Jurisdictions around the word are crafting investor visa systems to appeal to wealthy foreigners from regions such as Asia and the Middle East. This article looks at how well the UK stacks up with its system.

As recounted regularly in these pages, a number of jurisdictions around the world are competing to roll out the red carpet to wealthy foreign investors in the hope of bolstering national coffers and their economies. Different systems have their foibles. The UK has operated an investor visa regime for some time and its terms have been recently changed. How does it stack up against other jurisdictions? With investors in China and other countries shopping around for jurisdictions, weighing up the pros and cons is important. The law firm Lewis Silkin takes a look at the latest changes. The article is by Olga Nechita, senior associate in the employment, reward and immigration team at Lewis Silkin. The editors invite readers to respond with their own comments.

Recently an increasing number of European Economic Area countries have amended their offerings for wealthy overseas investors and introduced competitive fast track investor citizenship programmes which facilitate long term residency or in some instances citizenship.

On the other hand, big changes to the UK visa route, designed for potential investors, are due to come into force any time now. These will raise the minimum investment threshold from £1 million ($1.6 million) to up to £2 million. Further changes occurring to the specific methods of investment are also in the pipeline for next year. With these changes occurring just how competitive is the UK and its migration pathways for potential investors when compared to its European cousins?
 
Currently, investors wishing to relocate to the UK under the Tier 1 Investor category must invest a minimum of £1 million, of which at least 75 per cent must be made up of UK government bonds (gilts), share capital or loan capital in active and trading UK-registered companies, and the balance must be deposited in UK financial institutions or in assets. There is a requirement to maintain investments which has proved onerous. Consequently, very few investors chose to opt for high-risk portfolios which produce higher returns.

Although the minimum investment threshold is set to double under the proposed changes, the specified investment instruments may become more flexible and there is a strong possibility that the “top up” requirement will be scrapped altogether. Five years of investment and residency lead to settlement in the UK. Then after one year, a settled investor may qualify for British citizenship.

An analysis of other European countries’ rules shows why the UK is attractive for overseas investors. In Hungary, as in the UK, a residence permit is granted to those who invest in government bonds, but the threshold is much lower set at €250,000 ($317,218) at least. Although the investment threshold is lower, Hungarian citizenship can only be obtained after eight years of residence in Hungary. Since 2010, Latvia also offers opportunities to obtain a long residence permit when investing in specified instruments; however citizenship is only granted after 10 years of residence in Latvia.

“Golden visas” in Portugal and Spain provide a long-residence permit and offer a path to permanent residence and ultimately to citizenship, usually in six years’ time. This is offered to those who invest in the country, including in real estate greater than €500,000. Both countries have emerged as very attractive second home destinations for wealthy investors.

Although, Portuguese, Spanish, Hungarian and Latvian residency provide visa free travel to Schengen countries, investors cannot travel to the UK before obtaining prior approval. Holders of EEA passports, however, can travel to and establish themselves and carry out any business activities without prior approval in the UK.

Bulgaria has a Priority Investment Project for those investing BGN1 million (around $648,000) in the capital of a Bulgarian company, with an accelerated citizenship path after one year and a doubling of the initial investment. Similarly, in Cyprus and Malta, investors can qualify for citizenship through a combination of various investments and a donation to the State which is used in the public interest.

However, the Cypriot investor scheme remains the most expensive European Union programme requiring investors to invest between €3 million to €5 million. The Maltese scheme is another one of the most expensive programmes as it requires a €650,000 donation to the state.

Most of the investor citizenship programmes have no or very minimal physical residence requirement. This means that spouses and dependent children and parents have to rely on the same investment to obtain long-term residency and citizenship.

Currently, the UK residence requirement is a deterrent for investors who wish to apply for British citizenship. However, there are accelerated options available with shorter terms to settlement, such as £5 million and £10 million investments leading to settlement in three and two years, respectively. Dependents cannot benefit from obtaining a settlement at the same time as the main investor. Therefore changes to the settlement and citizenship rules would increase the attractiveness for the UK as the ultimate destination.

Many European investor citizenship programmes try to compete with the UK on the level of investment, methods of investment or period within which citizenship is granted. The UK however, remains a global hub with educational, cultural and investment opportunities that arguably set it apart from other European countries.

Changes to the investor rule have long been overdue to suit the new generation of investors in the UK. The increase in investment threshold and widening of the range of permissible investments will improve the UK image worldwide, and subsequently will lead to more wealthy investors wanting to come to the UK.