By Liam Bailey
With many countries mired in slow growth, unemployment and austerity for what seems as though it could be an eternity, more people than ever are considering emigration, either to find better employment opportunities or a better quality of life – or both.
While visa requirements and other rules and regulations often limit the options, there are a number of countries that grant automatic residency to property buyers. By buying a new home, it may be possible to kill two birds with one stone – in a very big way.
Here is a guide featuring some of the best places in the world in which buying property grants automatic residency to the country.
Want to Work?
We all know that there are some parts of the world where the economy is performing better than the rest of the world, where unemployment is not such a problem. There are even such places that grant residency to property buyers.
Foreigners are automatically granted residency in Malaysia when they buy a property, no clauses, no catches, plain and simple.
Chance of Capital Appreciation: Excellent
Malaysia has always been one of the favourite Asian property markets. During the boom it never overheated, with growth remaining steady at around 10% per year. Now, after a short recession (about four months), it has fallen into the same trap as many Asian markets that survived the crunch unscathed and has overheated. However, the government is already acting to slow growth to bring the market to a soft landing, from where steady growth can resume. Malaysian property is therefore a safe bet for capital appreciation over long-term ownership.
Few Restrictions on Foreign Ownership
Because Malaysia is formerly a part of the British Empire, it has many laws left over from that time. One is a very relaxed system on foreign property purchases. Foreigners may buy any property, anywhere in Malaysia, as long as it costs more than RM500,000 (€124,500), although they are currently trying to make it RM1million (€249,000).
First Language is English
Malaysia is a fantastic place to move to and work, especially for those from English-speaking countries or who are fluent in English. This is because English has been the first language ever since it was part of the British Empire. This also makes it easier to buy property because all contracts are in English as well.
Foreigners May Obtain Financing
Foreigners may easily obtain mortgages in Malaysia, both from Malaysian banks like Maybank and from international banks operating in the country, including HSBC.
Relaxed Tax Regime
While it is about average on things like income tax, Malaysia has a very relaxed tax regime including no annual wealth taxes, no estate duties, no gift taxes, no accumulated earnings tax, no federal (as opposed to national) income tax, no controlled foreign company legislation, no thin capitalization rules (yet) and no transfer pricing rule.
After being abolished, capital gains tax was recently reinstated on property sales to curb speculation. Currently, gains from the sale of property are taxed on a sliding scale: from 10% if a property is sold in Year 1, to 0% if it is held for more than five years.
Income tax for non-residents is a flat 26%, payable on Malaysian-sourced income. However, permanent residents are classed as resident, and resident individuals are taxed on chargeable income at graduated rates from 2% to 30%, after the deduction of tax relief.
Another remnant of its being a British colony is a world-class healthcare system. In fact it is so good that medical tourism is taking off.
After one of the shortest recessions of the financial crisis, the Malaysian economy has been growing strongly since 2010. According to the CIA World Factbook, Malaysian GDP rebounded from a 1.7% contraction in 2009 and grew 7.2% in 2010, then 5.2% last year. What’s more, reports indicate great growth in job opportunities for skilled foreigners as the country develops.
Outside Natural Disaster Danger Zone
Malaysia is outside the Pacific Ring of Fire so there is little risk of earthquakes, tornadoes and tsunamis.
While prices have grown rapidly of late, Malaysian property prices are still low compared to many developed nations. For example, it is possible to pick up an attractive 2-storey, 4-bedroom townhouse in Bukit Bandaraya, Jalan Medang Serai or Kuala Lumpur for just 1.35m Malaysian Ringitt, which is over the foreign ownership limit, and currently converts to £274,000.
Disease, in particular tuberculosis, is epidemic. Of course, most developed nations immunise against TB in childhood, but this is certainly worth consideration. AIDS is also a big problem in Malaysia.
United Arab Emirates
Foreign buyers of property in United Arab Emirates are automatically granted a 3-year residency permit, which can be easily renewed.
