The chairman of Identity Malta, Joe Vella Bonnici, has no doubt about what will happen to the Individual Investor Programme once it reaches its 1,800 maximum.
“No one believes for a moment that if it were successful, and we brought in all the money expected, that it would not be extended.
“From an economic point of view it would be shortsighted to stop something if it works. Today, we get people coming to live in Malta for all sorts of reasons, from carers and nurses to chefs and waiters. If we have a choice, is this what we are going to stop? Or would you try to limit other migratory inflows? This is something which will have to be assessed in the light of where this country wants to go,” he said.
The Individual Investor Programme raised considerable political hackles, not to mention howls of patriotic protest, when it was first mooted in 2013. It was subsequently overhauled to make it more palatable to its critics – but with the first passports now being handed over, the drive to assess the economic impact is slowly but surely taking root.
Mr Vella Bonnici pushed a plate of Maltese almond biscuits past the flower arrangement on the board table at the Identity Malta office in the Mediterranean Conference Centre: “Would you like one? Two applicants came here to take the oath of allegiance this morning so we laid on some sweets,” he said.
The government announced a few weeks ago that 13 foreigners had become Maltese citizens, with another 573 being processed.
Many of the 13 are people who had been living in Malta before the scheme was announced and who therefore already satisfied the 12-month residency. The others are being subjected to due diligence – a verification process – which involves a painstaking check of each and every document, each and every link, each and every signature by Identity Malta’s team of 20. It is hard to appreciate the scale of these checks. The application itself fills a standard file.
However, the filtering process starts with the authorised registered mandatories – agents – who must have access to sufficient software to “know from day one who they are dealing with”.
“We have turned away some applicants – the numbers are not significant – for a variety of reasons ranging from their medical and police records to the fact that they are ‘politically exposed people’. It is in the agents’ interest to be thorough.
“It is very difficult to tell applicants at the eleventh hour that they did not meet the criteria, after they have paid a considerable amount of money – applicants pay a non-refundable €650,000 – and gone through certain processes. But we have had to do it,” the CEO of Identity Malta, Jonathan Cardona said.
The legislation for the fund is ready and we are told that it is at an advanced stage of being set up
There are now 113 agents including concessionaire Henley and Partners, which is no longer involved with the assessment of the applications, as was originally conceived.
So far, Identity Malta has handed over €12 million to the government, targeting about €50 million this year, of which 30 per cent will go to the consolidated fund with the balance going to an economic and social fund.
“The money collected so far is sitting with us,” Mr Vella Bonnici said. “The legislation for the fund is ready and we are told that it is at an advanced stage of being set up; we hope it will be done quite soon, within weeks.”
The fund, which is being handled by the Office of the Deputy Prime Minister, will be administered by an agency, also not yet set up. Until this is done, it is pointless to hazard a guess as to where the money could be spent, although it was announced that it would take “a longer term perspective of the economic and social needs of the country, from research and development, technological development, education, health”, Mr Vella Bonnici said.
Apart from the money collected from the application fee, applicants must either buy a property worth €350,000 or rent for at least €16,000 a year.
The majority of those whose application for citizenship is at an advanced stage are more interested in buying than renting – and they are spending far more than the minimum of €350,000.
“I don’t meet all the applicants but I do meet most of them – and we have not heard of anyone buying for much less than €1 million. And the highest so far is nearly €4 million,” Mr Cardona said.
So far, the numbers are hardly enough to skew the property market and Mr Vella Bonnici believes that with high-end developments coming on stream, like Pender Gardens, Metropolis and various high-rises, there will be enough on offer for even the most discerning buyers.
“But at the moment, it is tight,” he admitted.
Anecdotal evidence from real estate agents suggests that many of the applicants are coming to Malta with the intention to rent – but fall in love with the island and decide to buy.
“We haven’t really started to analyse the information as the obligation to rent or buy only takes force once they get the approval from us,” Mr Cardona said.
“But yes, we have a number of applicants who came here with the idea of going for the minimum possible but who end up buying.”
Identity Malta has to be given a copy of their purchase or rental agreement so it will eventually be able to analyse these figures, as well as monitor rented properties to ensure they do not sublet for five years.
“They need to give us an address in Malta when they apply and although they do not need to spend €16,000 as minimum rent at that stage, they do not tend to rent for much less than that,” Mr Cardona said.
“These are millionaires, even billionaires. None of them have had to go the bank to borrow money to pay for this programme, I assure you!”
Apart from the property requirement, the scheme was designed to encourage the applicants to forge ties on the island – not merely through a somewhat vaguely defined 12-month residence, but also through involvement in other areas.
“Our idea is to set up a post-citizenship relationship with them. We have various ideas to ensure that, once they take citizenship, we remain in touch, telling them how the programme is going and bringing certain areas to their attention,” Mr Vella Bonnici said.
Mr Cardona added: “We need to find what they are passionate about whether it is sports or culture or social welfare. You can create a synergy like that.”
There are also obligations relating to investments, and here too, the citizenship scheme is punching above its weight, at least according to participants at a workshop during the Finance Malta annual conference.
Mr Cardona, a bit more thick-skinned after a year of controversy, shrugged.
“That is why this programme was created: to attract investment and high fliers to this country. Our budget to market ourselves out there is very limited – both in terms of money and human resources. This programme has managed to put Malta on the map of really successful individuals and helped them to understand what Malta is really about.
“We bring to their attention where Malta has been extremely successful, where we are global leaders, like the financial sector, i-gaming, maritime and aviation services. And it is working. We liaise with other authorities and ministries, from Malta Enterprise to Finance Malta, depending on their background or area of interest,” he said.
“Ultimately the country has to decide what benefits we are getting from citizenship and residence programmes and decide what it wants to do.”