Not enough emphasis has been made on one huge political blunder committed by the late Nationalist administration in the years before its defeat.

For all the talk about how Malta’s economy kept going in the years of crisis (true enough) and how the past administration was good at defending the national economy, there was one huge case where it caused a crisis out of nowhere and, in true Mintoffian fashion, pigheadedly insisted it was in the right and refused to see the force of reasonable objections.

Then, when it could not resist the tide any more, it backed down ungracefully and came up, after months of suspense, with an alternative that was far worse than what was there before.

Meanwhile, a golden opportunity remained untapped.

I am speaking, of course, of the late lamented Special Residents Scheme that Tonio Fenech saw fit to abort one Christmas Eve. Later, it turned out he had been scared out of his wits by a huge hospital bill run up by one person, that’s right, just one person, whose long-term hospitalisation cost the government a considerable sum.

This, and there may have been other loopholes, panicked the Gonzi government into suspending the scheme without any warning. People who were thinking of moving to Malta lost money in aborted promises of sale (konvenji) and developers and real estate entrepreneurs remained with empty properties on their hands.

For quite a long time, the government remained in a state of denial until, weeks or months later, it succumbed to the protests from the real estate sector and commissioned what it called a proper review of the scheme.

The new scheme, promised time and again and delayed by weeks and months, when it was finally launched had everyone laughing his head off, for it made it completely impractical for anyone to move to Malta. They had to have such a huge bank account and deposit such a huge sum that one seriously wondered if the person who came up with this was thinking of Monaco, not Malta.

Predictably, this attracted hardly anyone. And it came far too late to make any impact, considering the impending election.

As in so many other areas of the Gonzi time, the issue was left in the hands of civil servants and outside consultants who with supreme arrogance and heads in the sand laid down the law as they saw fit without any consideration for the results.

As I see it, that’s why politicians are there for: to have an overview, and to monitor the consequence of decisions that are being taken. To let civil servants have their way unchecked means asking for trouble.

I remember quite well the scandalized tones with which Mr Fenech replied many times in Parliament to questions on the issue, as if this poor man had almost collapsed the economy of the island. In this matter, the PN government was well and truly penny wise and pound foolish.

There was also, if I remember correctly, an issue with people coming from outside the EU and using Malta to enter the EU and get full citizenship and travel rights as if they were asylum seekers not fully-fledged residents. The irony was that I had joined a government delegation which toured the Gulf States and which portrayed Malta as an entry point into Europe. Why the people from the Gulf were welcomed but the Chinese, for instance, were not, escapes me. More on this shortly.

While the Gonzi administration was playing virtuous virgin, other countries were busy doing their thing. I recently reported how in the space of one year, just one year, 1,000 Chinese entered Cyprus thus boosting the fragile economy after the bailout.

Then this government was elected and in just a few weeks it came up with a revamped and much improved version, now called the Global Residence Programme. At the end of this article, you can find a description borrowed from a local lawyers’ studio.

My information is that now demand is increasing hugely, and not just from China. A government delegation, for instance, is soon going to South Africa to try and attract potential residents.

But if the government wants to see the benefits of this and help kick start the developers of high-grade residential properties, it must first eradicate the huge bottleneck that still exists.

This bottleneck is called immigration and this too was another of the PN government’s signal failures. Immigration control fell between three stools – police, the Foreign Office and Citizenship Affairs. There were squabbles and disputes along with turf wars all the time, rendered even worse by the personalities involved.

It was only at the end of the PN term that this confusion was sort of straightened out. Meanwhile, people with regular visas were turned back at the airport and the people involved seemed to think that a person who was for example Ukrainian and a woman was surely a prostitute or a pole dancer.

The issue is still not completely resolved. Up to a few weeks ago, asylum seekers and people requiring a residence permit had to cram into the DOI building for hours on end with associated hassles and disputes (and sometimes fights). What a way to welcome a millionaire who sought to bring money and opportunity to Malta!

Anyway, they have now moved to the Evans Building (maybe that was planned by the PN government) and two streams are being created. More staff is needed to process applications.

The PN paper, In-Nazzjon, clearly forgetting the role and mistakes of the past administration, ran a picture of a queue at the Evans instead of investigating the matter to find out what was happening.

Still, I add, there is much more to be done on this issue. People in cities in Russia or China have to physically go to the capital city to get a visa (and I believe people in the Ukraine have to go to Russia). Air Malta would dearly love to lay on more routes to Russia but is hampered by this issue. We Maltese do not seem to appreciate enough the attractions of Malta’s mild winters on people locked for six months in ice and snow. I also know, and the government should also know this and override the timorous objections civil servants or police come up with, that other EU countries are willing to issue Maltese visas from their own consular offices, which Malta simply does not have – many times what we call our embassies consist of a man and his dog.

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Malta: Global Residence Programme

Last Updated: 29 July 2013

Article by Christian Farrugia and Maria Borg Scicluna

Fenech Farrugia Fiott Legal

In June 2013, the Maltese government launched the latest residence scheme – the Global Residence Programme – a residency and tax programme which provides favourable tax incentives for non-EU, non-EEA and non-Swiss Nationals seeking an alternative residence base in the Maltese Islands. A legal notice bringing into effect the Global Residence Programme for EU Nationals is expected to come into effect in the second half of 2013.

Benefits of the Global Residence Programme

Beneficiaries of a Special Tax Status under the Global Residence Programme (GRP) enjoy a flat rate of personal income tax of 15 per cent, chargeable only on a remittance basis. Foreign source income received in Malta is subject to Malta tax only if remitted to Malta while foreign capital gains are altogether outside the scope of tax in Malta. Local source income arising from business, investment or other economic activity held in Malta is subject to tax at 35 per cent. Minimum tax under the present High Net-Worth Individuals (HNWI) Scheme has been reduced from €25,000 for the applicant (plus an additional €5,000 per dependent) to a minimum tax of €15,000 under the GRP, covering all dependents.

Beneficiaries are not legally bound by minimum stay requirements. However, they are not permitted to spend more than 183 days in a calendar year in another jurisdiction.

In order to qualify for residency under the GRP, an applicant will need to satisfy the following conditions:

Property purchased in the island of Malta must have a minimum value of €275,000;

Property purchased in the island of Gozo or in the south of Malta must have a minimum value of €220,000;

If the applicant opts for rental of property, the property must have a minimum annual rental value of €9,600 (or €800 a month) in Malta and €8,750 (or €730 a month) in Gozo or in the south of Malta;

Applicants must also take out an all-risks medical insurance – they will not be eligible to benefit from Malta’s free State healthcare system.

The definition of dependents has been widened from that under the HNWI scheme. The age limitation of children (natural, adopted or in care) has been increased to 25. Dependents now includes brothers, sisters and direct relatives in an ascending line as long as it is shown to the satisfaction of the Director of Inland Revenue that these are dependents of the beneficiary of the GRP. Certain employees are also provided for including carers, butlers, personal drivers and other domestic staff in the employment of the applicant for the preceding two years.

Applying for Special Tax Status under the GRP

Special Tax Status under the GRP Rules must be applied for through an Authorised Registered Mandatory and the non-refundable application fee is of €6,000 and €5,500 if the qualifying property is in the south of Malta.

The GRP Rules state that the beneficiary must continuously satisfy the obligations in terms of the Rules and also that the special tax status may be inherited.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.