The EU's Limited Authority Over 'Golden Visa' Programs: Legal Implications and Indirect Influence
Over the past decade, EU government programs designed to attract foreign investment have enabled tens of thousands to secure European residency or citizenship through financial contributions. These programs primarily fall into two categories: Residence by Investment (RBI), commonly known as the "Golden Visa", and Citizenship by Investment (CBI), also referred to as the "Golden Passport". RBI grants foreign investors and their families the right to live and work in a country in exchange for investment, typically in real estate or local businesses. CBI, known as the "golden passport," offers full citizenship, including a passport, voting rights, and the ability to pass citizenship to descendants. Unlike RBI, which is time-limited and requires investment maintenance, CBI is permanent.
The number of applicants for EU investment programs has surged to over 100,000. Greece and Spain have recently tightened their requirements, while Portugal plans to phase out its program by 2025. Countries like Malta, Cyprus, and Bulgaria offer "golden passports," granting European citizenship in exchange for a relatively low capital investment compared to the benefits it provides.
In recent years, these "golden programs" have caused headaches for Brussels. The lack of harmonized legislation and the consequences of these schemes have raised growing concerns within the EU.
Let’s now conduct a more in-depth legal analysis on the topic.
The fundamental problem: Automatic acquisition of EU citizenship
First, it is important to define “European Citizenship.” The Maastricht Treaty, which established the EU as an independent legal and political entity, formally introduced the concept as a core element of the Union. Today, the TFEU grants nationals of EU member states the status of European Union citizens (Article 20 TFEU). This status is significant not only in itself but also for the rights it confers, including the four freedoms— the free movement of goods, people, services, and capital (Article 21 TFEU), the right to vote and stand in European Parliament elections (Article 22 TFEU), and consular protection by other EU states outside the EU (Article 23 TFEU). Additionally, EU citizenship and the concept of a shared European identity are reaffirmed in the Treaty on European Union (Article 9 TEU). The Charter of Fundamental Rights of the EU also outlines a broad range of rights under Articles 39-46, titled "Citizens' Rights," which recognize the rights associated with European Citizenship.
Therefore, it is clear that EU citizenship is not granted independently through administrative procedures, but rather is an inherent aspect of a person’s nationality within an EU member state. In other words, EU citizenship automatically follows from national citizenship in any member state and provides European-level rights that extend across all member states. Thus, the ability of governments to grant EU citizenship—and its associated rights—through investment programs is questionable.
The issue is that, while the EU can implement policy measures to restrict the granting of rights to non-EU citizens, it cannot dictate to member states how each non-EU golden visa investor can acquire residency or citizenship in their respective countries.
Why doesn't Brussels approve "golden legislation"?
As mentioned earlier, the reason Brussels does not approve "golden visa" programs is that member states independently take measures to grant residency or citizenship to non-European citizens. These decisions are made at the national level, allowing member states to unilaterally extend certain cross-European rights to non-EU nationals without interference from the EU.
Additionally, the funds generated through these investment programs primarily benefit the member states themselves, with little to no direct economic benefit for the EU as a whole. The proceeds from golden visas often go directly into the national economies, but the broader European Union does not receive a share.
Why can't Brussels regulate the 'golden' investment programs?
The underlying reason Brussels cannot regulate 'golden' investment programs is due to its lack of competence in this area.
According to the European treaties, there are three competences of EU action. The exclusive (art.3 TFEU), shared (art. 4 TFEU) and the supporting, coordinating, and complementary competences (art. 6 TFEU). These competences serve as the framework that defines the specific areas of EU action, striking the appropriate balance between member states' sovereignty and EU-level legislation. Additionally, the Treaty established the principle of subsidiarity which limits EU action to areas where objectives cannot be sufficiently achieved by individual member states acting alone (art. 5 TFEU).
Article 4(2) of the Treaty on the Functioning of the European Union (TFEU) reserves competence in the areas of immigration, citizenship, and national matters to the member states. It states: "The Union shall respect the equality of Member States before the Treaties, their national identities inherent in their fundamental structures, political and constitutional, including regional and local self-government." As such, the EU has no authority to legislate on who can become a citizen or resident of a member state. In other words, each member state has sovereign control over its own borders. Thus, the criteria for granting residency or citizenship, including in programs like those offering golden visas, are determined by the member states themselves.
Another relevant point concerns the Schengen Area. While the EU can regulate security and the free movement of people within the Schengen Area (intra-Schengen), it does not have the authority to set the conditions for non-EU nationals' entry or stay in individual countries. Nations that offer golden visas do so based on their own national laws, even though these residency permits may allow travel within the Schengen Zone.
The solution: Indirect intervention
While the European Union (EU) cannot directly regulate "golden visa" programs due to the national sovereignty of its member states over citizenship and residence laws, it can influence these programs through several indirect means. One of the most significant ways the EU exerts influence is through its Anti-Money Laundering (AML) directives, which apply to financial transactions and the sources of wealth of foreign investors. The 4th Anti-Money Laundering Directive (AMLD), along with subsequent updates like the 5th AMLD, imposes strict due diligence requirements on financial institutions involved in such schemes, ensuring that applicants are not involved in illicit financial activities. Additionally, the EU's Common Reporting Standard (CRS) facilitates the exchange of tax information between member states, helping prevent tax evasion and ensuring compliance with EU tax regulations. Moreover, the EU also plays a role in preventing fraud by leveraging its European Anti-Fraud Office (OLAF) to investigate potential abuses of these residency programs. On security matters, the EU’s Schengen Information System (SIS) and other databases allow member states to screen applicants for criminal backgrounds, particularly in relation to terrorism and organized crime. While the EU cannot directly ban or regulate the programs, it issues recommendations to encourage member states to adopt best practices, such as ensuring financial transparency and enhancing vetting procedures to mitigate risks associated with these programs. Through these indirect tools, the EU shapes the operational landscape of golden visa schemes, particularly with regard to compliance, security, and financial integrity.
Conclusion
In conclusion, while the European Union cannot directly regulate "golden visa" programs due to the principle of national sovereignty over citizenship and residency laws, it can exert indirect influence through various mechanisms. These include its Anti-Money Laundering directives, tax information exchange protocols, and security screenings. By leveraging these tools, the EU ensures compliance with financial and security standards, promoting transparency and mitigating potential risks. As long as member states maintain control over the granting of citizenship and residency, Brussels' involvement will remain limited, but its ability to guide best practices continues to shape the operational framework of these investment programs.
Addendum: Golden Visa in Greece
Greece offers a Residence by Investment (RBI) scheme which grants residency permit to non-EU investors who make qualifying investments. Although, the Greek scheme is based on the residence by investment model, it can lead to citizenship as investors residing at least 7 years and meet some requirements (i.e., acquire Greek language proficiency) can eventually apply for citizenship.
The Greek scheme with its low threshold at 250.000 for special investment cases has attracted plenty of overseas applicants. However, tensions arose from the property market inflation urged legislators to rise the investment limit in high demand areas (Athens, Thessaloniki, Mykonos, Santorini and other Greek islands) to 800.000 euros and a prohibition for exploitation as short term rentals (i.e., in Airbnb platform). The medium threshold of 400.000 euros in investment in properties outside of the above prime locations and smaller islands is aimed at attracting investors with moderate investment capacities.