Developers join chorus of disapproval on permanent residents’ rules

The Malta Developers Association has added its voice to the chorus of disapproval on the high thresholds for foreigners seeking a 15% tax rate in Malta.

MDA president Michael Falzon said the new conditions, which include purchasing a property as much as €400,000 to qualify for the tax, are too onerous.

“We understand the genuine motivation behind government’s decision, even though some of its members may be adversely affected,” Falzon said, referring to cases in which non-EU nationals qualified for expensive healthcare in the UK that was billed to the Maltese government.

“Contrary to popular perception, the financial thresholds and constraints in the new scheme do not apply to all foreigners who want to buy property in Malta but only to those who want to become permanent residents, a status that leads to heavy social burdens on the Maltese government,” Falzon said.

“Foreigners buying property in Malta only need an AIP (acquisition of immovable property) permit, which does not give the privileges of permanent residency.”

Falzon also took the opportunity to deny claims by the GRTU director-general Vince Farrugia that the new rules would prop up property prices for high-end development.

“Contrary to what has been capriciously claimed, the new parameters of the permanent residents scheme does not help to prop up property prices. Neither government nor the MDA are in favour of property prices being artificially high, as had happened in the past, because this is economically unhealthy,” Falzon said.

“We’re currently discussing with government proposals for fiscal incentives indicated in the current economic situation, none of which involve amnesties or reducing taxes levied on developers’ profits.”

Farrugia has claimed that the new rules for permanent residents are intended at keeping property prices from falling further by enticing tax exiles to Maltese shores on condition that they buy properties over €400,000.

“There’s a property glut in Malta and speculators hope to make a quick return by selling to foreigners because they believe foreign sales are the safety valve to hive off the more expensive properties,” Farrugia said, just a day after Finance Minister Tonio Fenech unveiled a reformed scheme for foreigners to benefit from a 15% tax rate.“The scheme is not bad in itself but the aim is clear: government wants to halt the slide in property prices and is helping speculators keep prices from falling further,” Farrugia said.