The Lost Decade – A Brexit Discussion

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Eric Major is CEO of Latitude Group, made up of Latitude and RIF Trust. We are a key provider of residency and citizenship solutions. Eric weighs in on Brexit. He offers solutions for those who are disillusioned with the country’s divorce from the European Union. 

After three and a half years of fierce negotiations and political debate the United Kingdom has left the European Union on the 31st of January, 2020. Without a doubt, Brexit will redefine how Britain trades with the EU and the rest of the world. While we look to a new era in UK-EU relations, let’s assess what options citizens have to maintain freedom of mobility in the long and short term.

Certainly, not everyone is fortunate to have family lineage from EU diasporas such as Ireland, Italy or Portugal, that would allow them to easily reclaim EU mobility and settlement rights. Luckily, however, there are a number of ways one can regain EU access and privileges in a post-Brexit world, including investment routes that will not only allow free movement but also provide tax advantages and succession planning strategies to shelter one from the uncertain decade that Brexit will most certainly bring.

Factors to consider are legacy, taxes and personal timeline. Interesting investment options exist within the EU but some investors may also like to look further afield to hedge their bets.

Eric Major explains: “Traditionally, many pensioners invested in real estate in Europe’s sunnier regions: France, Spain, Italy ,and Portugal. In a Post-Brexit era, those investments will be less straightforward to acquire. Retirees, for example, will require proper residency status to enjoy their golden years in the sun.”

Eric adds: “With Brexit now underway, British nationals who continue to draw an income from their UK and international business operations will need to ready themselves for the harsher economic climate which the UK is likely to endure in the decade ahead.”

How will the UK pay for its nasty divorce from the EU and re-adjust to a new economic and political reality? Like in any separation, the journey will take time. First come the ‘extraction’ which is the hardest (and most expensive) part, followed by ‘re-alignment’ with its new trade arrangements and visa regimes. And when this ‘new reality’ begins to settle in and adjustments are finally made, Major predicts we will be losing a decade.

However, resourceful clients need not fear, as there are a number of residency and citizenship solutions that can facilitate settlement rights in the EU. Indeed, within the European Union, a number of jurisdictions already offer solutions to Non-EEA applicants. These will also become options for British Nationals once the final stages of the divorce from the EU are in place.

Both Malta and Cyprus, for example, offer citizenship-by-investment programmes, that are the fastest and most expansive route to ensure EU settlement rights are retained. In Cyprus the qualifying investment is €2 million with an additional requirement to make a government contribution of €150.000. Malta’s Individual Investor Programme offers citizenship in return for a €650.000 government contribution, a real estate lease of at least €16.000 per annum or purchase of €350.000. You will also need to make a €150.000 investment in government bonds.

Similarly, Portugal offers the Non-Habitual Tax Regime which has been hugely popular with pensioners and retirees. It helps them shelter worldwide income for up to ten years. A less-publicized but equally interesting offering for tax planning is available just 20km away from the French border in Jersey, a stunning island in the English Channel. Jersey residents pay a flat income tax of 20% and a GST (Goods and Service Tax) is 5%. There are no capital gains, wealth or withholding taxes in Jersey. Corporate tax is 0% for most companies and only 10% for those in the financial services sector.

It is also worth considering Montenegro, a recent member of NATO and contender for accession to the EU as early as 2025. Just this autumn, it launched a citizenship-by-investment programme. This requires, depending on the selected region, a €250.000 to €450.000 investment in real estate and a €100.000 donation to the Government Fund of Montenegro. Residents can avail themselves of a special tax regime with 9-11% personal income tax, 5% tax on interest and 9% withholding tax on dividends and royalties for non-residents. Montenegro’s corporation tax is only 9%.

Further afield, the British Overseas Territories of Anguilla and the Cayman Islands offer alternatives to those fearing adverse economic policies in the aftermath of Brexit. The Residence for Tax Purposes Programme in Anguilla entails an annual US$75,000 to fulfill worldwide tax obligations. Anguilla does not levy tax on income, corporation, capital gains, or inheritance. Additionally, you must own and maintain real estate in excess of US$400,000 and maintain links to the island. There is an annual administrative review process of your status.

The Cayman Islands offers two options for residency by investment.  The first option is a 25-year renewable residency permit for qualifying investors who purchase a property with a minimum value of US$1.2 million in Cayman Islands real estate. This permit requires the investor to spend 30 days each year in the Cayman Islands.  The second option is a permanent residency certificate. This requires one day of residency annually and the opportunity to apply for a British Overseas Territory passport after five years of residency. This option requires a minimum investment of USD $2.4 million in Cayman Island real estate.

The Cayman Islands is a tax-neutral British Overseas Territory – no corporate, personal, capital gains, inheritance, property, or sales (VAT) taxes.  There are no restrictions on foreign ownership of land and no alien land holding licenses are required. The Cayman Islands feature modern infrastructure, over 55 nonstop weekly flights from the USA and Canada and one of the highest GDP per capita rates in the world.

Eric Major concludes: “More than ever, it is imperative to plan around the uncertainties that Brexit continues to bring to our clients. I do not believe on focusing on the pitfalls of the upcoming decade. The sooner our clients accept this ten-year realignment, the sooner an exit to Brexit can begin.”

For all your RCBI needs, don’t delay and contact us today.