Bernard Laferla is a Qualified Chartered Accountant in both Scotland and South Africa and a Registered Tax Practitioner and Registered Auditor domiciled in South Africa. Laferla is a Malta BNI La Valette Chapter member. He can be contacted on email@example.com
The words “Give me your tired, your poor, your huddled masses yearning to breathe free” are inscribed on a plaque located on the pedestal of the Statue of Liberty in New York – in the last 150 years, much has changed.
The outright sale of citizenship was until recently only available in a few countries globally with Bulgaria, the Caribbean Islands, Cyprus, Malta and Turkey, being some examples. As a result of recent scandals, many of these schemes are being modified or even rolled back.
What however has been less conspicuous to the public has been the sale of residency, which is significantly cheaper and often has an option for the applicant to become a citizen after a prescribed period of time.
EU Residency is very highly prized as it allows unimpeded travel and work opportunities throughout the EU countries.
Being domiciled in South Africa, the author has been aware of such programmes and, for decades, has witnessed hundreds of thousands of wealthy or skilled South Africans utilising residency programmes to emigrate to the US, the UK, Australia and New Zealand, and in the long-term becoming valuable citizens of these countries. Citizenship of countries, such as the Caribbean Islands, Cyprus, Malta or Portugal was known but was relatively expensive.
As a result of the pandemic, many countries are now facing declining tax revenues and increased expenditures. In order to close this gap many countries have either modified or introduced a new export commodity – sale of residency.
EU countries including Austria, Italy, Latvia, Portugal and Spain have amended and started marketing their residency programmes over the past few months. They have also reduced the cost of the purchase of residency often with minimal physical residency requirements.
Traditionally, those seeking a second citizenship or residency in another country do so for a variety of reasons, but the most common ones being education and business opportunities, safety and security and ease of travel. These are great massive selling points for EU Residency.
What is noticeable is that the “selling” countries desire residents who will place no burden on the state and require that the new residents have sufficient funds to sustain themselves. This is a bonus for the “selling” country, as there are limited costs and, inevitably, the resident will boost that particular economy by purchasing assets and services in the country. Finally, there is always the opportunity for the selling country to be able to levy taxes on global income or death dues of the new resident.
What does this mean for Malta?
While countries such as Cyprus and Malta have been lambasted by the media for their sale of citizenships, many other EU countries have used the opportunity presented by Covid-19 to introduce or revise their residency schemes. Often the latter are cheaper and less onerous than those currently in place in Malta. The government of Malta has recently proposed a change to the residency by investment scheme, which still would require approval by Parliament
This presents a significant risk for the Maltese economy as, in all cases, people looking for residency in the EU will be quite happy to select the cheapest and least onerous options.
Malta should be aware of this and be careful that other EU countries do not capitalise on the negative media that has been generated to the long-term detriment of the country.
Please note that the information below is based on the latest information available and includes the proposed revision to the Malta Residency and Visa programme and assumes a sole applicant is one who invests by means of purchase of property or the establishment of a business.