Citizenship by Investment and Tax Advisors

I. Types of Investment Immigration

Investment immigration falls into two categories:

1. Citizenship By Investment (CBI)

• Grants citizenship and passport quickly through investment
• No lengthy residency requirements
• Typically offered by small nations or developing countries
• Generally has lower overall requirements beyond investment

1. Residence By Investment (RBI)

• Provides residential visas (short-term, long-term, or permanent)
• Requires meeting specific conditions (like residency requirements) for visa extension or naturalization
• Visa status can be revoked if requirements aren't met
• Usually offered by larger or developed nations
• Has higher thresholds beyond financial investment
• Requirements typically become increasingly stringent

II. Tax Considerations in Investment Immigration

For high-net-worth immigrants, tax implications are crucial whether pursuing CBI or RBI. Most of our high-net-worth clients either:

• Abandon immigration plans
• Change their destination country
• Restructure assets pre-immigration
  This demonstrates the critical importance of tax planning.

Tax Implications: CBI vs RBI

CBI is typically simpler tax-wise:

• Individuals obtain foreign citizenship (unless illegally retaining Chinese citizenship)
• Tax impact mainly involves:
  • Local tax system of the new country
  • Tax system of actual residence (few live in their passport countries)

RBI presents more complex tax challenges:

• Individuals retain Chinese citizenship with permanent resident status elsewhere
• Must consider both:
  • Chinese tax implications
  • New country's tax system
• Faces inherent double taxation risks
• Most RBI countries have higher tax burdens as developed nations

China's Tax Advantages

Despite increasing tax enforcement, China's personal tax burden remains lower than Western countries, with narrower tax scope.

Key Chinese tax advantages:

1. Passive income taxed at max 20% with various exemptions (listed stocks, property)
2. Active income though taxed up to 45% has optimization possibilities
3. Global taxation not fully implemented
4. No inheritance, gift, or exit taxes

Western Tax Costs

European/American immigration may subject you to:

• Combined taxation of passive and active income (similar to China's current comprehensive income system)
• Active income tax rates typically exceeding 40%, with very limited planning opportunities
• Rigorous enforcement of global income taxation (just look at U.S. FATCA for example)
• Exposure to inheritance tax, gift tax, and exit tax

If you can recognize potential tax risks and issues before immigration, you can take necessary steps to mitigate these challenges. Post-immigration solutions typically offer much less flexibility, leaving taxpayers with limited options and minimal tax optimization opportunities. For instance, it's advisable to consider selling real estate before immigrating to the U.S.; otherwise, you might face full U.S. taxation on future property sale profits.

This is precisely why we consistently recommend that high-net-worth individuals consult professional immigration tax advisors before making their immigration decisions.

III. Investment Immigration Tax Consulting

Professional investment immigration tax consulting services encompass:

• Identifying tax implications and personal tax burden in potential destination countries
• Developing pre-immigration tax optimization strategies to minimize future tax liabilities
• Recommending alternative destinations if the client finds potential tax costs prohibitively high

To provide accurate consulting advice, a truly professional immigration tax advisor must have a comprehensive understanding of the client's income, assets, and family circumstances. This knowledge enables them to formulate the optimal tax strategy tailored to the client's needs. The best solution should minimize lifetime tax burden while meeting non-tax requirements and maintaining manageable tax risks.

IV. Investment Immigration Tax Advisors

Immigration tax advisors are responsible for providing guidance on tax-optimal potential immigration destinations based on:

• The client's personal circumstances
• Family situation
• Property holdings
• Income sources
• Non-tax considerations (such as local economic conditions, language, and educational opportunities)

Once the client has selected their immigration destination, the advisor develops pre-immigration tax planning strategies (such as asset disposal or transfer) and ensures local legal and tax advisors properly implement the planned arrangements during the immigration process.

Immigration tax advisors derive their income directly from consulting fees, which naturally aligns their interests with their clients' needs. Moreover, since their new clients typically come through referrals from existing clients, delivering excellent customer service is their top priority.