Chance of Capital Appreciation: Fair/Good
As it is such a wealthy region, it is easy to say that chances for positive capital appreciation are good. However, many investors are nervous about the UAE. Currently it looks as though Dubai might be clambering back to its feet, but at the same time, the UAE is looking increasingly desperate as it constantly shifts the goalposts to keep up the appearance that authorities are controlling the slowdown. That said, with all that wealth and because it is such a great place to do business in, it will take some pretty spectacular crashes to stop property prices from growing over the long term.
This makes it a question of whether they can learn from the mistakes of the recent past with regards to over-building, rampant speculation and, most of all, over-ambitious plans.
Excellent Business Environment
The United Arab Emirates is one of the best places in the world to start a business, from the favourable tax regime, to the trade tariffs and central location. Benefits of starting a business in UAE include:
- No foreign exchange controls
- No trade barriers or quotas
- Competitive import duties (4% with many exemptions)
- Competitive energy costs
- Competitive real estate costs
- Competitive financing costs and high levels of liquidity
- No taxes (except for oil companies and some foreign banks).
On top of that, the UAE is a liberal and very wealthy Arab state, very friendly to foreign investment and as such, the regime invites foreigners to start businesses.
Foreigners May Obtain Financing
Foreigners may obtain mortgages relatively easily in the UAE, not least because international banks are very active in the country.
Relaxed Tax Regime
United Arab Emirates has a very friendly tax regime and individuals are not taxed. Inheritance and estate taxes are, in the absence of a will, dealt with in accordance with Islamic Sharia principles.
Real Property Tax: A transfer charge of 2% is levied on the transfer of the real property, with the seller paying 0.5% and the buyer paying 1.5% on the sale value of the property.
Net Wealth/Net Worth Tax: Does not exist
Capital Acquisitions Tax: Does not exist.
The UAE is an oil-rich country, which is why it can afford to have such a comparatively lax taxation system.
Language barriers: While the expat population is large and English fairly widely spoken, unlike Malaysia, the first language is not English, and foreigners will find it difficult to communicate at times.
Emiratisation: Companies are being encouraged to hire more local residents for white-collar jobs, and a quota system is in place for the insurance, banking and trade sectors. The number of Emiratis employed has gone up by as much as 300% in some sectors as a result of Emiratisation.
Arab country, Islamic law, Islamic way of life: The legal system in Muslim countries is far different from most non-Muslim states, including jail sentences for defaulting on debt. Dress and behaviour should be modest, buying and consuming alcohol requires a licence, and living together without being married, adultery and homosexuality are all illegal.
If Work is Not a Priority
St. Kitts and Nevis
World-Beating Residency Program
When purchasing a property in St. Kitts and Nevis for USD400,000 or more, buyers automatically qualify for residency. The program also gives home buyers visa-free travel to more than 100 countries, including the Schengen Zone (25 EU countries), Canada, the UK, Hong Kong, Singapore, etc., as well as making it easier to gain a residency permit to Monaco, Switzerland, Andorra, the UK, Bermuda, Cayman Islands, Bahamas and other Caribbean countries.
Chance of Capital Appreciation: Good
St. Kitts and Nevis real estate benefits from its Caribbean location. Ever since the financial crisis, investors and buyers have been scouring the globe for safe havens in which to buy property, places that have proven resilient to global financial shocks. Because Caribbean property is at the higher end of the price scale, and mainly purchased by lifestyle buyers as opposed to investors, the lack of speculation meant it held many safe havens.
St. Kitts and Nevis can be put on that list of Caribbean safe havens. Buyers pay USD500,000 and more for a property because: it is an OK property in a spectacular location, a spectacular property in a good location, or a spectacular property in a spectacular location. Either way, these properties hold their value because they are sought after and because the owners are wealthy enough to hold out for the right price, or because an even wealthier buyer makes an irrefutable offer. These properties hold value during down cycles and grow rapidly during up cycles. This gives St. Kitts and Nevis real estate a good chance of capital appreciation.
No Language Barrier
Like Malaysia, English is the official language of St. Kitts and Nevis.
