Overseas identity planning: An interview with Canadian immigration expert David Lesperance

An interview originally published in Wealth Plus China 29/11/19

Author: Tian Tian

As the number of high-net-worth individuals in China climbs year by year, how to place assets has become a topic of concern for high-net-worth individuals. In the past, these high-net-worth individuals have allocated their assets overseas in various ways. With the rapid advancement of CRS, the era of offshore is coming to an end. Bank accounts and even trusts established by many Chinese high-net-worth individuals overseas are affected. It will become more and more difficult to conduct reasonable tax avoidance by citizenship planning. Overseas citizenship planning obtains a secure “Global Pass” and how to prepare a “Back Up Plan” for reasonable asset allocation. We invite Canadian immigration and international tax expert David Lesperance to answer some professional questions about overseas citizenship planning.

David Lesperance specialises in immigration, citizenship planning and international tax law. He started to pay attention to immigration-related legal matters when he served in the immigration department of Canada in his early years, and was qualified as a lawyer. After visiting Mainland China and Hong Kong for the first time in 1990, he has been providing consulting services in the fields of citizenship planning and international taxation for high net worth and ultra high net worth individuals and families in various countries.

Consider the three elements of citizenship planning According to a survey conducted by the Hurun Research Institute, the main purpose of overseas financial investment by the rich in China is “asset allocation and risk diversification.” Such consideration accounts for as much as 80.3. Second is the “preservation and appreciation” of wealth. However, in reality, many people did not think about the purpose of overseas citizenship planning at first. David pointed out that the most common mistake most people make when planning for citizenship planning and preparing a “Back Up Plan” for themselves and their families is

Haven’t figured out the real purpose and motivation of your citizenship planning, what is it for travel convenience? For the next generation of education? Or seek a new lifestyle? To avoid making directional mistakes, David has prepared three questions for those interested in overseas citizenship planning:

  1. What is the purpose of family immigration? For travel convenience, education, lifestyle, business opportunities, safety?
  2. What are the main concerns? Travel in the current country is inconvenient, over-taxed, population issues, lack of rule of law, unrest, political uncertainty, etc.
  3. What is the budget? Is there a requirement for the timing of overseas status acquisition?

Think through these three issues, and then ask a professional consultant to develop a suitable overseas citizenship planning plan. Citizenship planning is not just planning an overseas identity, but a comprehensive range of complex issues involving law, taxation, and the family of high-net-worth individuals and corporate development. Therefore, it is important to listen to professional advice. In order to earn commissions, some salespeople will strongly encourage customers to believe that the solutions they recommend or plan are the most suitable for customers, but they do not provide other alternatives for customers, and of course they will rarely mention the disadvantages of products, such as tax Obligations, longer status acquisition, military service, public disclosure of the client ’s name, etc., so when planning your citizenship, be sure to ensure that your overseas citizenship planning provided by your consultants will ensure that your benefits are maximized, not Ensure that his commission benefits are maximized.

Potential risks of Vanuatu passports

However, in recent reports, Vanuatu passports have exposed many risks. For example, honorary citizens holding Vanuatu ordinary passports have been asked by foreign immigration officials to further prove their Vanuatu citizenship.

The International Air Transport Association has also presented a risk warning on Vanuatu passports in its brochure: not all Vanuatu passport holders have citizenship, and each country has the right to decide what additional documents they need To prove its true Vanuatu citizenship. As a result, airlines (which will let you return and pay fines if passengers are refused entry) will exercise caution and refuse to issue boarding passes to all passengers holding Vanuatu passports. In short, the honorable citizenship provided by the Vanuatu government has laid a great hidden danger for the future travel of its citizens.

David reminded China’s HNWIs to be cautious about such honorary citizenship. It is only a matter of time before Vanuatu passports cause a greater risk outbreak. In addition, David gave another example of “US EB-5 Visa”.

For example, David said, “You ca n’t fully trust the advice of a sales consultant. Vanuatu is a good example.” Vanuatu has revised legislation to provide “honorary citizenship” to foreigners. “In my 30 years of experience, this This “trick” is common and the end result is obvious. “David added. Honorary citizens will not produce any expected results. Vanuatu passports sold by salespeople are a defective “product”. They know that there is a problem with “honorary citizenship”, but for their commissions, they continue to recommend. Vanuatu recently announced The income earned by honorary citizens has exceeded the value-added tax income. Behind the popularity of “honorary citizenship” may reflect the irrationality and herd mentality of customers when planning overseas status. Vanuatu, a South Pacific island country known as the “New Zealand back garden”, has a very developed offshore financial industry and is also the world’s top tax haven. Without global taxation, it naturally attracted the attention of many investors. The Vanuatu Passport Office reported that since 2017, they have issued more than 4,000 passports with the support of the Vanuatu Citizen Investment Program, which itself consists of two parallel projects, VCP and VDSP.

