Last Updated on January 24, 2019

After ending its investment immigration program in February 2014, Canada is all set to introduce a new program that allows wealthy individuals to obtain residency visas by investing a minimum sum of 1 million Canadian dollars into a venture capital fund that will be setup by the Government.

Before being abolished, the Canadian investment immigration scheme, which offered permanent residency in lieu of minimum investment of C$800,000, was very popular amongst investors, especially wealthy individuals from China. The applicant was required to invest the amount in the form of a five-year zero interest loan to a Canadian province.

Critics of the scheme highlighted the fact that foreign investors were enjoying the benefits of permanent residency in such a developed country without taking any risk whatsoever as the loan, backed by sovereign guarantee, suffered by virtually zero chances of default.

Many other countries are relying on immigration in lieu of investment to attract foreign investment into their troubled economies. Canada is expected to setup a venture capital fund that will utilize the minimum investment, ranging between C$1 million to C$2 million, brought in by the foreign investors and invest the same in start ups in Canada. The Canadian government has established an ambitious target of around C$120 million from this new scheme.

The new scheme is expected to address issues like undervaluation of residency in Canada and acquisition of permanent residency by the investor without actually moving to the country. Canada had indicated that a revamped scheme was in the works when scrapping its previous scheme but had not provided any details of the new investment immigration program.

Under the new scheme, investors may not have any guarantee of earning any return on their investment. Investors may even face losses if the target investment of the VC fund underperforms. The new scheme is expected to act as a shot in the arm for VC funding, which, according to the Canadian Venture Capital and Private Equity Association, witnessed a 29% decline in the third quarter of 2014 as compared to the third quarter of 2013.

The official spokesperson for the Canadian Immigration Ministry said that the terms and conditions of the new venture capital fund were still being finalized and that an official announcement would be made in due course. There is no official word on the specific features of the new investment immigration fund.

Venture capital funding has always been a preferred option for the Canadian government to encourage creation of skilled jobs and facilitation of long-term economic growth in the country. Ottawa had set aside a sum of C$400 million for existing and new funds to jump start the flow of private money into this new-age investment option in Canada. A typical fund will allocate funds to start-ups or companies still in nascent stage of operations and look to generate significantly high returns on investments. The government is seeking to attract twice its contribution to the fun in the form of private sector investment.

Investment immigration has gained popularity and acceptance in recent years with other developed countries offering residency or even citizenship/passport in lieu of foreign investment. In the UK, an investor pumping in GBP2 million can get a long-term visa without onerous residency conditions. European countries like Portugal, Spain, Malta, Cyprus, and Greece offer residency permits in exchange of real estate investments of just EUR250,000.

Australia enhanced its Significant Investor Program and introduced a Premium Investor Program that allows investors to apply for permanent residency after just 12 months of residence provided the applicant also makes an investment of A$15 million in the country. The former program required minimum investment of A$5 million for a period of four years. The new program requires investors to provide funds for infrastructure projects that involve significantly higher risk as compared to earlier investment options like purchase of sovereign bonds or allocation of money to managed funds.

Like the Canadian scheme that was eventually scrapped, the Australian investment program has witnessed significant demand from Chinese investors with 90.8% of all applicants coming from and 87.7% of all allocations going to China.

The scrapping of the Canadian scheme led to cancellation of tens of thousands of applications, mostly from individuals residing in China. The immigration investment scheme decision had followed Ottawa’s decision to prohibit Chinese government investment into Canada’s oil sands, fueling speculation that Canada was trying to actively discourage Chinese investments into the country. Despite speculation about discouraging investments from China, figures show that Canada has consistently led all other G7 countries in terms of per capita immigration inflow in recent years.

Source: www.theaustralian.com.au