Global Residence and Citizenship Handbook - Christian H. Kälin

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Lawyers’ costs are usually borne by the party commissioning the lawyer. However, the seller is always responsible for paying capital gains tax.

      In most cases, the seller is also liable to pay the broker’s commission. This generally varies between 2% and 10% of the sale price in different countries and is usually subject to Value Added Tax (where such a tax exists).

      The property acquisition taxes which are levied everywhere are as a rule borne by the buyer. However, if they cannot be collected from the buyer, they may in some countries be charged to the seller. This is particularly relevant when the seller remains resident in the same country. With regard to capital gains taxes it is exactly the reverse: they are payable by the seller but the buyer may be jointly liable if the seller doesn’t pay them – and the tax authorities may be entitled to put a lien on the property.

      When apartments or houses belonging to an owner’s association (e.g. concerning the shared amenities of a condominium) are sold, the amount of any reserve or renovation fund must be determined, as this can have an effect on the sale price.

      A property designed for private use should above all bring subjective pleasure to its users and not only maintain and increase its value in objective terms. Therefore, careful clarification of these factors is most important before closing the deal.

      1 See Vertovec/Cohen (2008)

      2 See Ong (1999)

      3 Organization for Economic Cooperation and Development

      4 For an overview of these rules, see Chapter 3

      5 With the sole exception of Andermatt, where foreign residents can buy without any restrictions whatsoever; see www.henleyestates.com/andermatt

      6 A more detailed overview of this important aspect is given in section 1.9

      7 e.g. Swiss Insurance Partners, see www.sip.ch

      8 E.g. the Netherlands, with regard to extended inheritance tax for citizens even if they have already left the country and are residing abroad

      9 E.g. 10 days in the UK or 30 days in Switzerland

      10 E.g. Hong Kong, Panama, Singapore

      11 For a good discussion of these issues, see Betten (1998)

      12 See Chapter 3

      13 Betten (1998)

      14 France has also recently introduced such a regime

      15 E.g. Australia, Austria, Canada, the Netherlands

      16 The author would like to thank Swiss Insurance Partners, Zurich/Dubai/Hong Kong, for their valuable input in compiling this section

      17 Société Civile Immobilière

      18 The purchaser runs the risk

      19 Buyer beware

      2

       Citizenship Planning

      Chapter Summary

      Henley & Partners was the first firm to globally specialize in the field of Citizenship Planning. Today there are many reasons why you should consider becoming a citizen of more than one country.

      There are a variety of different benefits to alternative citizenship. As citizenship may impact on your tax status, it could be a key factor in international tax planning. Alongside this, you may gain more privacy and security across your banking and investment portfolio. Frequent travellers, especially those who often require visas, find a second citizenship invaluable in ensuring flexibility and the ability to travel at short notice. Those who have the need to live in a safer country than their own, either now or in the future, can obtain that security through citizenship.

      The most common factors in acquiring citizenship are by birth, by descent, by marriage or by grant. The US is an important example of the few countries that still grant citizenship by birth. Many people will be entitled to another passport by descent or by birth, and this may be easy to establish.

      If birth, descent or marriage do not offer a solution, there are other options open to wealthy or skilled individuals. Seven countries offer citizenship-by-investment, Antigua and Barbuda, Austria, the Commonwealth of Dominica, Cyprus, Grenada, Malta and St. Kitts and Nevis, and can give you a new passport swiftly and legally, which is of paramount importance, as illegal options are commonplace.

      When considering any of these options, you must remember to take guidance on dual citizenship, as roughly only half of the world’s countries allow this.

      Finally, and of great importance, is the reputation of the country and its passport. The level of visa-free travel it affords you will be critical to the impact and benefits it has on your life.

      In recent times, and especially since the dramatic events of 9/11, questions of citizenship, visa restrictions and freedom of movement have become more and more important for internationally active individuals and families, although the concept of citizenship planning was created by Henley & Partners about 20 years ago.

      A main characteristic of the modern world system is that economy and trade increasingly take place on an international level, while people are still bound within nation-states by the instruments of citizenship and sovereignty.20 This new, transnational flexibility in business, production, labour and financial markets, travel and international family relations is increasingly being matched with flexible citizenship. This field can be described as the strategies and impacts of internationally mobile individuals and families seeking to optimize their situation in view of different nation-state regimes by selecting different sites for work, investments, leisure and family relocation.21 Indeed, there are many reasons why all over the world more and more wealthy individuals consider becoming a citizen of more than just one country, and consequently holding more than one passport.22

      Due to political or economic circumstances, citizens of many countries find it difficult to travel abroad and are confronted with strict visa requirements each time they want to enter a foreign country.23

      Furthermore, nationals whose passports usually allow them easy access to most countries can find it impossible to obtain visas due to temporary travel restrictions during trade sanctions and other geopolitical disturbances; or due to their nationality may be overly exposed to terrorist threats and other hostility.24

      Moreover, even though the necessary visa may be granted to you, getting a visa is always a very tiresome procedure. During this time, the passport on which you are getting the visa is not available – and this can be a significant factor of delay for your travels. 18% of Chinese visitors to Europe, for instance, make it to the UK, but two-thirds visit France, a member of the Schengen travel zone where visas are easier to get.25

      Visa-free travel can also be obtained via a residence permit, not only through a second passport. For example, residence in any of the Schengen countries will offer visa-free travel throughout the Schengen Area of Europe. However, only the acquisition of a second citizenship and a second passport can guarantee the desired long-term visa-free travel, and only citizenship guarantees the long-term security of these privileges.26

      If you cannot acquire or renew your passport in your home country, for example due to political instability, civil war, revolution or change of government, having another passport can be very useful, even critical. Even if you simply lose your passport, it may take some time until you can get a replacement.

      There is a growing tendency in many countries to follow the US in taxing even non-resident citizens.27 In fact, I believe that this will be an increasingly important issue in the future.

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