What are the pros and cons of investing in a second passport?

Global demand for a second residency and citizenship-by-investment (CBI) has risen by 23 per cent year on year, according to the Rif Trust, an investment migration consultancy.

Why is the industry experiencing such growth?

The advancement of technology has created a more connected world than ever before, but it has not provided a solution for people who still struggle to travel freely between borders.

Second passports are being increasingly sought out to combat this restriction of mobility.

Similar to high-end cars with steep price tags, second passports were once perceived to be a luxury item that only wealthy individuals could afford.

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This is no longer the case, as second passports have grown in popularity among the world’s middle class.

CBI programmes in locations such as St Lucia, Dominica, and Antigua and Barbuda have helped to drive this shift in mindset, with minimum investments starting at $100,000.

Affordable health care and access to educational opportunities are among some of the several benefits that second passports offer.

However, with inflation rates rising and a global recession looming, many people have viewed the prospect of securing a safer financial future as a primary factor in their pursuit of a second passport.

Financial protection

Second passports facilitate the ability to open international bank accounts. This allows you to store your money in a potentially more favourable location that may have more incentives than your home country — in other words, it is a great way to protect your money.

Take Cyprus, for instance. In 2013, expatriates were suddenly blocked from taking any money out of their accounts and out of the country.

A similar situation is occurring in Lebanon. The country’s banking system has had limited withdrawals of dollars since 2019, and it has been announced that their banks will remain closed indefinitely.

This means individuals with money tied up in Lebanon’s banking system are unable to access it as the severe economic crisis in the country continues.

By securing a second passport and being able to bank overseas, the threat of your wealth being restricted is mitigated.

Furthermore, many countries, such as Singapore and Switzerland, also offer banking confidentiality to maintain investors’ privacy.

Investment opportunities

A second passport provides more investment options as it grants access to a wider pool of financial assets to invest in. It allows you to diversify your assets in ways that may not have been possible with your original passport.

Holders of a second passport are not required to live in the second country year-round, and investing in property as an asset can yield an ongoing return in the form of rental income.

For example, Greece’s residency-by-investment programme (RBI) must be renewed every five years, but has no stay requirements.

Therefore, if a Golden Visa applicant avails of permanent residency in Greece through the acquisition of real estate, they can rent out their property and use this passive income to invest in additional assets if they choose to.

Tax incentives

Since its inception three years ago, the UAE’s RBI programme has surged in popularity. It was recently announced that more than 100,000 people have received the country’s Golden Visa, which offers various advantages including tax incentives.

Similarly, second passports for Caribbean Commonwealth countries such as St Kitts and Nevis are highly appealing as their government does not impose a tax on offshore income; this benefit applies to both personal and professional income.

Business growth

For business-oriented individuals, a second passport can be leveraged to strengthen corporate relationships.

Being able to travel freely to an expanded list of countries enables additional face-to-face interactions with potential prospects and existing clients, resulting in extra networking opportunities and more fruitful co-operation.

There are fewer political and logistical restrictions and investors can capitalise on the tax benefits mentioned above that most governments offer alongside second passport programmes.

What the future holds for the investment migration industry

The global CBI sector is currently valued at approximately $30 billion; it is projected to hit the $100 billion mark by 2025.

Considering these expectations, investors are likely to continue seeking opportunities to acquire second passports for the betterment of their future and that of their families.

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From increased freedom of movement to family safety and lifetime security, financial benefits are just one aspect of the many advantages that second passports bring to the table.

This is becoming increasingly known worldwide and as this knowledge becomes more accessible to all, the demand for second passports will continue to rise.

What are the cons of investing in a second passport?

While getting a second passport has many benefits for business-oriented individuals, families and educational opportunities, long wait times are often associated with the physical obtainment of the passport.

The process takes as long as four months and, in many cases, even longer, with 90 per cent of the time being spent on background verification.

This is why submitting all documents in a timely fashion is essential to ensure there are no further delays with the processing time. Missing documents may even lead to rejected applications.

Some countries restrict citizens from holding a second passport and in this case, those who wish to apply for a second passport need to renounce their current citizenship.

Interested parties should do their due diligence to understand whether a second passport is a viable option for them.

Jeffrey Henseler is the founder of Passport Legacy and managing partner of Passport Legacy, UAE HQ.