Realtors' complain of high thresholds for permanent residents

The Chamber of Commerce’s real estate section said the long overdue tax incentives for foreign high earners have qualifying thresholds that are too high and may impinge on the attractiveness of Malta’s offering.

The Chamber said the announced thresholds can have negative repercussions on the property market in general, with a ripple effect on all other service providers, not only to the property industry but also local business in general.

“Whilst appreciating that the introduction of certain measures were necessary, the section is apprehensive that the new rules may be too onerous. We feel the new cost of joining the Scheme is somewhat exorbitant.”

The new ‘High Net Worth Individuals’ rules will require applicants to purchase property of over €400,000, or rent at €20,000 per annum, a substantial jump from the former thresholds of €69,000 for property purchased, or €4,150 for property rented.

Successful applicants will benefit from a 15% tax that allows the possibility to claim double tax relief, with a minimum tax cap of €20,000. The scheme will also apply an additional minimum tax of €2,500 per dependent of the applicant.

The Chamber’s real estate section welcomed the introduction of the long overdue high net worth scheme for foreign nationals. “The delay caused great uncertainty in the market, especially when other neighbouring Mediterranean countries were introducing far more advantageous schemes,” the Chamber said.

Despite the fact that the Permanent Residence Scheme was not designed to sell property in Malta, it went a long way to incentivise overseas nationals to purchase property in Malta and stabilise the property market, generating millions of euro for both the private and the public sectors since its inception.

“This occurred in a negative global economic climate and the fact that the property market in Malta remained relatively stable was a major contributor to the well being of the Maltese economy in turbulent times,” the Chamber said.

In a reaction, the finance ministry said that of some 15,000 foreigners live in Malta, only 1,042 were permanent residence holders. "Indeed, over the past four years, 3,457 properties were purchased by foreigners in Malta. However, only 123 foreigners were permanent residents who have purchased property."

The ministry said the former scheme required the payment of only €4,193 in taxation. On the other hand, following EU accession and the subsequent transposition of EU legislation, after five years in Malta, permanent residence holders were eligible for free healthcare, free education, over and above the significant fiscal and VISA benefits enjoyed by the scheme holders.

"This was onerous and detrimental to the economy while also being unfair on the Maltese taxpayer. Government has introduced a number of initiatives and schemes that have attracted foreigners who have purchased property in Malta. These include incentives towards temporary residents, the highly qualified persons scheme as well as the general transformation in our economy that has created a number of high-value added jobs in financial services and e-gaming.

"These sectors have not only created thousands of higher-paid jobs for Maltese citizens, but have also attracted a number of foreigners to our shores. Government will be actively promoting the new scheme, particularly through Malta Enterprise and Finance Malta to ensure its success."