High net worth individuals scheme

re 1) - I'm not sure if non-EU will be allowed to rent

6) minimum stay of 90 days per annum

Hi all,

the statements made by T.Fenech (according to Maltatoday) top it all:

' The new scheme will attract 'better quality of individual' to Malta-Fenech '

The Finance Minister said that ' Malta is sending out a message as to the type and quality of person it wanted to attract'

' We are competing for the quality of person, not for everyone to come to Malta'

http://www.maltatoday.com.mt/news/natio … individual

It seems that someone needs advice in English language and PR !

Cheers
Ricky

The Malta Today article suggests non-EU (actually non EEA + Swiss) can rent

there is also

7) cannot leave Malta for a stretch of time longer than 183 days.

http://www.maltatoday.com.mt/news/natio … individual

"a minimum tax cap of €20,000" ?? a cap is a maximum - I presume they mean floor

8) PR can now work in Malta

Just curious...How will this affect anyone who moved here under the 'Old' PR scheme (the one suspended last fall).   Will the 'Old' PR scheme certificate holders be subject to the new tax minimums (and 'deposit' requirements if they are non-EU)?  If they came here prior to 2011 thinking their tax liability was a minimum of around 4200 euros (can't remember the exact amount) and now it is 20,000 will they be subject to that new amount?   I would think not but wondered what everyone else thought since you never know here!

Thanks,
Kim

KTS wrote:

Will the 'Old' PR scheme certificate holders be subject to the new tax minimums (and 'deposit' requirements if they are non-EU)?

no

Malta - who do  they think they're kidding? what planet are these people on......just more craziness from Malta -----O I M.

Interesting article by Frank Salt in todays Times

timesofmalta.com/articles/view/20110922/opinion/Messing-with-the-economic-motor.385815

"Today, the local property industry first works its backside off promoting Malta as a safe, inexpensive and pleasant place in which foreigners and their families can come and live in peace. Then, when the market gets off its feet, quality developments are built, foreign residents, permanent and temporary come to Malta to see whether they would like to live here... bang... once again it is time to mess things up."


"It is only fair to say that there was a need to revise the conditions of Permanent Residency Scheme, but revise, not destroy all the good work that was done over many years. Hard work, by the people who are the sharp end of the property industry. Hard work, to bring into Malta and Gozo potentially thousands of permanent tourists that would be of tremendous benefit to the economy of our country.

Now we have to get back to the drawing board."

"because of the extraordinarily difficult, expensive and complicated conditions that have been issued, which have now placed us at the very bottom of the countries that will attract new permanent residents from outside the EU. Our competitors must be amazed at their good fortune."

mm interesting indeed

shot in the foot i think.

Is the new scheme already launched and open for applications, or it must be discussed and approved by Parliament?

Hi rferra,

the details of the scheme for EU/EEA/Swiss Nationals have been published in the Legal Notice 400/2011 on the 30.September 2011 in the Government Gazette.

These rules were deemed to have come into on 1 st.January 2011 so I would presume that applications are accepted as of 30.September.

Cheers
Ricky

Hello,
The details of the scheme for EU/EEA/Swiss Nationals have been published in the Legal Notice 400/2011 on the 30.September 2011 in the Government Gazette

I scrolled through the Government Gazette dated 30 September, online, but did not find anything relevant. Did I miss it or could it be another date ? Thank you.

Found it. One must not go to the Gazetteonline page.
Here's the link :
http://www.doi.gov.mt/EN/legalnotices/2011/default3.asp

Thank you for the info
Point 4 of the Law says that the applicant must hold "a qualifying property holding". So before applying one must buy a house. And if the application is rejected? One will be stuck with the property? It seems wrong.
Any idea?

under the old system I believe it was permissible to sign a contract to purchase a particular property subject to getting the PR permit

Tank you Georgeingozo. Was it also possible for renting?