What risks does Eb-5 pose?

The US Investment Immigration EB-5 Program is an immigration visa category established by US immigration law for overseas investment immigrants, referred to as “EB-5” (Employment Based Fifth Preference). It is the fifth category of employment-based immigration in the United States.

Visas have been in force since 1991. In 1993, the U.S. government added a “Regional Center Pilot Program” to the EB-5 immigration regulations. The “opportunity” rule was relaxed to “directly or indirectly create ten employment opportunities”. Make EB-5 a convenient way to apply for approval with the shortest time and qualifications of all US immigration categories.

According to federal statistics from 1990 to 2013, the success rate of obtaining a permanent green card I-829 through EB-5 US investment immigrants is less than 4.8%, which is 1/21. Since 2003, no one in Europe or other countries has participated in the eb5 US investment immigration
program, except for mainland Chinese investment immigrants. According to the current US immigration law, once the EB-5 applicant’s temporary green card (I-526) or formal green card (I-829) is rejected, even the United States tourist visa will not be obtained in the future. What is more serious is that once there are records of deportation by the United States, applications for immigration to Europe and other countries will be rejected.

Regarding the risks of an EB-5 visa, David added, “Most EB5 visa applicants are unaware that once they obtain a green card, they become national taxpayers and they need to pay taxes on their global income. For those who realize this, The person in question can only evade taxes by “not informing the IRS of non-US accounts, businesses, or property.” With the advancement of CRS globally, the FATCA Act in the United States has become more stringent, and the IRS has sought Tax residents’ overseas assets are becoming more and more intensive, and it is becoming more and more difficult to try to evade taxes by “not reporting property”.

Whether it is a lengthy 15-year processing time, plus future EB5 visas for worldwide U.S. tax obligations, or Vanuatu Honorary Citizen Risk, the availability of experienced independent advice is related to the success of maintaining the family’s property and life . Therefore, when preparing an overseas citizenship plan, it is important to choose an experienced and independent consultant who will help you identify your goals, risks, budgets and schedules. Once these issues are clarified, it is natural to work with consultants to formulate and implement the most appropriate planning solution, which will have a positive and profound impact on the lives of

If establishing a secure and private new citizenship is part of a family plan, then an independent and experienced consultant will help you get the right citizenship by investing, which will a) allow you to change your name, b) will not Post your original or new name. They will also guide you in the best way to keep your new name private.

Different citizenship planning program.

As mentioned earlier, the three major factors that need to be considered in overseas citizenship planning are the client’s immigration purpose, client budget, and time. Some customers have enough time to wait for their naturalization, so these customers can consider the “Residence by Investment” programs in these countries, such as Canada, Australia, New Zealand, Singapore, the United Kingdom, Ireland or Portugal, etc. Get permanent residency before you get citizenship. There are also wealthy and eager customers who can consider “Citizenship by Investment” programs: such as some Caribbean countries, and Cyprus, Turkey, etc. It needs to be emphasized here that Malta is not a true citizenship for investment. Rather, it is an investment for permanent residence program, plus a one-year short-term naturalization phase. And Malta has a disadvantage, they publish the names of all individuals who haveobtained citizenship. If the applicant’s country does not recognize dual nationality, this will be a major hidden danger.
Tax impact is a topic that citizenship planning salespeople avoid talking about, as it may affect their sales performance and commissions. Although significant, understanding the tax obligations of resident and citizenship obtained through investment is only one of the main considerations when designing an identity plan.

Besides taxation, another factor that is almost always overlooked is the impact of divorce laws.
Whether it’s the applicant, their spouse, or their adult children, divorce is the most devastating event that hits family wealth. In terms of taxes, we are talking about the percentage of income, and in terms of divorce, we are talking about the percentage of capital!

So, more importantly, an experienced independent consultant must not only understand the potential impact of taxes or divorce, but also how to legally structure your wealth to minimize or even avoid its potential impact.

Under the global tax transparency trend, FATCA and CRS have begun to take effect, and overseas citizenship planning is not just as simple as obtaining a new citizenship. This is a complex issue that is intertwined with many aspects such as law, taxation, and company management. Children ’s education, travel convenience, living environment, and wealth inheritance are seizing opportunities. HNWIs need to distinguish between different definitions of (temporary) residents, permanent residents, green cards, and citizenship. At the same time, they must seek the help of professionals. A design, A properly implemented and maintained BackUp Plan (backup plan) will focus on the well-being and wealth of the family, and a successful citizenship planning program can also successfully protect the wealth and happiness of customers.

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