Favourable Tax Regime
Homeowners under the residency program pay no capital gains tax, no gift tax, no wealth tax and no inheritance tax. On top of that, there is no personal income tax.
St. Kitts and Nevis are hot, tropical islands, but thankfully there are gentle breezes from the northeast trade winds. Humidity rarely goes above 70% and average temperatures hover around 75 degrees and 81 degrees year-round. Rainfall on the islands is around 54 inches per year.
In a place like St. Kitts and Nevis, you get to experience a tropical lifestyle. Its beaches are home to beach bars where food and drink may be ordered to enjoy under the shade of the palm trees that line the beaches. The azure blue waters of the oceans that lap these places of paradise are not only bearable, but as warm or warmer than most indoor pools. But this is also a part of the culture. Everything but the temperature is chilled on St. Kitts and Nevis – people are laid-back. This means you can be/do the same. It is a slower pace of life and this is what many of us desire.
Little chance of working: In order to work in St. Kitts, you need a work permit and these are hard to get. You will need to find an employer who is willing to sponsor your application and prove to the labour ministry that you have a unique skill and/or there are no locals who could fill the position. Even if it can be proven that no local could fill the position, there is no guarantee that the permit will be granted. If you are granted a permit it is good for one year, and then there is equal doubt as to whether it will be renewed. Unfortunately, the residency-by-investment program does not affect the work permit application. Technically, you may not live or work on the island while the work permit is being processed, but some applicants do remain as non-working visitors.
Tropical Lifestyle: According to people who have moved to St. Kitts and Nevis, you really have to love the tropical lifestyle, because apart from the beaches and the activities that go with it (diving, snorkelling, boat trips, etc.) there is not a lot else to entertain you. There is very little in the way of culture, art galleries, museums, etc. Not that St. Kitts does not have a rich history or culture – it does – it just lacks places where it is displayed. There is the National Museum, which opened in the last few years, as well as the carnival at Christmas and the masquerade balls celebrating St. Kitts’ exotic fashions and dance.
Expensive: St. Kitts and Nevis is a tax haven for millionaires from all over the world, and the tourists who visit the island are predominantly wealthy as well. As a result, some activities, bars and restaurants aimed at tourists and expats are on the expensive side, which can push up the overall cost of living.
However, reports of high costs are usually associated with people living on local salaries. If you are going on an expat package, or running an international business, you will be able to live comfortably.
Residency through Investment
Buying a property costing USD500,000 or more will almost guarantee that your application for permanent residency in Bahamas will be accepted quickly, provided you can prove you are of good character, financially solvent, and say in writing that you wish to live permanently in Bahamas.
Chance of Capital Appreciation: Excellent
For the same reasons cited for St. Kitts, Bahamas has emerged as a property safe haven, where values hold during down cycles and grow rapidly during up cycles. But Bahamas’ property has the edge of being some of the most sought-after real estate in the world. Thus, if you buy a good property in a good area, you have an excellent chance of achieving solid capital appreciation.
No Language Barrier
Bahamas was also a British colony and so English is its official and first language.
Favourable Tax Regime
Like St. Kitts, Bahamas is also a tax haven. There is no income tax, capital gains tax, purchase or sales tax, VAT or capital transfer tax in Bahamas. This applies not only to individuals, but also to all resident corporations, partnerships and trusts. Employees pay national insurance contributions, there is stamp duty on property and mortgage transactions, and a tax on real property.
Refined Tropical Lifestyle
Bahamas offers a tropical lifestyle to match any other Caribbean island. However, unlike St. Kitts, Nevis and many other Caribbean islands, Bahamas also offers sophistication and modern refinement.
Difficult to Work: According to expat forums, Bahamas is even worse than St. Kitts with respect to working there. What’s more, you cannot start your own business in Bahamas, but instead must partner with a Bahamian who has the majority share in the company.
High Cost: Bahamas is even more expensive than St. Kitts and Nevis.
