By Aoife Gillespie and Samantha Arnold
As Brexit casts a gloomy shadow over the future political and economic relationship between the UK and the EU, the governments of Ireland and the UK have taken steps to signal a clear and sunny view of their unique future ties. On May 8, the two neighboring states entered into a Memorandum of Understanding (MOU) reaffirming their shared commitment to protect the Common Travel Area (CTA) and to maintain the rights and privileges that flow from the CTA for British and Irish citizens alike. This signals the continuation, post-Brexit, of the current status quo enjoyed by Irish and British citizens, where they can each enjoy the following rights in the other’s country: the right to move freely and reside; the right to work and be self-employed without the need to obtain permission; equal access to education and mutual recognition of qualifications; and equal access to healthcare, social protection and social housing.
The UK and Ireland have committed that post-Brexit these rights will continue to be enjoyed with the greatest of protections and fewest of bureaucratic barriers. Importantly, this position is regardless of the terms of any Withdrawal Agreement that is, or quite possibly is not, concluded before the Brexit deadline.
Following Britain’s exit from the EU, Irish citizens will find themselves in a particularly special and advantageous position. They will be the only citizens in the world who will enjoy freedom of movement throughout all 30 member states of the EU/ EEA and free movement within the UK.
Membership of this unique club is rather exclusive and, if you can’t establish a qualifying ancestral link, Irish citizenship is generally earned through connection to the country and actual residence - most commonly for a minimum of five years. For anyone who desires Irish citizenship, the first step is to secure a right to reside in Ireland. Once you have completed your five years residence (which can be spread over nine years), and have generally stayed out of trouble, in most cases you can apply to secure an Irish passport and gain quality access to Ireland, the EU/EEA and the UK.
Securing a right to reside in Ireland
The Immigrant Investor Program (IIP) was introduced in 2012 to attract Foreign Direct Investment into Ireland. The IIP is a residency-by-investment program where high net worth non-EEA nationals and their family members may apply to reside in Ireland on very favorable and flexible terms subject to making a significant commercial or charitable investment in the state. There are presently four investment streams available to non-EEA national applicants:
Enterprise investment of 1 million euros for a minimum 3 years.
Minimum investment of 1 million euros in an approved investment fund for a minimum 3 years.
Minimum investment of 2 million euros in any Irish Real Estate Investment Fund.
Minimum once-off endowment (charitable donation) of 500,000 euros or 400,000 euros per investor if part of a group of five or more investors.
When an IIP application is successful, the investor and his immediate family members (spouse/partner and children up to 18 or 24 if still dependent) are granted permission to reside in Ireland with freedom to work, study, set up a business or be self-employed.
Charitable donations under the IIP
One of the most straight-forward and often overlooked options to secure IIP residency in Ireland, is the endowment option. Even though not suitable for all potential IIP applicants, the endowment option will be attractive to investors with a genuine interest in philanthropy or considering options to satisfy their own corporate social responsibility (CSR) as well as those who are risk-adverse and looking for an alternative to the commercial investment options generally relied on for immigrant investments.
The overall benefits of the endowment option are: funds are wholly philanthropic in nature, the endowment provides the investor with the opportunity to engage with the local community in which they may decide to settle, the cost of the IIP is limited to the cost of the donation and there is no risk of losing further funds, and identifying suitable charities and business plans is more certain than other investment options and does not require additional corporate advice and due diligence assessments.
Profile of suitable charities
Although straight-forward, it is important to note that not every charitable donation (whatever the size) will qualify as an endowment for the purposes of the IIP. To qualify under the IIP, the investor must make a philanthropic donation to an organization which will use the donated funds for an approved project with a clear public benefit to Ireland in the areas of arts, sports, health, culture or education. The organization receiving the endowment must be a registered charity in Ireland and should ideally have a record of receiving and appropriately managing significant or comparable revenue. Strict and effective governance and financial management protocols should be in place and evidenced in the business plan. The Department of Justice and Equality (Department) have indicated that they are only interested in endowment proposals based on capital projects – so a proposed project which would see the funds used for core or staffing costs is unlikely to be approved.