Another point: all minimum tresholds, for taxes etc. are labelled in euro. Fine today. But if the southern countries leave the euro and devalue (probably at least a 40% devaluation), and Malta with them, the equivalent of the minimum tax in MTL will be upped 40% if the euro is the base, while for example an italian pension would also have been devalued 40%. So for people from the south of Europe it will be prudent to simply rent and not buy property, in order to be able to move away. Another negative for the property market.
It would be better if the thresholds were labelled both in euro and MTL at the rate fixed when Malta adopted the common currency

I come back to my first point. The Act says the property bought or rented, before applying, must be the place where “the individual habitually resides in as his principal place of abode”. According to the Act this individual "should not already be resident in Malta", so until acceptance of the application he will be simply a tourist, right? How can a tourist have his habitual residence and place of abode in Malta? I cannot understand.
Georgeingozo wrote that under the old system it was permissible to sign a contract to purchase a property “subject to getting the PR permit”. But as a contract does not establish “habitual residence and place of abode” this should not work. So one should buy or rent, and be stuck with a property if the application is not accepted. Who will take such a risk?

Malta will not leave the euro in any of our lifetimes

George, I do not mean that Malta is in bad shape, but I can tell you that other countries are. And if Greece, Portugal, Italy, Spain (and Belgium?) were forced to leave the euro it would be difficult for Malta to be the only spot with a strong currency in the Mediterranean, as it will loose tourists from all these countries (and applicants for the scheme)

It is interesting to read the rules published on the site of the IRS :

http://ird.gov.mt/regulations/hnwi.aspx

From all of the information available the applicant has to hold a Qualifying Property Holding ( before the Special Tax Certificate is released )

An applicant holds a Qualifying Property Holding if:
a. he owns an immovable property in Malta purchased after 14th September 2011 for
a consideration of not less than €400,000; or
b. the said applicant, having already filed an application under the Residents
Scheme Regulations, which application has been duly received and
acknowledged by the Commissioner of Inland Revenue, either:

i. owns an immovable property in Malta which was purchased before the 14th of September 2011 for a consideration of not less than €116,000, or

ii. has entered into a contractual commitment before the 14th of September 2011 to purchase an immovable property for a consideration of not less than €116,000 and actually purchases the property to which the contractual commitment refers by not later than the 31st March 2012; or

c. rents an immovable property in Malta for not less than € 20,000 annually as lessee, and in all cases, the applicant and his family members have their habitual residence in such property as their principal place of residence.

At application stage applicant is not required to submit evidence relating to the acquisition/rental of property but certificate of special tax status will be released only when
applicant submits evidence of qualifying property holding.
It is important to note that:

- no person other than the beneficiary and his / her family members reside in the Qualifying Property Holding, and
- such property may not be leased or sub-leased.

Where applicant has already acquired a Qualifying Property Holding by the application date, an authenticated copy of the contract providing evidence of such ownership or lease needs to be attached to the application.

So it seems quite clear that you can apply as an individual, as duly represented by an authorised registered mandatory, to the Commissioner for special tax status under these rules and at application stage you are  is not required to submit evidence relating to the acquisition/rental of property but certificate of special tax status will be released only when applicant submits evidence of qualifying property holding.

It is an application for a Special Tax Status in Malta with certain conditions.

Seems quite clear and simple -)))

Cheers
Ricky from sunny Germany at the moment.

Thanks a lot Ricky. I had printed the IRS Guidelines doc in mid September and now realize it has been corrected with the provision that at application stage it is no longer required to have already acquired or rented property. That makes sense.

Still the question of what happens in case of devaluations in southern countries is a source of concern, in the case that Malta devalues as well and (worse) if Malta does not. The unknown risk will lead people to rent, in order to be able to run away, and not buy (while the scheme is also expected to support the property market)

Kind regards

Hi rferra,

as George already said , we will not see Malta leaving the S.E (Southern Euro) area but ....we might see other countries leave the S.E. area and I think Italy will be in the same currency area as Malta if this happens! But this is pure speculation!

The new regulation we are discussing has nothing to do with the property market although the M.B's (Maltese builders) would like to see it that way. It is a 15 % tax scheme on income brought into Malta.

