Permanent residence scheme reworked to attract ‘higher quality’ of individual

The rules are part of a revamped and updated version of the now-defunct permanent residence scheme, which government suspended in December after several exploitations of the system were uncovered.

The most high-profile of these was one instance where an EU national had qualified for overseas medical treatment for a serious chronic illness at the expense of the national health system.

The new scheme will address two categories of applicants:  those from within the European Union, the European Economic Area, and Swiss Nationals, as well as third country nationals.

The new rules will require applicants to purchase property of over €400,000, or rent at €20,000 per annum, a substantial jump from the former thresholds of €69,000 for property purchased, or €4,150 for property rented.

The applicant must also be a non-Maltese domiciliary, in possession of health insurance as well as stable and regular resource, and pass a Fit and Proper test.

This test, which represents a means through which government intends to keep out “undesirable individuals”, will be carried out by a subcontract foreign investigation company.

The property which applicants use when applying (qualifying property) must also not be a shared property, and the entire registration process will carry a price tag of €6,000.

The new scheme also applies certain continuing obligations, which are that successful applicants must retain holdings of the qualified property, must retain insurance and a stable source of income, must not become a Maltese domiciliary, must reside in Malta for  a minimum of 90 days, and cannot leave Malta for a stretch of time longer than 183 days.

Successful applicants of the scheme are also obliged to inform the Maltese government of any changes in situation, such as relating to the qualifying property or the stable source of income.

Successful applicants will benefit from a 15% tax that allows the possibility to claim double tax relief, with a minimum tax cap of €20,000. The scheme will also apply an additional minimum tax of €2,500 per dependent of the applicant.

With regards to applications from outside the European Union, the European Economic Area, and who are not Swiss Nationals, certain special regulations apply on top of the existing rules.

Should third country nationals with to become long-term residents or are already long-term residents of Malta must enter into a qualifying contract with government with a financial bond (deposit) of half a million Euros, in addition to €150,000 per dependent.

This special deposit is intended to cover potential social costs.

For third country nationals, the tax rate will be the same, but the minimum tax cap is placed at €25,000 with an additional €5,000 per dependant.

With regards to those applications for permanent residence which were pending when the scheme was suspended, the new rules will allow those who had applied by 14 September to waive the €6,000 registration fee.

The rules also allow property purchased by prospective applicants to the previous scheme would be considered under the new rules, as long as it qualified under the previous scheme’s rules – as long as it is worth at least €116,000.

The new rules also lay down that anyone selling or marketing the scheme will have to be certified as an authorised mandatory and conform to a code of ethics when selling and prompting the scheme.

Those not conforming tom the code will risk having their certification withdrawn, and must be registered with the Commissioner of Inland Revenue. The stricter requirements are intended to cut down abuse in how the schemes and promoted to foreigners.

New scheme will attract ‘better quality of individual’ to Malta – Fenech

Unveiling the revamped scheme, Finance Minister defended the increased thresholds by saying that through this new threshold, Malta is sending out a message as to the “type and quality” of person it wanted to attract. He emphasised that the scheme was targeting high net worth individuals, and added that

“If we apply low thresholds, we would be attracting people who we did not truly intend to attract and instead of coming to our country to contribute economy would be coming here to take. We are competing for the quality of person, not for everyone to come to Malta,” he told MaltaToday.

Speaking during the announcement of the new scheme, Fenech said that the name required changing due to the European implication of the term ‘permanent residence’ and said that under the former scheme, minimum tax requirements had not been revised since 2003 and no periods of stay were imposed, which meant permanent residents did not necessarily spend money in Malta.

He said that within the context of the previous scheme, high net worth individuals were actually prohibited from working locally, as it was not desirable that they take jobs meant for Maltese individuals.

He said this would now change, and any income obtained from local economic activity would be taxed at normal Maltese rates.

Fenech particularly emphasised how the new rules will make the whole process stricter and will offer far less potential for abuse, pointing to how “it was evident that the scheme was being sold badly.”

He said that this meant that Malta’s reputation was suffering, adding that its low thresholds for property bought and purchased meant that Malta was being marketed as “the cheapest option” and attracting not high net work individuals, but middle-income individuals.

“Some of those who participated in the scheme though they were buying an EU citizenship,” Fenech said.

‘We need to be realistic’ – Chamber of Commerce

Speaking to MaltaToday, Chamber of Commerce board member and Malta Business Bureau president John Huber reiterated concerns that the new financial thresholds for property bought and rented might not be competitive.

“We are entering a completely new market than the one we used to operate in before, aiming for individuals of quality markedly better,” Huber said, describing it as “a bold move by government.”

He said that given that Malta is now attempting to attract high net worth individuals, there is the risk that Malta does not manage to attract them.

“We made our recommendations; some were heard, but not all,” Huber added. “The Finance minister is the one with the last say. We will work to make this a success, but if that is not the case, everyone will realise this, and we can engage in fine tuning.”

Asked if Malta has the potential to attract individuals from such a high net worth market, Huber was cautious. “I always say that we need to be realistic, keep our feet on the ground. We are what we are.”

Huber also welcomed the stricter controls on how he scheme will be marketed, describing this as a measure “which will cut a lot of abuse and a lot of wrong-marketing of the country.”

He said the country was being sold for the wrong reasons, and added that the stricter conditions “are a very positive move.”

source: Maltatoday