Investing in property in Grenada not only opens up access to the US but a host of other countries, including the UK, Hong Kong and Singapore. Here's what you need to know about investment migration...
Demand for second passports and Citizenship by Investment Programmes (CIB) has spiked since Level 3 of the Covid-19 Lockdown, says Nadia Read Thaele, MD of LIO Global, a leading specialist firm in second residency and citizenship by investment planning.
The current climate of economic and political uncertainty in South Africa, has wealthier South Africans, moving significant amounts of money out of South Africa, either through offshore investments or through physical migration, adds Tim Powell, Forex Director, Sable International.
'Looking for an effective Plan B'
Thaele says as investor confidence in South Africa is at an historic low and wealthy South Africans are concerned about the economy and future of the country.
While many South Africans are actively looking to emigrate, with FNB for example recently noting that emigration related property sales account for some 17% of all current sales, Thaele says that rather than emigrate, many wealthy South Africans are investing in offshore property in areas where they can secure a second citizenship.
"Finance Minister, Tito Mboweni’s budget speech has not inspired much confidence and the desire for a “Plan B” option has accelerated, especially due to high crime levels and future uncertainty. The benefit of a CIB programme is that you do not need to sell up and emigrate quite yet and wealthy South Africans are taking advantage of this opportunity," says Thaele.
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Powell adds, those investors staying in South Africa effectively looking at “investment migration are generally high net worth individuals who have ability to invest in countries that have programs that enable residence or citizenship, such as Portugal, USA EB5, Malta or Montenegro.”
'Secure a second citizenship from R3.6m'
"Grenada in the Caribbean currently tops the list with an increase in applications of a whopping 120% compared to last year," says Thaele.
It is also one of the few countries with both an active CBI programme and a bilateral investment treaty that will allow you to live and work in the USA via the USA E-2 Treaty Investor Visa programme.
"This is a massive drawcard for South Africans to gain access to the USA, one of the hardest countries to get into, she says.
The E-2 Visa is valid for 5 years, and can be renewed without any limit on extensions, provided that the underlying investment still qualifies.
"Property investment starts from around R3.6 million (USD 220,000 or about R5.37 million for a family inclusive of costs), not particularly high compared to what you will pay for a home in South Africa’s upper income areas. It equates to what you will pay for a basic one-bedroomed apartment in Mouille Point or Melrose Arch, and you get fast-tracked second citizenship in under 6 months.
"The attraction of the Grenada E-2 Visa option also tops the USA EB-5 investor visa. The cost is substantially less and the process much simpler. The processing time for the E-2 visa is usually around 2-months compared to 5-years for the EB-5 visa and it takes about 24-months before you can move to the USA with the EB-5 visa."
"Grenada is politically stable and offers excellent tax advantages and an investment friendly regime. As a CARICOM (Caribbean Community of 15 Caribbean nations and dependencies) member this also proves advantageous, offering freedom within the CARICOM group of countries, including places such as the Bahamas and Jamaica.
"It also offers one of the fasted routes to second citizenship (under 6-months) and a passport with visa-free travel to over 143 countries in the UK, EU Schengen countries, Singapore, Hong Kong and China. If you invest in the real estate option, you can resell after 3 years (or 5 years if to another CBI investor) and still keep the passport.
Spouses and dependents will normally be granted the same period of stay as the principal. Another significant benefit is that the principal’s children under 21-years can go to school (public or private) in the USA and are eligible for in-state tuition.
Powell adds there are a range of considerations that you need to look before you go ahead with an offshore investment. As a starting point, consider these key questions:
- How much money can you transfer?
- Do you need to open a foreign bank account?
- Where will the money be invested?
- What is the timeframe for tax clearances to ensure that you obtain them in good time?
- Must you financially emigrate and what are the implications in terms of South African Exchange controls?
- Can you leave your South African bank account open?
- If you emigrate, what do you do with any assets left behind e.g. rental property, shares, retirement annuities?
- Will you potentially inherit from a South African estate one day and what are the tax
- and banking implications?
If you are immigrating:
Powell adds, emigrating means investors will inevitably be selling their homes and liquidating assets. Those planning to emigrate and move their investments, should obtain a professional assessment of their personal circumstances, specifically considering:
- Investment allowances
- SARS tax clearance applications for foreign investment
- Emigrating and the cross-border tax implications
- Maintaining bank accounts in SA
“If you leave SA as a family unit (e.g. husband and wife), you would have a R22 million allowance in the year of departure that you could transfer, plus further annual allowances for your children dependent on their ages,” says Powell.
In terms of SARB exchange control, SA residents are entitled to two annual allowances:
- R1 million Discretionary Allowance (DA) – can be used for travel, gifts, study, alimony and foreign investment without having to apply for tax clearance
- R10 million Foreign Investment Allowance (FIA) – requires tax clearance for foreign investment
“It is important to note that the R1 million DA and R10 million FIA allowances run from 1 January to 31 December,” says Powell.
“Tax clearance applications for foreign investment have been taking longer than normal with Covid, so it is advisable to get applications in as soon as possible. Also, from mid-December SARS tend to go on skeleton staff and the probability of getting approval gets lower the later one leaves their application.”
“Even if you have used your 2020 allowances it’s a great time to get tax clearance and make sure that as early as the first week of January 2021 you can then start utilising your 2021 allowances,” says Powell.
Do you have to financially immigrate?
“It can be a confusing time with all the exchange control rules and the banks are quick to suggest that you financially emigrate. This would require you to complete a form called an MP336 and to close your bank accounts in South Africa, transferring everything into a blocked Rand account.
However, financial emigration is only required in specific circumstances, he adds.
"Others may need to consider tax emigration – it’s complex and each situation needs to be individually assessed and you should obtain professional advice from migration specialists before taking any drastic steps,” says Powell.
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