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‘Shady characters’: Will EU countries now put an end to ‘golden passport’ schemes?

Since Russia's invasion of Ukraine European countries are coming under pressure to end backdoor routes to EU citizenship which are deemed to be unfair and "shady". This week MEPs in the European parliament made their opinions on the scheme clear.

Published: 10 March 2022 09:56 CET

'Shady characters': Will EU countries now put an end to 'golden passport' schemes?

A picture taken on February 14 , 2022 shows national flags of European Union's member countries at the European Parliament in Strasbourg, France. (Photo by FREDERICK FLORIN / AFP)

The European Parliament on Wednesday called for the phasing out of citizenship by investment programmes operated by some EU countries and for EU-wide regulation on so-called ‘golden visas’ offered to wealthy individuals.

Such schemes pose a threat to European security and democracy as they can be used “as a backdoor” to the EU for “dirty money”, MEPs argued during the debate.

Members of the European Parliament have been calling for the termination of ‘golden passport’ schemes since 2014, but the issue has become more prominent in the context of Russia’s invasion of Ukraine, because of the number of Russian citizens acquiring rights in EU countries through this route in recent years.

The resolution passed by the parliament with 595 votes to 12 and 74 abstentions says golden passports should be phased out fully.

The background…

The market of golden passports and visas developed rapidly since the 2008 financial crisis, as countries have sought to incentivise foreign investment

Three EU countries – Bulgaria, Cyprus and Malta – offer citizenship in exchange for a financial investment. Currently, however, Bulgaria is considering a government proposal to end the scheme, Cyprus is only processing applications submitted before November 2020, and Malta has just suspended the processing of applications from Russian citizens.

In addition, 12 EU countries (Cyprus, Estonia, Greece, Spain, Hungary, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands and Portugal) grant residence permits on the basis of investments, the so-called ‘golden visas’.

Each national scheme has different rules regarding minimum investment requirements, which range between €60,000 in Latvia and €1.25 million in the Netherlands. These can be through property ownership or contributions to public projects.

A European parliament study estimates that, from 2011 to 2019, the total investment associated to these schemes has been of €21.4 billion. 42,180 citizenship or residence applications have been approved under such programmes and more than 132,000 people have benefited, including family members of applicants.

Dutch MEP Sophie IN’t Veld, the European parliament rapporteur, said that “when governments are selling passports or visas, what is actually bringing in the cash is… the little blue and yellow logo on them” – in other words, the EU flag.

‘They are designed for shady business, shady money and shady characters’

Getting citizenship of one EU country of course means the freedom to live and work in all 27 member states, so one country’s passport policy affects everyone in the Bloc.

Benefits include the right to move to other EU countries, exercise economic activities in the single market, vote and stand as candidates in local and European elections, receive consular protection outside the EU and travel visa-free in many other states around the world.

Residence also ensures economic rights and the possibility to be joined by family members.

All this bypassing standard citizenship requirements, which typically involve a period of residence and a “genuine connection” to the country, such as family links, or integration conditions, such as speaking the language and knowing the culture.

“Passports and golden visa schemes are not about attracting any meaningful legitimate investment in the real economy of Europe. They are designed for shady business, shady money and shady characters,” Sophie IN’t Veld said during the debate.

A picture taken on March 8, 2022 shows European Union’s and Ukrainian flags fluttering outside the European Parliament in Strasbourg, eastern France. (Photo by Frederick FLORIN / AFP)

Security risks

In an earlier analysis, the European Commission found that such programmes pose risks regarding security, money laundering, tax evasion and corruption due to weak vetting procedures.

For instance, EU countries offering citizenship by investment usually request clean criminal records from applicants or their country of origin, which are difficult to verify especially in case of a conflict. But Malta can waive the requirement “where the competent authority considers such a certificate impossible to obtain”.

Cyprus, which is not part of the border-free Schengen area, is not connected to the Schengen Information System that allows member countries to share security information.

In addition, EU member states consult on applications for short-stay visas issued to citizens from certain third countries, but they do not consult for citizenship by investment programmes and do not inform each other of rejected applications, the Commission noted.

Media investigations also highlighted how the schemes have been linked to corruption and crime. Journalist Daphne Caruana Galizia was murdered in Malta in 2017 following her investigations into corrupt politicians and money laundering through the citizenship by investment programme, MEPs reminded.

