Immigrant Investors and the $120,000 Myth

The “common scenario” under the old immigrant investor program was that investors would pay financial intermediaries $120,000 to finance their loans to the Canadian government. At least 90% of immigrant investors paid this amount. However, those immigrant investors that paid $120,000 to the financial institution paid too much.
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Federal Investor Program Requirements To Double

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In a much anticipated change, the Federal Government has announced a series of changes to the Federal Immigrant Investor Program (“FIIP“) in the Gazette.  Changes to the Quebec Investor Program are expected shortly.

The Doubling

The Government of Canada is proposing that amendments be made to the definition of “investor” and “investment” in section 88 of the Regulations that would increase the investment amount from $400,000 to $800,000 and the personal net worth amount from $800,000 to $1.6M for Investor class applicants.

Administrative Pause

No FIIP  applications will be accepted unless they are post-marked or received by the designated Citizenship and Immigration Canada office before June 26, 2010. This pause will extend until the coming into force of proposed regulatory amendments to the definitions of “Investor” and “Investment” applicable to Business Immigrants in Division 2 of Part 6 of the Immigration and Refugee Protection Regulations.

Priority Processing

FIIP applications received on or after the coming into force of the proposed regulatory amendments shall be processed concurrently with those federal applications received prior to the administrative pause in a ratio consistent with operational requirements.

Why The Doubling?

The Government of Canada is first of all confident that this will not reduce the number of applicants. 80% of FIIP applicants in 2009 came from the Asia-Pacific Region, which continues to boom despite the global economic crisis.

According to the Gazette, the increase will result in a net economic benefit to Canada of $59,229 per investment. In total, this would result in a benefit of $600,000,000 per year to Canada.

While $600,000,000 isn’t bad (you could almost fund security for a G8 summit with that amount), it’s interesting to note that an increase of $400,000 per investment only results in a $60,000 benefit. For reasons on why that is, and where the money goes, please see my colleague Ryan Rosenberg’s blog post on the matter.

Furthermore, the increase in the net-worth requirement is hoped to address an emerging liquidity issue with federal investment immigrants. As property values have increased throughout Asia (especially in China), it became increasingly easy for individuals to meet the $800,000 requirement. However, because federal investors were not required to sell any of their assets in order to immigrate, they did not bring with them the amount of capital that was originally hoped. The doubling of the requirement to $1.6 M is expected to result in an increased amount of capital entering Canada.