Being from the EU you are just as welcome to rent a qualifying property for 20.000E/year. That already supports the over-development of Malta as a quick calculation shows that that amount is 5 % of 400.000 € ! Where else do you get 5 % interest on your capital ? So don't worry , the Maltese builders and developers don't really care!

If you are not interested in the 15 % income tax business you are much better off applying for ordinary residence. The other conditions are just about the same and you can buy or rent any property that you want.

This is not advice on your personal tax situation , just my personal opinion and publicaly available information.

Cheers
Ricky

Ricky wrote:
we might see other countries leave the S.E. area and I think Italy will be in the same currency area as Malta if this happens!

Yes, that is exactly what I said. And in case we go back to local currencies, devalued, or we are in a South euro, devalued, and one is expected to pay the equivalent of 20,000 old euro, that means that the minimum tax will cost in South euro or Maltese Lire or Italian Lire maybe 40% more.

One year ago such discussion could seem academic but now...

if your scenario turned out to be true,the EU might not survive, the Maltese property market would collapse taking down the Maltese banking system, there would be a massive jump in Maltese bond yields, so the least of your concerns would be about minimum tax rates to continue living in Malta.

HI rferra,

purely speculativ I presume that in the case of introduction of new southern or whatever Euro's I would not worry too much unless you want to transfer your money to one of the countries that you think would have a 'better' Euro.

This is exactly the reason why I am keeping all my Euro's in 'German' Euro's! -))

I do not see any EU country going back to their local currency! Not even Greece! They can get by with a decent default to get rid of their debts! But that would not solve their (and Malta's or Italy's) problem of not being competitive with the more successful EU countries. This is where the idea of two different Euro's steps in !

This is my personal belief and if you see things similar you should really consider moving your money to other ,safer havens ! And once again, do not consider this as advice on your personal tax or money situation. I'm not a tax adviser or bankster or otherwise legally involved person-))

I think we will be in for interesting months ahead! The members of the 'Troika' must be real political whimps accepting the way they are being treated by the Greek authorities. Any 'normal' person would have turned already and left Greece but it seems that for this time they have to give the go-ahead for the next billions for Greece. Believe me, Germany as a major netto payer and guaranter is at boiling point. And Greece is really unimportant on an European scale. I really hope and pray that Italy does not follow in it's steps.

That should be your main concern and not the Maltese tax scheme !

Cheers
Ricky

They have to give some more billions to Greece, otherwise a lot of European banks would get a bloody nose, and if the next step is Italy or Spain the banks would spit their teeth. They own a large part of European debts. French banks are first in line to take the blow,and then the German. Germany, the payer, has to pay because if Southern Europe devalues the costs for Germans would be multiplied. If European markets collapse they will have to eat their Mercedes and Porches and machinery. Germans have become the lords of Europe, they won the war... provided they don't make myopic mistakes now

ricky wrote:

This is exactly the reason why I am keeping all my Euro's in 'German' Euro's! -))

If the scenario panned out, then I don't think that would help you unless you are German - I suspect Germany would protect euro deposits held by Germans in Germany, and not euros held in Germany by non-Germans

My take on this ? The euro is a political not an economic construct - from the very outset many economists questioned the idea of the euro - an ideal currency bloc needs a number of criteria, and the original currency bloc didn't share them - the expanded eurozone even less so.

USA is close to an ideal currency bloc, as is the UK
1. common language
2. free movement of labour and capital
3. a fiscal and monetary policy covering the whole zone, allowing transfers from rich to poor areas
4. flexible labour markets
5. eurozone wide bonds guaranteed by all countries
(this I learnt at uni 30 odd years ago when the idea of the euro was merely a concept, but remains true)

if the euro (and the EU) are to survive, and because its a political not an economic construct, everything will be done to make sure it does survive. Dividing the eurozone into 2 won't work unless the 2 currencies are allowed to fluctuate  - merely devaluing the new PIIGS currency and then fixing it to the GFH currency will lead to massive speculation about future devaluations and also higher interest rates in the PIIGS currency than the GFH one - and having them fluctuating would be politically unacceptable.

what needs to be done ?
1. Greece will be allowed to default, but remain in the euro
2. Eurozone wide govt bonds will be issued
3. measures to make the labour market more flexible (already happening in Greece and Spain)
4. much tighter fiscal discipline (already being discussed)

Hi George,

you make some interesting points!

