In mid-September, Finance Minister Tonio Fenech announced a High Net Worth Individuals Scheme to replace the Permanent Resident Scheme, which was suspended abruptly at the beginning of the year.

Mr Fenech told a news conference that the new scheme would not attract people to come here simply to buy property but people who would also contribute to the local economy.

While attention at the time of the launch was mainly directed at the terms of the new scheme, which many felt to be too onerous, there is now concern that the new scheme will force existing permanent residents out of Malta.

Under the rules of the new Permanent Resident Scheme, property purchased by foreigners has to be worth at least €400,000, up from the previous minimum of €116,000. Moreover, people buying property under the new scheme have to spend a minimum of 90 days per year living in Malta.

Residents in this scheme will have to spend a minimum of €400,000 on a property or €20,000 a year in rent. They have to have health insurance recognised across Europe and pay an application fee of €6,000 to cover fees the government will be incurring through a sub-contracted international firm to carry out a “fit and proper” check to ensure that the applicant is “desirable”.

They have to pay 15 per cent tax on foreign income and normal tax on any local income. The minimum tax payable is €20,000 a year and €2,500 tax per dependent.

Under the new scheme, non-EU residents also have to renew their visa every three months or 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, when the money will become the government’s.

Their minimum tax payment will be € 25,000 a year.

But those residents already in Malta and registered under the old Permanent Resident Scheme have been targeted by the new scheme in ways that make their continued stay in Malta very doubtful.

If they are in rented accommodation and need to change their residence, for any reason, they must go from the previous minimum annual rental of €4,192 to the new €20,000 per annum.

A resident who will be affected by the changes said that people in rented accommodation change their residence for a number of reasons:

The landlord wants his property back

They have to move to be near their children’s new school

A developer has purchased the property next door and the excavation work is making life impossible

A relative, such as the mother, is moving in with them and their apartment is too small. In such cases, the rent for a new property into which they move must be at least €20,000 a year.

If the resident wants to buy property, the new property must be worth at least €400,000.

All this, residents have told this paper, has come as a great surprise. They were not prepared for it, they have not been given a limited period during which the old permanent resident scheme would still apply to existing residents. There is no way many of them can come up with such onerous payments and as a result many of them are seriously considering leaving. They must either stick to their present accommodation or else leave.

Malta had become their home and they have enjoyed living here, have integrated with the local community and many of them are involved in voluntary work, and now they are hurt that the country they have come to like so much is treating them so badly.

Their hurt has been compounded by quotes attributed to government figures that Malta is looking for “desirable” residents, as if they, the residents under the previous scheme, were somehow less than desirable.

Only bankers could possibly qualify under the new scheme, they argue, and look at what the world is going through as a result of bankers. Does the fact that they have so much money to spend make these bankers more “desirable” than the permanent residents who have contributed so much to the local economy over the years?

These people have paid their taxes, have employed people and have enabled the properties they have been living in to increase in value.

Under the old Permanent Resident Scheme, most of the properties rented at the prices that pertained then belonged to Maltese people, so the scheme contributed to the local economy and the mostly local owners. But at rents of €20,000 a year, or a purchase price of €400,000, there is a strong possibility that the rent or sales price would go to foreigners and so the money paid would not circulate in the local economy but would go straight out of the country.

Certain thresholds introduced in the High Net Worth Scheme launched to replace the Permanent Resident Scheme may impinge on the attractiveness of Malta’s offering, the Real Estate Section within the Malta Chamber of Commerce, Enterprise and Industry said.

The section said it feared that the new thresholds could have negative repercussions on the property market in general, with a ripple effect on all other service providers, not only the property industry but local business in general.

“Whilst appreciating that the introduction of certain measures were necessary, the section is apprehensive that the new rules may be too onerous. It also feels that the new cost of joining the scheme is rather exorbitant”, it said.

In reply, the Finance Ministry said that while acknowledging the concerns of the real estate sector, it would like to reiterate that the percentage of properties purchased by foreigners who are holders of permanent residency status is very low compared to the total number of properties purchased by foreigners in the last few years.

“Indeed, while it is estimated that over 15,000 foreigners live in Malta, only 1,042 are permanent residence scheme holders.

“Over the past four years, 3,457 properties have been purchased by foreigners. However, only 123 of these were residents under the Permanent Residence Scheme.”

The ministry said that the former scheme required the payment of only €4,193 in annual taxation.

On the other hand, following EU accession and the subsequent transposition of EU legislation, after five years in Malta, permanent residence scheme holders were eligible for free health care and free education, over and above the significant fiscal and visa benefits enjoyed by the scheme holders.

This was onerous and detrimental to the economy while also being unfair on Maltese taxpayers.

But the residents already in the scheme view such words as verging on the insulting. “The fact that we are so few does not give the government any right to ride roughshod over us,” they told this paper. And if there had been any abuse of their circumstances, the government should have introduced measures to eradicate that abuse, they said.