The unexpected suspension of Malta’s generous Permanent Resident Scheme has thrown certain real estate contracts for non-EU nationals into limbo.
Some foreigners enticed by the scheme had already made preliminary agreements to purchase property and it was unclear if they would still receive the tax incentives they expected, Malta Developers’ Association president Michael Falzon said yesterday.
While agreeing that the government had valid concerns that the scheme was being abused, Mr Falzon said he disagreed with the suspension and expressed annoyance that there was no consultation, warning or public announcement from government – and there has been no mention of a timeframe for the review process.
Non-EU nationals are currently unable to take advantage of the scheme, following the sudden unannounced suspension of applications from non-EU citizens by the government on January 4. Ironically, International Living magazine cited the scheme as one of the reasons that made Malta the third most desirable place in the world for expatriates to live.
Applications for the scheme were suspended without warning for non-EU nationals because of “a level of incorrectness and abuse of the system,” a Finance Ministry spokesman told The Sunday Times yesterday.
The scheme was designed to attract wealthy foreigners to take up permanent resident status in Malta so that they would invest their wealth in the local economy.
Beneficiaries of the scheme must prove they have an annual income of €23,000, or the capital equivalent to €349,000, among other conditions.
The local retail estate industry had promoted the scheme as being among the most generous in the world, with benefits including a flat tax rate of 15 per cent on income brought into Malta. No minimum stay or residence in Malta is required after the permit has been issued – though the resident must come once in the first 12 months – and beneficiaries are able to rent rather than buy property.
But the Finance Ministry spokesman said that Malta’s incorporation of the EU Council Directive to recognise the long-term resident status of third-country nationals after five years’ continuous legal residence, had led to some individuals with PRS permits from non-EU countries abusing the system and claiming benefits.
The scheme was also suspended because of suspicions that certain individuals with PRS permits were exploiting loopholes in the scheme to avoid bringing the expected economic benefits to Malta.
The scheme is now being reviewed so that it can be re-launched along the lines of its original intention to attract wealthy foreigners and investment to Malta, the spokesman said.
Federation of Estate Agents president Ian Casolini said: “We understand the government’s concerns and we are working hard and fast with them to come up with a satisfactory solution. We are assured the suspension is temporary.”
In a statement yesterday, the Labour Party urged the government to resolve the matter as soon as possible, and offered its assistance on the matter.
While acknowledging the importance of safeguarding the national interest as a top priority, it was also important to resolve the matter for economic reasons, the PL said.