I do disagree with one of them. If there are ever two 'Euro' zones it only makes sense if they are allowed to fluctuate in value. That is exactly the problem that the PI(I)GS have. They are economically weak countries that would need to devaluate their currency but are stuck with the Euro that is being kept strong under immense costs.

On another topic.

Today is the German Day of National Unity to celebrate the re-union of former East Germany with Germany in 1990. This means that the Germans have 21 years experience with a monetary transfer union. The direct costs (through Solidarity Tax and VAT increase of 1 %  have been around 300 Billion and the indirect costs (pensions and other social transfers) are estimated at around 1.5 Trillion Euro's!

Germany knows what a transfer union means and that is exactly what is being proposed with the introduction of Euro Bonds and other debt guarantee plans (EFSM and ESM) and the idea is not very popular with the population as the transfers to former East Germany are still costing around 100 Billion every year. That is a lot more than would be needed to 'save' Greece from bancruptcy.

So, back to your thoughts about the ideal currency bloc.

You forgot one thing : One government with fiscal and legal power over all countries. And that is where I think it won't happen.

But it is interesting where a discussion about the HNW tax scheme leads us . At first I thought it might be getting off topic but now I think it all belongs together. Taxes,property market in Malta,the European idea ,the European (World) debt problem and how it might affect us all in the future.

Cheers
Ricky

"it only makes sense if they are allowed to fluctuate in value." - from an economic point of view yes, but not from a political one, and politics trumps economics

"One government with fiscal and legal power over all countries" -

thats what I meant by "3. a fiscal and monetary policy covering the whole zone, allowing transfers from rich to poor areas", except its doesn't require a government

"They are economically weak countries that would need to devaluate their currency" - their main weakness is over rigid labour markets - they were competitive when they joined the euro, but have had too high wages growth relative to productivity since then. That is what needs sorting - a devaluation is a short term fix only

OK lets say there was a currency area with PIIGS in it - why should that succeed better than the current eurozone ? It would actually be in a worse situation - it would be dominated by Italy and Spain (I guess 80-90% of the group's GDP and debt), and require a new ECB

Then there is the matter of interest rates - what interest rate would the GFH block have ? Maybe 2-3% long term - and PIIGS ? probably 7% plus - so Italy and Spain would end up paying more for their debt than now,plus the amount of their debt in their new currency would rocket and almost certainly force them to default as well.

If Spain and Italy leave the euro, they would be far better off either having their own currencies, or being in a block together - why would they want to share a currency with Ireland, Portugal, Greece (and possibly Cyprus and Malta) ? I just cannot see a 2nd euro zone happening - its either stay as we are, or countries drop out entirely

I'm sorry to say that your point 3.) is against the German constitution and the German Constitutional Court just voted on the German participation in the EFSM on the 7.September 2011.

Although it judged the financial help program for Greece and the past EFSM as being constitutional it also made a few important statements to future developments:

Any future financial participation in any kind of help for other Euro-zone countries has to have a positive vote on it by the German parliament. This could prove difficult as the present government has only  very small majority left. The pressure from the tax payers is increasing and the next elections are already on the board. More than 60 % are against any further payments or guarantees although actually so far not much has had to be paid anyway.

Euro Bonds in any form are against the German constitution.

This court ruling has been kept under the carpet for political reasons but will have a major impact in the future as there will be no Euro bonds without German participation. Someone seems to be dreaming !

I expect that Greece will get one last money payment this month before finally being denied further payments in December and defaulting in January 2012.

Want to bet ?-)))

Cheers
Ricky

Oh, Greece will default in some way or another - their debt dynamics mean they have no choice