Brexit-backing billionaire Christopher Chandler, born in New Zealand, was reported to have acquired EU citizenship using the Maltese scheme in 2016.

In 2021 Cyprus revoked the citizenship of 39 foreign investors and 6 members of their families, after it emerged that insufficient background checks had been carried out for over half of the 6,779 passports issued under the scheme between 2007 and 2020.

‘It is not fair to Ukrainians at this point’

The parliament said on Wednesday that these schemes are “discriminatory and lack fairness” as they contrast “dramatically with the obstacles to seeking international protection, legally migrating or seeking naturalisation through conventional channels”.

MEPs also called on the European Commission to propose, in 2022, EU-wide regulation on residence by investment schemes. These should include stricter background checks on applicants, their family members and the sources of their funds, minimum residence requirements, investments that truly benefit the economy of the country, and proper scrutiny of intermediaries helping people acquiring rights trough these channels.

“It should not be enough to just buy a house or a villa. The investment must be in the real economy and in line with the climate and social objectives of the Union,” said Sophie IN’t Veld.

It is “very difficult for small countries whose revenue streams depend on this… I understand it is painful but it is not fair to European citizens, and Ukrainians at this point,” the rapporteur said.

Despite the vote in the European parliament EU powers on this issue remain limited because the rules on the acquisition of citizenship are defined at national level rather than in Brussels.

The European Commission, however, has already launched a legal action at the European Court of Justice against Cyprus and Malta because “the granting of EU citizenship for pre-determined payments or investments without any genuine link with the member states concerned undermines the essence of EU citizenship”.

What about Russian nationals obtaining golden status?

Russian nationals account for 45 percent of those who have acquired citizenship in EU countries using this route, followed by Chinese nationals and people from the Middle East (15 percent for each group). Chinese investors account for over half of residence permits issued in this way.

In consideration of Russia’s invasion of Ukraine, the European Parliament also appealed EU countries to stop operating citizenship and residency by investment schemes for Russian nationals with immediate effect and to re-assess whether those who benefited in the past have links to the Putin regime.

In the first round of sanctions against Russia, the leaders of the European Commission, France, Germany, Italy, the United Kingdom, Canada and the United States committed to “limit the sale of citizenship… that let wealthy Russians connected to the Russian government become citizens… of our countries and gain access to our financial systems.”

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK.

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Mythbuster: Can you really 'cheat' the Schengen 90-day rule?

If you’re the citizen of a non-EU country and you want to spend long periods in the EU/Schengen zone, you will need a visa.

But citizens of certain countries – including the US, Canada, Australia and the UK – benefit from the ’90-day rule’, which allows you to travel visa free within the Schengen zone for 90 days out of every 180.

Anyone wanting to spend longer than this will need a visa or residency card.

So a simple enough rule, and for most travellers 90 days out of every 180 is perfectly adequate for holidays, family visits etc.

However some groups – especially second-home owners – might want to spend longer than this.

For Brits, entering the world of the 90-day rule is a recent development, since before Brexit Brits were EU citizens and therefore benefited from EU freedom of movement.

The harsh reality of the post-Brexit world has prompted a steady stream of articles in UK media (examples pictured below) promising ’90-day loopholes’ or ‘how to beat the 90-day rule’ (scroll to the end of this article for what the below ‘loopholes’ really entail).

But do these so-called loopholes really exist?

Despite the claims in the headlines, there are really only three options for non-EU citizens wanting to spend time in the EU – limit their stays to 90 days in every 180 (which still adds up to six months over the course of a year); get a short-stay visitor visa; or move to an EU country full-time and become a resident.

All of the advertised tricks, dodges and loopholes are really just variations on these three options.

Limit stays to 90 days

Advantages – the big advantage of this method is no paperwork. You can travel visa free and there is no requirement to register with authorities in the country you are visiting (although second home owners will of course have to pay property taxes and other local taxes in the area where their property is located).

In this scenario you retain residency in your home country and are simply a visitor in the EU – a status identical to that of a tourist.

Disadvantages – the time limit is too short for many people and there is also the problem that stays are limited to 90 days in every 180. Although over the course of a year this adds up to six months, you cannot take your six months all in one go – so for example spending the winter in Spain and the summer in the UK is no longer possible. Likewise travelling to your French holiday home for four months over the summer is no longer an option.

