buying a home can be part of an attractive wealth preservation plan.
Joyce Chen is editor at Wealth-X (www.wealthx.com), which provides marketing, strategy and compliance solutions for financial clients in the high-net-worth market.