Automatic Residency Permit to Property Buyers
This is the simplest deal of its type: Quite simply anyone who buys a residential property in Seychelles is automatically granted a residency permit. The residency permit is valid for five years, after which it can be easily renewed by paying the application fee of approximately USD12,500.
Chance of Capital Appreciation: Good
For the same reasons as St. Kitts, Nevis and Bahamas, property in Seychelles has a good chance of capital appreciation because property is expensive and sought after. That said, the unspoilt nature of the islands leaves a lot of room to build and to increase supply, which is a controller of price growth. However, over a longer term, capital appreciation is a good bet.
Much of the land on the 115 islands that make up Seychelles is still unspoilt and untouched. While clean air and clear skies are big attractions to many people, others may see the great wilderness as being stuck in the middle of nowhere.
Temperatures in Seychelles rarely drop out of the 80s, making it very warm and humid, but residents report a near-constant breeze. As it lies in the Indian Ocean, there are some quite heavy rainstorms on the Islands, but expats report that the rain often falls on only one side at a time of a given island, at which point sun-lovers simply move to the other side.
Outside the Hurricane Belt
Like St. Kitts and Nevis, Seychelles is outside the hurricane belt, so there is little risk of natural disaster affecting your paradise life on the islands.
Seychelles is not the offshore tax haven it once was, not least because buying shares and banking is no longer as anonymous as previously. However, there is no inheritance tax, no capital gains tax and no individual income tax. Also, if you have a business that is classified as non-resident and does not source its income from the islands, no taxes are payable. If income to the business is from within the islands, there is a tax of progressive rates ranging from 0-33%.
Use of English
While Creole is the main language spoken on the islands, English is used in the business world and in all contracts and legal proceedings.
Robinson Crusoe Syndrome: Some forums say that Seychelles is a great place to visit but you would not want to live there, because there is not enough to do.
Language Barrier: Creole is the most widely spoken language in Seychelles. As it lives from tourism, this will not be a huge problem most of the time, but when living there you will not only frequent touristic locations and could encounter a language barrier.
Mauritius is located beside Seychelles in the Indian Ocean, so it shares the same turquoise waters, great white sandy beaches and warm, breezy climate. Like Seychelles, English is the legal language, making it easier to buy property.
Mauritius has one of the strongest economies and is one of the most stable democracies in Africa. It also has one of the highest standards of living in Africa, with a per-capita GDP of USD5,080.
Various Residency Schemes
Foreigners can now buy property through one of the government’s schemes: the Permanent Residence Scheme (PRS), Integrated Resort Scheme (IRS), and Scheme to Attract Professionals for Emerging Sectors (SAPES).
- The PRS grants residency to foreigners who purchase up to 1.25 arpents (5,050m2) of residential property costing at least USD500,000. Foreigners may only purchase land at least 100 metres away from the sea.
- Under the IRS, foreigners may purchase luxury villas of up to 1.25 arpents each. As a property owner, a residency permit is also granted, which is extended to the investor’s family.
- SAPES is an incentive to encourage professionals to work in Mauritius and allows foreign professionals to acquire residential property.
More in the Way of Culture
The main island of Mauritius is much more heavily populated than the smaller islands of Seychelles, although it still has its unspoilt areas with pristine beaches, jungles and national parks.
With a bigger and denser population comes a better experience in terms of culture and a wider choice of restaurants, bars and shopping.
Like Seychelles, there is no inheritance or capital gains tax in Mauritius. However, residents are taxed on worldwide income at a flat rate of 15%. Residents are entitled to income tax allowances that vary depending on the family circumstance of the taxpayer.
Low cost of Living
Unlike many destinations these days, expats report that Mauritius is a fairly cheap place to live.
Gargantuan Work Permit Procedure: To get a work permit in Mauritius is a massive ordeal that includes blood tests for everything from HIV and hepatitis B, to urine tests for albumin and sugar, stool tests for parasites and a chest x-ray. However, it only takes a month to obtain the permit.
Language Barrier: English is not the most widely spoken language, which may create some difficulties in day-to-day life.