A new system to replace the abruptly-suspended Permanent Residency Scheme would introduce more rigorous checks to ensure that only “truly desirable” people avail themselves of it, Finance Minister Tonio Fenech said yesterday.
He said that, unlike the previous scheme, the new rules would attract high net worth individuals rather than simply anyone purchasing a property in Malta and paying a minimum of €4,000 a year in tax. The new system is called the Special Tax Status for High Net Worth Individuals Scheme.
The minimum tax payment has been raised to €20,000 a year for EU nationals and €25,000 annually for third country nationals while the minimum cost of the property purchased in Malta has been increased to €400,000 from €60,000.
Moreover, a €6,000 registration fee will go towards financing an in-depth analysis of the applicants to make sure that whoever takes advantage of the scheme contributes to the economy rather than being a burden on it.
The previous scheme, designed 25 years ago, had been suspended because it was being marketed badly and because people were taking advantage of it with foreigners buying property worth more than €60,000 having the option of obtaining residency after five years. This, in turn, obliged them to pay tax here but they also enjoyed the benefits extended to Maltese citizens, including free health care and free education.
It was also being used by third country nationals to acquire residence rights under EU laws.
Mr Fenech said the new rules would attract individuals who left “proper value to the country” and “limit social cost liabilities” to future generations.
The new rules will require citizens of EU and European Economic Area states, including the Swiss, to purchase property costing over €400,000 or rent property at €20,000 a year.
They must also have health insurance, stable and regular income, pass an international due diligence exercise, pay €6,000 on applying and have their applications processed and filed by authorised mandatories, such as accountants, lawyers, notaries and legal procurators.
Non-EU nationals who would like to take up the scheme must make a €500,000 deposit when applying and €150,000 for each of their dependents.
Under the former scheme, no periods of stay were imposed, which meant applicants were not bound to live in Malta and contribute to the economy. Now, they must spend a minimum of 90 days in Malta.
They must also pay 15 per cent tax on foreign income and normal tax rates on any local income. The minimum tax payable was €20,000 a year and €2,500 tax per dependent while non-EU nationals had to pay a minimum of €25,000 a year.
Existing permanent residents will not lose their status unless they sold their property. Applications received or copies of promises of sale signed before yesterday and which were not processed because the scheme was suspended will have the €6,000 application fee waived.
Mr Fenech said there were people who purchased property under the previous scheme and who never visited the island after coming here to sign the documents. These were not contributing to the economy, he said.
There were also cases of people, Chinese, renting property to each other. The biggest problem was that the scheme was being marketed wrongly with some even promising EU citizenship, he said.
Its name had been raising legitimate expectations under EU laws on what it meant to be a permanent resident. “The potential future liabilities were big and detrimental to the country. The situation was not acceptable and although it took us nine months to come up with a new scheme, the new scheme is in Malta’s best interest,” Mr Fenech said.
A number of information sessions for professionals will be held through the Malta Chamber of Commerce, Enterprise and Industry.