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10/04/24
CITIZENSHIP: Spain joins UK, Portugal in scrapping Golden Visas
As published on: business-standard.com, Wednesday 10 April, 2024.
Spain has announced plans to terminate its 'golden visa' programme, which allows foreign investors to obtain residency by investing in the country's property market. The decision was made during a cabinet meeting on Tuesday, signalling an end to a scheme initiated in 2013 under the conservative government led by Mariano Rajoy.
The golden visa programme, which was introduced to attract foreign investment and stimulate economic growth, allowed individuals to obtain residency permits in Spain by investing in real estate, government bonds, or starting a business. However, concerns have been raised about the lack of transparency and potential loopholes in the programme that could be exploited for illegal activities.
The programme has seen the issuance of approximately 6,200 visas up to 2023 for property investments.
A significant portion of these visas, nearly half according to a BBC report, went to Chinese nationals, amounting to 2,712 visas. Following China, Russians were the primary beneficiaries with 1,159 visas, then Iranians (203), Americans (179), and Britons (177), based on data from Transparency International.
The Spanish government is worried that the programme might have some downsides. They're concerned that it could:
Fuel illegal activity: Some wealthy individuals might use the programme to hide illegal money or avoid taxes.
Driving up housing costs: A sudden influx of rich investors buying property could push up housing prices, making it harder for ordinary Spaniards to find affordable homes.
Unfair advantage: The programme might give wealthy foreigners an unfair advantage in obtaining residency compared to people going through the regular channels.
Spain is not the only country to have taken such a step. Several other countries, including Portugal and Cyprus, have also either scrapped or modified their golden visa programmes in response to similar concerns. Portugal, for example, recently announced reforms to its golden visa scheme to tighten eligibility criteria and enhance due diligence measures to prevent abuse.The move to end the golden visa program reflects a broader trend among countries to strengthen regulations and oversight mechanisms governing investment migration schemes. With increased scrutiny from international bodies and growing awareness of the risks associated with golden visa programmes, governments are taking proactive measures to mitigate potential vulnerabilities and safeguard their national interests.
What is a golden visa?
The 'golden visa' offers a residency permit to individuals making substantial investments in a country, such as buying property or investing in businesses or government bonds. Applicants must be over 18, possess a clean criminal record, and have the financial means for the investment. The scheme is distinct from 'golden passports', which grant citizenship through investment, offering broader benefits including free movement within the EU for those acquiring EU country citizenship.
Why is Spain scrapping golden visas?
Despite its initial success, the Spanish government has opted to discontinue the 'golden visa', citing concerns over housing speculation and the impact on local housing markets.
Prime Minister Pedro Sánchez said his government's intention to scrap the scheme was intended "to guarantee that housing is a right and not merely the subject of business speculation".
He said that the majority of visas awarded were linked to the purchase of properties in places such as Madrid, Barcelona, Valencia, Málaga, Alicante and the Balearic Islands - all areas where the housing market "is under enormous pressure and where it is almost impossible for people who live and work in those places and pay their taxes each day to find affordable housing".
The programme was not solely limited to property investment; it also included options for investing $2.17 million or more in state bonds or Spanish companies. However, such investments constituted a mere 6% of the total visas granted, with the bulk being for property purchases. The government's move aims to address the housing affordability crisis in regions heavily affected by investment-driven demand, such as Ibiza in the Balearic Islands, where rental prices have soared.
Why is the EU against golden visas and passports?
The European Commission in 2022 urged EU member states to stop selling citizenship to investors. Although golden visas provide permanent residency and not citizenship, the call came as part of a move to crack down on this combined multi-billion euro industry. In the wake of the Ukraine war, there were concerns that these schemes could be a security risk.
Brussels had previously, in 2019, called for a crackdown on golden visa and passport schemes, highlighting the potential for corruption and money laundering. The schemes are notably popular among wealthy Chinese and Russian investors, raising fears about their implications for security and financial transparency within the EU.
Which other countries have scrapped golden visa schemes?
The trend towards discontinuing golden visas is becoming more prevalent across Europe.
The UK led the way by scrapping its own scheme in February 2022, aimed at curbing the inflow of illicit funds, particularly from Russia.
Following suit, Ireland terminated its Immigrant Investor Programme in February 2023, which had offered residence in exchange for substantial financial investment or donations. The programme was already suspended for Russian nationals in March 2022 following the invasion of Ukraine.
Portugal also ended its golden visa programme in February 2023, acknowledging its role in exacerbating housing price surges.
The Netherlands ended the scheme in January 2024.
Which EU countries still offer golden visas and what are the requirements?
Despite the growing aversion, some EU countries still operate golden visa schemes, albeit with tightened regulations and higher investment thresholds.
Malta: Offers citizenship with investment starting from $748,860, granting citizenship within 12 to 36 months depending on the investment size.
Greece: Continues to offer golden visas, now requiring a higher investment of up to $866,180. The programme is known for its expedited residency process and does not mandate holders to reside in Greece to maintain their visa status.
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Citizenship CIP Golden Visas Spain