It’s up to you to keep track of your 90 days, which you can use as either one long trip or multiple short trips. The 90-day limit is calculated on a rolling calendar and keeping track of the days and making sure you have not exceeded your limit can be stressful.

As a visitor, you have no rights to enter the country if the borders close (as, for example, happened during the pandemic).

Short-stay visa

If you want to remain a resident in your home country but don’t want to be constrained by the 90-day rule, you can get a short-stay visitor visa. Visas are issued on a national level, there is no such thing as an EU-wide visa, so you will need to apply for a visa in the country where you want to stay.

Different EU countries have different visas, but most offer a short-stay visa (usually six months) that gives you the status of a visitor, but allows you to stay for longer than 90 days.

Advantages – no more counting the days, for the period when your visa is valid you can stay for as long as you like in the country of your choice. By maintaining your residency in your home country, you don’t have to register with authorities in the EU country and won’t be liable for residency-based taxes.

Disadvantages – visa paperwork can be complicated and the process is time-consuming and sometimes expensive (most countries require an in-person visit to the consulate as part of the process). You also need to plan in advance as visas take several weeks or months to be issued.

A visitor visa usually requires proof of financial means, so this is not available to people on very low incomes.

You are still classed as a visitor, so have no rights to enter the country if the borders close (as, for example, happened during the pandemic).

If you are spending a significant amount of time each year out of your home country, this might also affect your tax status, depending on the rules of your home country around ‘tax residency’ (which is not the same as residency for immigration purposes).

Move to an EU country

If you were accustomed to splitting your time roughly equally between your second home and your home country, you might want to consider becoming a resident in the EU.

Advantages – as a resident, you are no longer constrained by the 90-day rule in the country in which you live. The rule does, however, apply to other EU countries. So if for example you are a Brit resident in France, there are no limits on the amount of time you can spend in France. However the 90-day rule does still apply for trips to Italy, Spain, Germany and all other EU/Schengen zone countries. In practice, border checks while travelling within the Schengen zone are pretty light touch, but technically the rule still applies.

You can of course pay unlimited visits to your home country, provided you maintain your citizenship.

Disadvantages – moving countries involves a lot of paperwork. The process varies slightly depending on the country and your personal situation but in general you will first need to get a visa (which must be applied for from your home country, before you move) and then on arrival will usually need to undergo extra admin to validate the visa and register with local authorities. You might also be required to undergo a medical examination and take classes in the national language.

Depending on the type of visa you apply for, you may also need to provide proof of financial means, which disadvantages people on low incomes.

You will also need to register for healthcare under the system of the country you live in, and may be required to either pay taxes or at least complete an annual tax declaration in the country you live in.

Admin is not a one-off event either, most countries require you to regularly renew your visa or residency card. Being officially resident abroad will likely also affect your tax status and access to healthcare in your home country, while your pension entitlements may also be affected.

Can’t we just ignore the 90-day rule?

As a responsible publication, The Local obviously doesn’t advise breaking any laws, but aside from the moral issue, the practicalities of the 90-day rule make it a difficult one to get around.

If you’re not working or claiming benefits most EU countries are unlikely to even notice that you have over-stayed, and the prospect of police knocking on your door is pretty remote.

However, the problem arises when you need to travel, as border guards will likely spot that you arrived in the EU more than 90 days previously and have no visa. Penalties for over-stayers include fines, deportation and ‘over-stay’ stamps in your passport that will make future travel more difficult.

Planned changes to EU border controls (due to come into effect in 2024) will tighten up these checks.

So in short you could over-stay your 90-days but only if you were prepared to never leave the Schengen zone. And if you’re now living here full time there will come a day when you need to access healthcare or other social benefits and that will be difficult if you do not have an official status as a resident.

All EU countries have undocumented migrants living in them, often working illegally on a cash-in-hand basis, but their existence is precarious, they are ripe for exploitation and often live in poverty. We wouldn’t recommend it.

PS: Those ‘loopholes’ promised in the articles above? The couple in the Telegraph got a visa and moved to France full time, where they are now residents. They told the paper: “The visa process took 9 to 10 months – we had thought it might take three. Yet we think our new life is wonderful and more than worth all the effort.”

The travel influencer mentioned in The Sun simply limits her stays in the Schengen zone to 90 days out of the every 180, but instead of returning to the UK for the rest of the time, she goes to Bulgaria (which is not part of the Schengen zone).

Truly, there are no loopholes . . .

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