Immigration: Malta Individual Investor Programme

Topics: Immigration

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  • Laura-Devine

Following sharp criticism both domestically and abroad, the implementation of a controversial Maltese citizenship law has been delayed indefinitely.

As passed by Malta’s parliament, the Individual Investor Programme (IIP) proposes to offer citizenship for a fee. In addition to obtaining a Maltese passport, successful applicants and their dependants would receive EU citizenship, thereby permitting them to live and work in any of the 28 member states. While many EU countries offer investor programmes, the Maltese scheme is unusual in its: comparatively low cost; payment of a fee rather than investment; and lack of residency requirements. As a result, the IIP has drawn deep disapproval, particularly from within the EU, where the proposal is seen as a way to circumvent national investor and citizenship rules.

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Henley & Partners, a firm specialising in residence and citizenship planning, was awarded an exclusive Public Services Concession by the Maltese government with regard to the design, implementation and international promotion of the programme.

Although the enabling act received presidential assent in November, the publication of the legal notice giving the law effect has been postponed to provide members of the government and opposition time to discuss amendments.

Requirements

In its present form, applicants would be required to pay a non-refundable ‘contribution’ to the Malta National Development Fund (NDF) under the following schedule:

  • main applicants, who must be 18 or older and represented by an authorised registered mandatory (ARM), would need to contribute €650,000, plus a €7,500 due diligence fee;
  • spouses and children would be required to contribute €25,000, plus a €5,000 due diligence fee; and
  • unmarried children aged 18-25 and dependant parents would each have to contribute €50,000, plus a €3,000 due diligence fee.

Additionally, individuals would be obliged to provide:

  • a medical certificate confirming that they do not suffer from contagious disease;
  • relevant police certificates; and
  • an affidavit of support for all non- spouse dependants.

Process

  • In addition to the above-stated fees, the current draft of the IIP demands that each applicant undergo a four-tier due diligence process before they may obtain citizenship.
  • Individuals would need first to contact Henley & Partners and complete seven government applications. Applicants who did not wish to contact the firm directly would need to do so through an ARM.
  • Applications would then be forwarded to Individual Investor Programme Malta Ltd, which will ensure they have been completed correctly.
  • Thereafter, IIP Processing Ltd would perform a de novo review of the applications.
  • Finally, a further review would be performed by due diligence firms in the applicant’s country of origin.

Once this process is completed, IIP Processing would provide the government with a recommendation to either approve or reject the application. Ultimately, however, the decision will lie with the government.

Controversy

Proponents of the new law stress that the IIP will forge close and ultimately meaningful connections between Malta and high-net-worth individuals, all of whom will have been subjected to strict due diligence procedures. Moreover, supporters maintain that a contribution is preferable to standard investment requirements, as the investor could not pull the money out later. Rather, as presently contemplated, funds would be sent directly to Malta’s NDF and available for investment or distribution as the government saw fit.

By contrast, Maltese nationals who oppose the scheme view it as an embarrassing sale of citizenship created to shore up a growing deficit. Some argue that the programme cheapens the national identity and gives a poor impression of the country abroad. Partit Nazzjonalista, Malta’s conservative opposition party, even went as far as to vow that it would revoke the citizenship of any IIP participants. While Malta’s attorney general cast this proposal as unconstitutional, and though amendments to the law may make such a threat a moot point, poor press and vehement opposition may still give prospective applicants pause.  

Internationally, a number of governments, particularly those of EU member states, view the scheme as undermining their own residence-based, more expensive investor programmes. In response to requests from several groups, the European Parliament debated the IIP last month.

Criticism has also been levelled at the programme’s administration, which will be managed solely by Henley & Partners. As currently drafted, this exclusivity is enforced by means of article 23(3) of the act, which makes it an offence punishable with a fine of up to €20,000 for any person who, for gain and without being duly authorised, ‘advertises, publishes or disseminates publicly through any means whatsoever any information’ relating to the IIP. What ‘for gain’ includes is not immediately clear. On the one hand, it may refer only to direct monetary profits. However, given the broad language of article 23(3) and exclusive contract with Henley & Partners, there is some concern that this may cast a much wider net.

Legal professionals have also expressed concern that the exclusive contract with Henley & Partners, a firm that offers competing services in other jurisdictions, has the potential to create a conflict of interest. Moreover, many high-net-worth clients who value the confidentiality of their attorney-client relationships may be hesitant or unwilling to disclose personal and financial details to an unrelated third party.

Finally, the commissions and fees associated with the IIP have raised eyebrows. According to Maltese news sources, Henley & Partners stands to earn a 4% commission (€26,000 based on the €650,000 main applicant fee) on each successful applicant. This is on top of the firm’s client fees, which amount to an additional €70,000 for main applicants, €15,000 for spouses, and €10,000 for children under 18.  Based on these figures, it is estimated that Henley & Partners could earn €5.7m to €28m a year from the IIP. As the firm in charge of applicant vetting stands to profit significantly from successful applications, it is unsurprising that some may be sceptical.

A precarious future

It is impossible to say what the IIP will look like, or whether it will come into force at all, once talks between the government and opposition conclude. While both sides have remained relatively quiet as to the content of the meetings, Edward Scicluna, Malta’s minister of finance, suggested that a number of amendments appear to be on the table, including a cap of around 50 individuals per year, and linking the IIP to some kind of ‘bonding’.  

Prime minister Joseph Muscat recently expressed his confidence that an agreement of some kind would be reached and said talks were nearing completion. For the moment, however, the future of the IIP remains uncertain.

Laura Devine is principal of Laura Devine Solicitors and Laura Devine Attorneys LLC 

Readers' comments (2)

  • It's future is not portrait to be uncertain by any means in Malta: just some hurdles that need to be taken to appease EU. Meanwhile, the law to issue them is in place, and amendments to it will/might come in due time. Secrecy on who's getting citizenship while this process is going on ensures that the government can please those who were promised favors and get access to some lovely funds.
    More info:
    http://daphnecaruanagalizia.com/2014/02/oh-if-only-they-knew-what-we-suspect-is-going-on-behind-the-electorates-back/

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  • One year on, the Malta Citizenship by Investment Programme has taken off after securing EU endorsement. There are now over 300 applicants undergoing the citizenship process.
    Updated Citizenship fact sheet at: www.ccmalta.com/publications/malta-citizenship-investment

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