Wealthy non-EU foreigners will be enticed to buy property in Malta through the revival of the Permanent Residence Scheme, the Federation of Estate Agents hopes.
We made sensible proposals to the previous Administration that were ignored
The previous Administration’s decision to replace the scheme in 2011 “killed certain markets overnight”, according to federation vice president Ian Casolani.
“For example, there was a growing number of wealthy South Africans looking to invest in property in Malta as a safety net, but Malta was no longer attractive after the changes as the costs became too prohibitive,” said Mr Casolani, who is also vice-president of the Real Estate Business Section within the Malta Chamber of Commerce.
Prime Minister Joseph Muscat said in last week’s Budget debate that the Permanent Residence Scheme would be revived.
This followed on from Labour’s manifesto pledge to improve existing residency schemes aimed at enticing wealthy foreigners to move to the island.
The old Permanent Residence Scheme was suspended by the previous Government in January 2011 and replaced with the High Net Worth Individuals (HNWI) scheme in September that year.
The HNWI scheme was intended to attract wealthy foreigners who not only purchased property on the island but also contributed to the economy.
In comparison, the old scheme was viewed by the previous Government as outdated and open to abuse.
Problems included beneficiaries purchasing property and never visiting Malta; third-country nationals using the scheme as a means to gain entry to the wider EU; and beneficiaries accessing healthcare treatment that far exceeded the value of their contributions to the economy.
The 2011 changes meant that the minimum required spend on property increased from €116,000 to €400,000 for properties bought after September 14, 2011, among other conditions.
EU/EEA/Swiss nationals who applied for the HNWI scheme were subject to different thresholds and conditions than third country nationals.
Minimum annual tax contributions increased from €4,192 to €20,000 for EU/EEA/Swiss nationals plus €2,500 for every dependent, and €25,000 for third country nationals plus €5,000 for every dependant.
The incentive for foreigners applying for the scheme was that they paid just 15 per cent tax on their overseas earnings received in Malta, with the possibility of claiming double taxation relief.
Third country nationals who applied for the HNWI scheme and declared that they intended to be long-term residents in Malta had to enter into a contract with the Government with a financial bond of €500,000 and €150,000 per dependent, to effectively purchase permanent residency after five years.
Those who did not declare their intention to be long-term residents could only reside in Malta for a maximum of nine months per year and their eligibility for a Schengen visa was affected.
Mr Casolani said there had been numerous “constructive” stakeholder discussions between the Federation of Estate Agents and Labour officials prior to the election.
He was confident the new Government shared many of concerns about the prohibitive costs and conditions of the HNWI scheme.
“We always accepted that the old system needed to be revised. We made sensible proposals to the previous Administration that were ignored,” he said.
“We are not expecting a free-for-all under Labour, especially in terms of access to Schengen visa and social benefits, but we want a system that is sensible and fair.”
Michael Falzon, president of the Malta Developers Association, said the HNWI scheme had not served its intended purpose and the number of applicants was very low.
Mr Falzon accepted that the tax, property value and other thresholds in the old Permanent Residence Scheme were too low.
“But the parameters introduced in 2011 were too high. We need them to be somewhere in the middle,” he said.