Residency scheme must not strain economy, says Fenech

A revised permanent residency scheme must ensure high-value people attracted to Malta contribute to the country’s economy rather than strain it, Finance Minister Tonio Fenech said yesterday.
The new scheme, intended to replace the one suspended in December, must strike a balance between the payback for the country and the strain caused by the benefits people taking up such a scheme were offered, he said.

Mr Fenech said talks were under way with the European Commission, which was approached by people who took advantage of the scheme and received their permanent residency permits and who asked for clarifications because they wanted more benefits.
The property scheme for foreigners was suspended after several cases prompted a rethink of the system, to the dismay of the real estate industry, which last year saw 151 foreigners buying €35 million worth of property.

One of the cases involved an elderly British cancer patient who received €500,000 worth of free treatment in Malta after buying a €100,000 property. Mr Fenech said it was not only this case that led to the suspension.

The elderly man was one of hundreds who took advantage of the permanent residency scheme, which gave foreigners buying property worth more than €60,000 the option of obtaining residency after five years. This, in turn, obliged them to pay tax but entitled them to the benefits extended to Maltese citizens, including free health care.
The industry is insisting the arrangement could easily have been modified to avoid cases such as the one raised by the government but without suspending it, potentially closing the door on millions of euros in property sales.

John Huber, a member of the management board of the Chamber of Commerce, Enterprise and Industry, said the case of the British cancer patient was not only “possibly a one-off case” but could be unrelated.
Any EU national who takes up residence on the island can have a Maltese health entitlement card without having to pay tax here. On the other hand, residence permit holders have obligations imposed on them, including the payment of a minimum tax.
“Suspending the scheme will not stop another case like the reported one happening, as long as Malta remains an EU member state. The chamber has been trying to convince the government this is not a property issue, but a holistic one that benefits the whole economy,” he said.

However, Mr Fenech said real estate agents were “wrongly marketing” the scheme by giving the impression anyone who took it up would have a right to free health care and education, as if they were Maltese residents.
“We have to be careful we don’t end up with a situation where the country’s citizens, through their taxes, pay for extra services in return for a small amount of €4,000 the country was making in tax, apart from the investment in property,” he said.
“We had a number of cases that opened our eyes and we have no option but to revise it.”

Asked about discussions with the Commission, Mr Huber said if Malta was being questioned, the government should ask the Commission to look into the Portuguese scheme introduced late last year, which was offering a 10-year zero-per-cent tax rate for retirees.
“We were already losing potential clients before the scheme was suspended. You can imagine what is happening now. The irony is we are ‘giving’ business away to competitors who we are helping to bail out,” he said.

Ian Casolani, president of the chamber’s real estate section, said these people did not need Maltese free health care and free education as “they have adequate cover for these already and do not need us to provide it for them”.

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