Migration via investment route catching on among rich Indians
The recently introduced Indian ODI (Outward Direct Investment) regulations – which permit direct investments in international entities, subject to certain conditions – have acted as a catalyst for many wealthy Indian families to explore international investment opportunities, says Sunita Singh-Dalal, partner, private wealth & family offices at Hourani & Partners in the UAE.
Up until recently, India’s investment migration market was largely geared towards the US EB-5. Now, residence-by-investment migration programmes in the UAE, Singapore, Greece and other European countries are gaining traction to enhance wealth and global mobility.
The recently introduced Indian ODI (outward direct investment) regulations – which permit direct investments in international entities, subject to certain conditions – have acted as a catalyst for many wealthy Indian families to explore international investment opportunities, says Sunita Singh-Dalal, partner, private wealth & family offices at Hourani & Partners in the UAE.
The first thing on the checklist should be to build a sufficient corpus.
India has stringent foreign exchange regulations, says Poorvi Chothani, managing partner of LawQuest, an employment and immigration boutique law firm. “HNWIs often face limits on the amount of money they can transfer abroad for investment purposes. For example, with the current limit of $250,000 that can be transferred by an individual in a financial year (under the Liberalized Remittance Scheme or LRS) and the restriction on clubbing funds, it could take several years to accumulate $800,000 that is required for an EB-5 investor visa for the US,” she shares.
This could also depend on the number of family members applying for citizenship/permanent residency. Nakul Beri, senior managing director, global client origination and coverage at Waterfield Advisors, says, “Residence visas are typically given to a family – husband, wife, two children under the age of 23 (or 18 depending on that country’s regulations). If you’re a family of four looking at an EB-5 visa, you can do it because it’s $250,000 per person i.e., $1 million. However, if you’re a family of two, you may need to wait for two cycles; one investment in March and one in April.” This problem is compounded when you consider programmes that require a $2 million, $5 million or $10 million investment.
Another factor is the increased TCS rates. From October 1, the tax charged at source (TCS) for all LRS transactions has increased to 20% with a threshold limit of ₹7 lakh from the formerly applicable rate of 5% above ₹7 lakh. “This might add another layer of tax on funds that are already saved net of applicable income taxes in India, pushing up the actual cost of investments abroad,” says Chothani.
International travel could also pose a problem. “If in a year, I’ve spent $100,000 on travel overseas, that goes away from my $250,000. You need to have enough quota to remit the money,” says Beri.
Singh-Dalal says investment migration is great for business families to expand global footprint, but never without taking professional, specialized cross-border pre-migration tax and legal advice. “Once citizenship or permanent residency has been obtained, the consequences are irreversible. Individuals could find themselves in a worse-off position, facing significant taxation, estate duties and even forced heirship provisions,” she says. It’s advisable to seek professional guidance from tax and FEMA experts.
Choosing the right partner
The right advisor can also help you identify alternate paths to citizenship/residency. For example, the UK no longer offers any core immigration routes designed for someone looking to invest or set up their own business. Chetal Patel, head of immigration at Bates Wells in the UK, says they’ve seen a surge in businesspeople setting up companies (or subsidiaries) in the UK. “The UK corporate vehicle then applies for a sponsor license. Once approved, it sponsors an individual under a skilled worker visa and often eligible family members apply for dependent visas,” she shares.
In the US, Paresh Karia, CEO of Acquest Advisors, points to set-aside visas. “While the waiting time for earlier investors has increased, investors under the new EB-5 programme can get the applications processed faster if they invest in projects with set-aside visas, like projects in rural areas which are eligible for priority processing. We have seen some applications for investors in such rural projects getting processed within six months, as against the normal two-three years,” he shares.
Look at the fine print
Understand what the repercussions are if you land up in a country and it does not meet your expectations. Your capital is then locked for years, so it’s important to check stay requirements for residence visas carefully.
Future taxation (inheritance tax or double tax) is another key aspect. “Indian citizens, who acquire residence or citizenship in another country, need to navigate tax treaties, exemptions or credits to avoid paying taxes on the same income in both countries,” says Chothani. Some countries, like the USA and UK, have inheritance taxes at both the state and federal level “which can have devastating consequences on the transmission of wealth to their heirs,” she adds.
Move quickly
Once you’ve identified your destination country and have consulted an immigration advisor and a financial one, Karia says it’s important to move quickly. “One of the pitfalls of immigration by investment programmes is that they are very dynamic. The timelines, the requirements as well as investment options and amount keep changing,” he says.
(Global Indian is part of a series of articles exploring questions about citizenships, business access and professional advantages in a world without borders.)
Authored by: Sunita Singh-Dalal
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