Recently there has been increased pressure on European Union (EU) member states to scale back their schemes offering citizenship or residence in return for financial contributions. This reflects heightened security concerns in view of the current geopolitical tensions and the resulting sanctions.
On 28 March 2022 a Recommendation of the European Commission called on EU member states to repeal their current investor citizenship schemes and to put in place safeguards to address the risks posed by investor residence schemes. In the view of the Commission these schemes bring risks relating to security, money laundering, tax evasion and corruption.
Schemes for citizenship by investment (CBI) and residence by investment (RBI) offer nationals of other countries a chance to obtain residence or citizenship in a country by making certain investments or financial contributions. Such schemes are operating in more than sixty countries worldwide and in a number of EU member states. The trend has been for more of these schemes to come into operation.
A report on the issue published by the European Parliamentary Research Service looked at possible legal bases for EU action and considered some policy options that could be followed in the EU.
The report notes that these schemes are seen as “commodifying” EU citizenship and residence, violating principles of fairness and cooperation, and they risk encouraging low standards of due diligence with regard to people seeking citizenship by this route. There is also a lack of fairness that can be seen by comparing these schemes with the traditional processes to obtain citizenship and residence that must be pursued by labour migrants and their families. CRB/RBI schemes carry the risk of facilitating corruption, money laundering, tax evasion and tax avoidance, although the limited data and lack of transparency make it difficult to quantify the risk.
According to the EPRS report the policy options include phasing out investment schemes in the EU; applying an EU-level tax on investment schemes; regulating investment schemes; introducing minimum physical presence requirements on residence by investment schemes; and regulating access to the EU for investors from third countries. The report assesses the potential impact of each of these policy options.
The study by the EPRS considers that positive impacts from EU action on these schemes could include increased transparency and lower risks of illicit financial flows from money laundering and tax avoidance. There would be more cooperation and trust among member states, and more coherence with the legal migration policies in the EU. This would also promote transparency and coordination of tax and capital flows.
