Lebanon proposes golden visa to lure in capital, but will investors trust broken banks?

Lebanon’s cabinet has put a golden visa proposal before the parliament’s finance and budget committee in a bid to unlock fresh foreign capital amid a lingering financial crisis. The draft would, if it becomes law, grant residency to foreigners who invest at least USD 500k in the country; applicants would also have to commit to paying USD 50k for every family member seeking the same residency. Lebanese citizens living abroad could also seek tax residency in Lebanon through the same mechanism, it seems.

It’s still work in progress: Our reading of the report suggests that physical residency is tied to the investment for foreigners and their families, while those seeking tax residency would need to pay the additional USD 50k per person, per year levy. Ibrahim Kanaan who chairs the parliament committee looking at the bill, said the draft will identify qualifying sectors for the investment. There are three industries on the table right now, but the government hasn’t yet said what they are.

The pitch is capital recovery: The mechanism will “create jobs, bring money into state coffers, and encourage investment once the conditions and terms are met,” Kanaan said, casting the proposal as preparation for a “next phase” in Lebanon’s recovery.

A golden visa is unlikely to attract many new foreign investors. The proposal is asking foreigners and non-resident Lebanese nationals to deposit USD 500k in a banking system that still hasn’t returned ordinary Lebanese their deposits six years into the financial crisis. What foreign capital needs is deposit safety and a stable currency, which won’t be solved by tax residency perks.

And the tax-residency angle is itself a red flag: Selling physical residency for investment may have gone out of fashion in many European countries of late, but it’s an established “thing.” Selling tax residency is the type of dodge that sets teeth on edge among the organizations in developed economies that track money laundry and tax dodgers. The FATF and the OECD warned in a 2023 report that residency-by-investment schemes can be soft spots for actors looking to launder money, avoid taxes, and side-step sanctions.

IN CONTEXT- Lebanon only legislated its bank-restructuring framework in December. The country’s first formal attempt (the financial gap law) for repaying depositors after the USD 70-80 bn in losses from the 2019 collapse cleared cabinet only at the end of April and still hasn't passed parliament — and economists told us then that it rests on a mechanism with no reliable revenues to back.

The proposal drew immediate criticism, even ridicule, in Lebanon on exactly that point: Wadih Akl, a senior member of the Free Patriotic Movement Party (FPM), one of Lebanon’s more influential parties, criticized the bill, writing, “In which bankrupt bank will [the deposit] be placed? And what contract will be signed with banks that don't return depositors’ money?”

The drafters seem to know they’re on shaky ground here: Kanaan went out of his way to stress that funds must be wired from abroad and screened for money laundering, adding that compliance language was built into the proposal.

What’s next: The draft has yet to clear the committee and would then need to go before the full parliament for a vote.