• Valletta: New rules could make the scheme less appealing to foreign millionaires, who now have to live on the tiny islands (Photo: Ronny Siegel)

Malta bows to EU 'pressure' on passport sales

30.01.14 @ 09:30

  1. By Andrew Rettman
  2. Andrew email

BRUSSELS - The Maltese government has introduced obligatory residence into its passport sale scheme under “tremendous pressure” from the European Commission.

The commission said in a statement after talks with Malta's attorney general in Brussels on Wednesday (29 January) that: “No certificate of naturalisation will be issued unless the applicant provides proof that he/she has resided in Malta for a period of at least 12 months immediately preceding the day of issuing of the certificate of naturalisation.”

It added that Malta “informed” it of “its intention to evaluate whether an increase would need to be made to the current capping of main applicants.”

The previous plan was to sell Maltese, and EU, citizenship for €650,000 per head without any need to live in Malta.

The sell-off was to be capped at 1,800 main applicants, who can add children, parents and grandparents for €25,000 to €50,000 each.

The commission noted the deal was “done in good faith.” Justice commissioner Viviane Reding also tweeted that Malta did it in the spirit of “constructive co-operation.”

But the level of good faith is open to question.

Reding’s lawyers had previously prepared potential infringement proceedings against Malta based on the EU treaty and on case law in the EU court in Luxembourg and the International Court of Justice in the The Hague.

The residency obligation is likely to make the scheme less appealing to foreign millionaires who now have to live on the tiny Mediterranean islands before gaining EU rights.

The fewer passports that Malta sells, the less money will also go to Henley & Partners, a consultancy based in the British tax-haven of Jersey, which is handling the scheme in return for a 4 percent cut.

A contact close to the EU talks told EUobserver: “The commission put tremendous pressure on Malta.”

The source added: “I think other EU countries should take note because it represents a significant extension of commission competence over their sovereign rights.”

But, under the terms of the EU accord, it is up to Malta to decide how much time the applicants must physically spend in Malta in order to qualify as having being resident for one year.

"It doesn't mean that the individual has to spend 365 days [in Malta]. But it also doesn't mean that the applicant can choose not to set foot in Malta," Malta’s Prime Minister, Joseph Muscat, said on Wednesday.

Meanwhile, the Maltese opposition, the Nationalist Party, says it might go ahead with its own legal challenge against the programme pending clarifications.

The potential increase of the 1,800 cap is also likely to ruffle feathers.

Muscat had previously promised the scheme would close once the number is reached.

The passport offer has already prompted queries from Chinese, Libyan, Russian and Saudi citizens, as well as Italians keen to take advantage of Malta’s lower income tax.

The British daily, The Independent, reports that a Formula One champion, a pop singer, and a South American footballer have also shown interest.