V. Why Investment Immigration Tax Advisors Aren't Popular

1. High Level of Expertise Required

Investment immigration tax advisors must possess extensive knowledge of tax systems across multiple countries and regions, along with mastery of international tax rules (such as BEPS, CRS, etc.). This breadth of knowledge is essential for providing truly optimal international immigration tax advice. While typical tax advisors might specialize in one or two countries' tax laws, the requirement to understand multiple tax systems and international tax regulations creates a high barrier to entry, resulting in a shortage of qualified professionals.

2. Conflicts of Interest with Immigration Agents and Lawyers

Although tax considerations are crucial for immigrants, most people lack awareness about consulting immigration tax advisors before migrating. High-net-worth individuals almost always consult immigration agents and lawyers, who understand the importance of tax advisors but rarely recommend tax consultation services. Why?

The answer lies in conflicting interests.

Given the importance of tax matters, one might think immigration agents and lawyers would gain a competitive edge by recommending tax advisors. Unfortunately, this doesn't align with their interests. Immigration agents and lawyers share aligned interests - one brings in clients, the other handles implementation. However, immigration tax advisors' interests often diverge from theirs. Tax advisors provide recommendations based on clients' personal, family, income, and asset situations, which often (unfortunately) conflict with the destinations being sold by immigration agents and lawyers. Who would want to recommend an advisor who might redirect their clients elsewhere?

For example: When a client considers immigrating to Canada, immigration agents sell various investment or skilled immigration programs, and immigration lawyers implement the chosen plan. Just as they're about to close the deal, the client consults an immigration tax advisor who honestly states: "Canada offers tax benefits for new immigrants' trusts, but they must be established at least 5 years before immigration." The client might then decide to wait, potentially indefinitely, possibly choosing a different destination altogether - and maybe different service providers.

Thus, while immigration agents promote their services under the banner of "tax planning" and "status planning," they rarely provide genuine immigration tax consulting services. Many immigration agents and lawyers lack understanding of local tax laws and CRS. Our readers know that merely buying a passport doesn't circumvent CRS, and many tax havens aren't truly havens.

This disregard for clients' long-term interests relates to the nature of immigration services. Since people typically immigrate only once or twice in their lifetime, agents focus solely on selling immigration services, and lawyers on completing legal procedures, with little concern for long-term client interests.

3. Industry Still in Early Development

The immigration tax advisory industry remains in its infancy, with most immigrants unaware of its existence, explaining its limited popularity.

VI. How to Choose a Quality Investment Immigration Tax Advisor

For prospective immigrants seeking professional tax advice, here are three key considerations:

1. Essential but Not Excessive Professional Qualifications

Quality immigration tax advisors must hold professional credentials - operating without any is unprofessional. Relevant qualifications include: Certified Public Accountant, Tax Advisor, and Lawyer. However, be wary of advisors who heavily emphasize holding all three certifications ("triple qualification") as a selling point - this might indicate they've spent more time acquiring credentials than solving real client problems.

2. More Case Experience is Better

Immigration tax consulting isn't pure science. Knowing tax laws doesn't guarantee problem-solving ability. It's more of a craft: more cases mean broader exposure to various countries'/regions' tax laws and diverse client needs, leading to better practical problem-solving skills.

Ask advisors to share past cases, ensuring they clearly describe client needs and customized solutions. While anyone can suggest tax planning ideas (via Google searches), the real skill lies in optimizing solutions for specific client needs.

3. Strong English Proficiency is Essential

While professional qualifications and case experience might be fabricated, English proficiency cannot be faked. A quality immigration tax advisor must demonstrate strong English skills (including speaking) as a basic job requirement. They must:

• Read extensive international tax news and articles in English daily
• Communicate with foreign lawyers and accountants to implement tax planning
• Write professional emails in English
• Conduct meetings in English

These requirements are non-negotiable aspects of the profession.