Foreigners confused by changes to permanent residency status

Foreigners living in Malta agree that recently-introduced changes to the permanent residency scheme have made it prohibitive for them to apply, but many are unclear about its implications.

I hope this scheme will not be the start of a drive to push foreigners... out of the country

The higher income and capital thresholds set by government were slammed by real estate agents with veteran realtor Frank Salt describing the new scheme as very complicated, extraordinarily expensive and virtually prohibitive.

It is a feeling shared by some foreigners who spoke to The Sunday Times on condition of anonymity, but their biggest concern is lack of information.

“I was practically left in the dark on the difference between ordinary residence and permanent residence when I bought a house here just over a year ago,” a mother of three told this newspaper.

She said that apart from the tax advantage of 15 per cent on income derived from abroad, the advantages of the previous permanent residency scheme were unclear.

“All I know is that by not being a permanent resident I paid exorbitant water and electricity rates, but this is being contested at EU level,” she said.

Another UK national who moved to Malta five years agosaid the new thresholds made it impossible for her to look intopermanent residency.

“I bought property here seven years ago and was exploring the possibility of applying for permanent residency but that has now been put on hold,” she said.

The self-employed woman admitted that apart from being charged lower water and electricity rates, the benefits of permanent residency were still very vague.

‘Non-residents’, even if they own property and live in Malta all year round, pay higher utility rates, an issue that is being contested in the EU on the basis of discrimination.

“I hope this scheme will not be the start of a drive to push foreigners, who have contributed with their work and taxes, out of the country,” the woman said.

A Finance Ministry spokesman admitted the new scheme created the misconception that only foreigners who fall within the thresholds would now be able to buy property in Malta.

“This is not the case,” he said, adding that the new scheme did not prevent foreigners, irrespective of their wealth, from buying property of any value.

Under the scheme, EU nationals wishing to take up permanent residence in Malta must purchase property worth at least €400,000 and pay a minimum of €20,000 a year in tax.

Under the previous scheme, foreigners buying property worth more than €75,000 were given the option to obtain permanent residency, which obliged them to pay tax on income derived from abroad in Malta.

The scheme did not make provision for foreigners to work in Malta, but it did it allow them to enjoy various benefits extended to Maltese citizens, including free healthcare.

Under the new scheme, foreigners eligible for permanent residency are also allowed to work.

“The scheme addresses only permanent residency status, which in any case the vast majority of foreign buyers before never bothered to apply for,” the spokesman said.

He pointed out that over the past three years, some 6,000 properties were sold to foreigners and just 123 formed part of the old permanent residency scheme.

“It is only if the foreigner wants to benefit from the advantages offered by permanent residency status that the person will have to satisfy the more onerous conditions,” the spokesman said.

He admitted though that permanent residence status holders would have to satisfy the new conditions if they decide to sell their current property and buy a new one.

Asked whether government was considering changing the conditions of the scheme, the spokesman said it would have to wait and see.

“The new scheme is being marketed through Malta Enterprise and Finance Malta and before making any changes, the government will have to evaluate itseffectiveness but the general principles will not be touched,” he said.

The previous permanent residence scheme was suspended last year by the Finance Ministry when it was alerted about a British expat – who had just obtained the status – who was receiving €500,000 worth of free cancer treatment in Malta after buying a €100,000 property.

According to the EU’s statistical agency Eurostat, in 2009there were 18,100 foreignresidents in Malta with 8,200 coming from EU memberstates and 9,900 from non-EU countries.

ksansone@timesofmalta.com