Reaction to the Report from the Commission regarding Investor Citizenship and Residence Schemes in the EU

Jan 23, 2019 | News

Press Statement issued by the Government of Malta

Reaction to the Report from the Commission to the European Parliament, The Council, The European Economic and Social Committee and The Committee of the Regions regarding the Investor Citizenship and Residence Schemes in the European Union

The Government of Malta is pleased to note that the European Commission recognises the economic benefits of investment migration, a sector that has significantly boosted employment across the EU and beyond. Government endorses some of the key outcomes of the highly awaited report from the Commission to the European Parliament, The Council, The European Economic and Social Committee and The Committee of the Regions – Investor Citizenship and Residence Schemes in the European Union.

The report also raises a number of concerns and arguments on the Residency and Citizenship by Investment (RCBI) industry’s impact on the Union, focusing on the 20 Member States that offer investor citizenship and residency schemes in the EU. Malta agrees and supports many of the report’s recommendations, while having reservations on a few issues raised.

Constructive step towards coordinated action

Government welcomes the report as another constructive step towards coordinated action and standardisation in RCBI across the EU and agrees with the recommendation that there should be more cross-border cooperation when it comes to information sharing. Malta has been at the forefront of this and has constantly been advocating for further cross-country collaboration. Malta also recognises that this is beneficial to both the country and to the wider industry in general, and has been working on establishing cooperation mechanisms via various bilateral meetings and fora in this respect.

Concerns about security risks

The Maltese Government disagrees with the report’s statement that investor citizenship is granted under less stringent conditions than under ordinary naturalisation rights. Persons given residence and citizenship rights in the EU via other avenues, which on average is estimated to exceed four million a year (where in contrast RCBI beneficiaries represent a fraction of this figure), do not undergo the rigorous due diligence checks and investigations in place for RCBI applicants.

Another concern for the report is physical presence. Malta is one of the few jurisdictions where physical presence is mandatory and a residence status is required for a minimum of twelve months. Malta reiterates that a link to the country where naturalisation happens is an important element of the process. Moreover, other links with the community are established that attest the individual’s relationship with the state, namely travelling to Malta, business connections, donations to philanthropic causes, memberships in societies and other diverse activity.

Enhanced due diligence

Malta adopts one of the most stringent due diligence processes based on a strict 4-tier investigative procedure spanning over a number of months, which also results in the highest rejection rate in the industry, averaging 25% of all applications received compared to only 10% of other jurisdictions. This to ensure that applicants who make it through are those with a clean bill.

Malta’s due diligence process considered by the industry as one to emulate – the ‘gold standard’. Checks using the EU’s centralised information systems mentioned in the report are part of the investigative process in place. MIIPA goes to a serious level of detail including the impact that an applicant has on their immediate network and society in general.

Malta agrees and supports the report’s call for a uniform process across countries, and is ready to share its experience and best practices it adopts, whilst maintaining an open mind to continue improving these due diligence processes.

Money laundering and tax evasion

The Malta programme adheres to the EU’s AML directives, also in place across other institutions as demanded via the local financial regulator. Checks on the source of wealth are an elemental part of the investigative checks done on applicants, as are investigations of business connections, political affiliations and criminal court cases.

While reiterating that the Malta RCBI programmes do not offer any tax benefits, the main concern highlighted in the study points towards risk of circumventing Common Reporting Standard (CRS). Malta, as an EU member state, abides by the EU agreed directive on automatic mandatory disclosures.

Furthermore, Malta has not only cooperated in the discussion and compilation of information on such schemes, but also made a number of commitments to mitigate further any potential risks. This shows Malta’s commitment to ensuring that the Malta Programmes are not used for the purpose of circumventing the CRS. Malta also welcomes any additional mandatory disclosure obligations to come into effect in 2020 and in the same manner that it supports the exchange of information in other areas.

Transparency and governance

In its commitment towards transparency, Malta is one of few European countries that publishes the names of individuals who obtain citizenship. The nature of the due diligence checks is also public. Additionally, professional firms and practitioners who are members of professional bodies, and accredited to submit applications, give an additional layer of good governance. Malta is also the only country that has a Regulator who is another dedicated institution that monitors the governance of the programmes and agencies, and publishes additional statistical information yearly.

Conclusion

The Government of Malta welcomes the EU’s acknowledgement that the decision to naturalise citizens is the sovereign right of each member state. It is also clear from the report that Malta stands out as having a robust programme. Indeed, many of the criticisms levelled have, in fact, have already been taken into account by Malta, with measures in place countering the lacunae mentioned in the report.

Malta’s programme has had a positive impact on the country by attracting a wealth of new talent and foreign direct investment from across the globe. During the first four years, the Individual Investor Programme generated an income of over €700 million, 70% of which will be reinvested in infrastructural and social projects for the benefit of current and future generations.

At a time when geo-political volatility is high, Malta believes it can offer a second home to successful families where they can re-settle in a safe and stable country with opportunities to work, study and do business both in Malta and beyond.

As a proud member of the EU, Malta holds Union law in high regard and always acts in the spirit of good faith and will continue doing so. Malta welcomes the Union’s commitment to keep monitoring the sector and will support any action that strengthens the integrity of the industry. We look forward to continue working very closely with the Commission with an open mind and with the spirit of sincere cooperation to further improve the standards in this industry. The livelihood of many depend on it and Malta will continue to invest in all the necessary mitigating factors to ensure the sustainability of this dynamic economic sector.

The Maltese Government thanks the European Commission for the hard work and the great effort it has put in to understand this relatively new and emerging industry, and to contribute towards its integrity by making recommendations to member states.

Malta Individual Investor
Programme Agency (MIIPA)

Mediterranean Conference Centre
Old Hospital Street
Valletta, Malta VLT 1645

Phone: +356 21 225 232
E-mail: info@iip.gov.mt

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