Unlike the other investment options, the endowment stream does not allow for investors to receive any financial return or recoupment of the principal. Where desired, investors may seek to identify a project in which they have the opportunity to take an active role or which aligns with objectives of particular importance to themselves or their family.
Successful applications under the endowment option include projects in the areas of: social housing; children’s hospitals/hospital foundations; health support, advocacy and research organisations; and education and university foundations.
The potential investor must commit to make a minimum donation of 500,000 euros. In the case of a group of five or more investors who combine to contribute to one project, the minimum donation is 400,000 euros per investor.
In support of the IIP application, the investor must provide evidence of the funds to be used, including their provenance and the ability of the applicant to transfer those funds to Ireland. The source of the funds can be business and investment activities, deeds of sale, inheritance and gifts and/or divorce settlements. Where the source is a gift, the applicant must show that the person making the gift has the capacity to do so and they must provide an explanation for the gift. Loans cannot be considered as a source of funds.
The investor must also show that they are independently wealthy or self-sufficient and have a minimum net worth of 2 million euros. They must demonstrate that their net worth was acquired legally. In addition, applicants must provide an explanation of all financial activities for the previous 12 months, including income, investments and loans.
In order to establish the applicant’s and their family members’ good character, they must provide a statement of character from police authorities in each country in which they have resided for more than six months during the previous 10 year period and due diligence reports from an international risk management and security organisation for family members aged 16 and older.
The purpose of the above is to ensure thorough, comprehensive and complete Anti-Money Laundering (AML) checks are undertaken. This is a key consideration in the assessment of any application by the Irish authorities. It is also likely to be an important consideration for any charity to which a donation is proposed to be made in view of the charity’s own regulatory, ethical and governance requirements.
Once approved, the investor must provide the authorities with a letter from a solicitor in Ireland confirming the funds have been donated to the registered charity, a letter from the charity confirming the financial value that has been donated to them and evidence of transfer of funds. The donation only takes place once the application and thereby the project is approved, limiting any risk to the investor.
There is no obligation on investors or their family members to reside in Ireland under the IIP. They must simply visit Ireland at least once per year to retain their residence permission. The permission is renewable at year two, year five and every five years thereafter. When renewing at year two, the investor must show that the funds were used by the charity for the stated purpose. Where funds were withdrawn, the immigration permission will cease.
Investors may apply for Irish citizenship after five years if they have been physically resident in Ireland in accordance with citizenship rules. By doing so, they will secure privileged access to both the EU/EEA and the UK.
Children who attend primary or secondary school in Ireland or persons generally who reside in Ireland or the EU for a period of three out of the previous five years are also eligible for EU-fees for third-level education or university. This includes, for example, medical school. Medical school in Ireland for persons considered non-EU nationals for the purposes of fees can cost up to 55,000 euros per year. However, a person considered an EU student can attend the same university for around 10,000 euros per year.
The implication of Brexit
With Brexit has come a renewed appreciation among Irish citizens of the benefits enjoyed by being part, not only of the EU/EEA, but also of the Common Travel Area between Ireland and the UK. Ireland’s Immigrant Investor Program offers a variety of means where people with significant personal wealth can secure permission to reside in Ireland. The Endowment option offers a number of advantages to people considering the IIP. It is in the first instance easier to manage and therefore potentially quicker and cheaper. The need for commercial law advice and assessment of risks associated with the other investment options simply does not arise for endowments. The Irish authorities describe the endowment stream as ‘the most straight forward option’ to secure residence under the IIP.
And while actual residence in Ireland is optional under the IIP, for people who do commit to a life in Ireland for at least five years, the IIP can be the first step towards securing an Irish passport and with it the privilege to live and work and do business in Ireland, the UK and the EU/EEA.
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