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Credit
Darrin Zammit Lupi for The New York Times
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VALLETTA, Malta —Russians rent high-end villas, then stay in
five-star hotels when they visit. An American financier plans to live in
Switzerland but occasionally vacation in Malta. One Vietnamese businessman sent
the necessary paperwork on his private jet to expedite renting a property he
had never seen.
“They come twice, once to get a residency card and once to
get a passport,” said Mark George Hyzler, an immigration lawyer at a firm here.
Malta’s citizenship program was introduced more than a year
ago. It is simple - if applicants are willing to pay 1.2 million euros, they
can get a passport.
Applicants must show they are renting a property in Malta
for 12 months. But they do not necessarily have to spend any time in this
Mediterranean island nation.
Lawyers, accountants and real estate agents say Malta is in
the radar of the global elite. Applications are pouring in, and the program will
raise €2 billion, more than a quarter of Malta’s gross domestic product.
The Malta Citizenship Program is housed in a 16th-century
building once used as a hospital. The Phoenicians, Carthaginians, Romans,
Byzantines, Fatimids, Normans, Sicilians, Spanish, French, a European lay
religious order and the British all tried to conquer or rule Malta, and many
succeeded. Maltese, the official language with English, looks and sounds
Arabic, but its speakers are primarily Roman Catholics..
Malta, which covers 122 square miles and is about 50 miles
south of Sicily, has few natural resources and a population of just 424,000.
Malta counts on the reliable sun and blue sea to attract tourists. Beyond that,
Malta must be creative to keep the country’s coffers filled.
The tax system, in particular, is very attractive. Some
foreign companies can be structured to pay 5 percent in corporate taxes. Malta
also has double taxation treaties with 65 countries, allowing individuals and
businesses to avoid being taxed in two places.
Significant tax advantages and a pro-business regulator have
created a booming financial services industry. It now represents 12 to 15
percent of the country’s G.D.P., up from 6.3 percent in 2004.
Under the initial citizenship program in 2013, the newly
installed Labor Party government proposed selling passports for €650,000, with
few other requirements for citizenship.
Almost immediately, it drew protests. To placate the
Parliament and the opposition, the government raised the bar for citizenship.
Strict due diligence standards were set to weed out money launderers and
criminals. It also raised the cost and adopted a residency requirement. In
addition to the €650,000 fee to the government, applicants must now invest
€150,000 in government bonds, buy property for at least €350,000 or rent a
place for at least €16,000 a year — all of which must be held for at least five
years.
The newcomers are establishing real links to Malta. They are
setting up bank accounts and buying health insurance, both of which are
required. They are also joining country clubs and donating to local charities,
which is encouraged.
“Clients genuinely want to do more than just make the
investment,” said Mark Stannard, managing director of the Maltese office of
Henley & Partners, a residence and citizenship planning firm. He said a
Saudi national with a Lebanese passport who had applied for Maltese citizenship
is planning to set up businesses in aviation, life sciences and real estate.
Henley & Partners was initially awarded the exclusive
rights to market the program and process the applicants, collecting fees in two
ways. A family of four with two minor children and two grandparents pays Henley
about €135,000 to apply; the government pays Henley €26,000 to handle that
application.
Henley also makes money from ancillary services. The company
can rent and sell property through Henley Estates and manage that property for
those who are not living in Malta.
In January 2014, before the program officially started,
Henley gave up the exclusive rights, sharing half of the business with other
private companies.
“Why did the government outsource the program? Why should
Malta engage a private company to sell its citizenship?” said Daphne Caruana
Galizia, a columnist at The Malta Independent newspaper and the author of a
well-read blog on the island. “It’s absolutely insulting.”
The tax advantages are also raising concerns. Maltese
citizens typically must pay income tax of up to 35 percent. But foreigners who
become Maltese citizens under the new program may be able to enjoy tax benefits
awarded to foreigners.
The globally mobile have taken note. One American finance professional, who spoke on the
condition of anonymity, said he moved to St. Kitts and Nevis seven years ago
for tax purposes, eventually deciding to give up his United States passport. He
then moved his family to Switzerland for the schools, European culture and
competitive tax benefits.
Since in Switzerland you must wait 12 years to gain
citizenship, his family is now applying for Maltese passports, attracted by the
speed of the program. “My kids will have
the ability to live and work anywhere in the E.U.,” he said. “It’s an
incredibly powerful passport.”
He does not, however, plan to live in Malta. “We will spend
some vacation time there.”
