NRIs Seek Opportunities Overseas Amid Concerns About Taxation
According to data from India’s Ministry of External Affairs, in the last five years, more than half-a-million nationals relinquished their Indian citizenship.
Surabhi Marwah, Partner and Co-leader Private Tax, Ernst & Young LLP, says that this figure is likely to double in the next five years and that one of the leading causes of this is recent changes to Indian tax residency rules.
“The Indian tax authorities have introduced two major amendments to the tax residency rules for individual taxpayers. These amendments are effective the fiscal year 2020-21, which started in April 2020. These changes are expected to significantly impact Indian citizens and Persons of Indian Origin (PIOs) who are based outside India.”
She refers to the amendment to the 182-day threshold rules. “Indian citizens or PIOs who are based outside of India and come on a visit to India could maintain non-resident status if they are physically present in India for less than 182 days. This limit is however reduced to 120 days for individuals whose India-sourced income is INR1.5 million [Dh73,600] or more.
“Indian citizens who have an India-sourced income exceeding this amount during the relevant tax year will also be deemed residents of India if they are not liable to tax in any other country by reason of domicile or residence or any other criteria of similar nature.”
While potential taxation is an increasing concern for wealthy NRIs, Marwah says there are a number of reasons why Indians may wish to seek second citizenship. “The most important considerations seem to be hassle-free travel and creating a convenient route for children to settle outside India.”
Managing Director of Range Developments, Mohammed Asaria adds, “Grenada doesn’t compromise on due diligence and it offers a strong second passport as it isn’t simply a strong travel document with attractive tax incentives.”
Another factor may be rumors that India could reintroduce inheritance tax, which was abolished in 1985, forcing wealthy NRIs to restructure their assets.
Mohammed Asaria, Managing Director and Board Member of Range Developments – a developer which offers investors second citizenship solutions when they invest in his developments in the Caribbean – also believes that NRIs are growing increasingly concerned about changes to tax regulations.
“There is speculation among the business community that citizenship-based tax is coming on income and estate. There are also fears that there will be an exit tax, similar to that in the US. At that stage, relinquishing Indian citizenship could have significant cost implications, which is not the case at present.”
Range Developments developed the Park Hyatt St Kitts, Kempinski Dominica, and is developing the Six Senses Grenada.
In the case of Grenada, NRIs have the opportunity to invest in a high-end resort and secure second citizenship. This allows them and their families to then apply for residency in the United States through the E2-visa.
“By investing US$220,000 (plus government fees) in a state-approved real estate project in Grenada, individuals can become eligible for citizenship,” says Asaria.
“By subsequently investing in a viable business in the US (there are no statutory prescribed minimum amounts), individuals can apply for residency in the United States through an E-2 visa in around six weeks.”
Dubai-based Asaria says that, since the outbreak of the coronavirus, his business is increasingly attracting high-net-worth NRIs.
“Today, citizenship by investment is increasingly the domain of high-net-worth individuals. People with substantial wealth tend to have financial advisers and are more likely to make highly considered investment decisions. They are often more discerning investors.
Asaria says that high-net-worth NRIs tend to be concerned about benefits and security over cost, which is why more discreet citizenship by investment programmes, such as Grenada are attractive, especially given its unique access to the US through the E2 visa.
“Following the coronavirus, NRIs are primarily family and future-focused. With the current situation, protecting their businesses and loved-ones for times ahead is paramount.”
Although Grenadian citizenship offers visa-free travel to close to 140 countries, including the Schengen region, UK, Russia, and China, Asaria believes wealthy NRIs are likely to expect more from their investments.
“Grenada doesn’t compromise on due diligence and it offers a strong second passport as it isn’t simply a strong travel document with attractive tax incentives. It provides NRIs and their families with the ability to live, study, work and run their business in the United States and this is significant.”