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Want a Maltese passport? Clock is ticking, lawyers say

EB5Investors.com Staff

 malta landscape

By EB5 Investors Magazine Staff

The clock is ticking for investors hoping to take advantage of Malta’s flagship citizenship-by-investment initiative, industry professionals say.

The Individual Investor Program, or IIP, which provides a Maltese passport in exchange for a 650,000-euro donation and other property and bond-purchase requirements, launched in 2014 with a hard cap of 1,800 participants, and current estimates suggest that about 1,200 applications have already been received.

That means the IIP could meet its statutory quota as early as next year, barring a move by the Maltese government to increase the cap, says Stuart MacFeeters, the managing partner in Malta for Henley & Partners, which won the tender to develop and implement the program on behalf of the Maltese government.

“I’d suggest moving quickly,” MacFeeters says. “If someone wants peace of mind, they should get their application in before next summer to make sure they’re included in the 1800.”

Applicants who beat the cap face about a year and a half wait time to become citizens — including a mandatory 12-month period spent as a legal resident of Malta. However, MacFeeters says, Malta processes residency paperwork quickly, so applicants could secure Maltese residency within five or six weeks of beginning the process.

“It takes about three months to get a citizenship application packet up to scratch and ready to send,” MacFeeters says. “Our number one suggestion to clients is to get the residency application in first, because that’s when the 12-month clock starts ticking.”

The residency application requires only basic documents, including birth certificates, passports, proof of address, and bank statements. The citizenship application is more comprehensive, and requires evidence of marriages and divorces, business incorporation documents, employment contracts, a background check, and police reports for every jurisdiction in which an applicant has spent more than six months during the previous decade.

Some of that can be hard for clients to track down, says Simon Xuereb, director of Private Client and Global Mobility Services at KPMG. Still, applying for residency first gives most clients plenty of time to get their citizenship paperwork in order.

“We’ve had applications that were processed and concluded in 13 months, so it is possible,” he says. “More than anything else it depends on the client, and on their timely provision of information if additional queries are raised. The delays are very rarely from the government side.”

Once applicants are approved by the government, they have a brief window in which to stump up their 650,000-euro donation, plus a further 25,000 euros each for their spouse, and between 25,000 and 50,000 euros more for each dependent. That’s a somewhat unusual system: most countries require investments in specific projects, with the potential for returns down the line, rather than requiring applicants simply to cut a check to the government. “I’m not aware of any other country that has a similar model,” says Xuereb.

On the bright side, Xuereb adds, the contribution isn’t due until an applicant has been accepted as a citizen and issued a letter of approval in principle. At that point, applicants have about 20 days to transfer the funds, which have to come by bank transfer from an account previously vetted by the government.

Applicants also have to purchase at least 150,000 euros in government bonds, acquire a property in Malta worth at least 350,000 euros, and secure a global health insurance policy before qualifying to receive a Maltese passport.

Many applicants don’t make it to that stage, either because they withdraw their applications or because their citizenship applications are rejected. The Maltese government charges 7,500 euros to cover applicants’ background checks, plus thousands more for applicants’ spouses and dependents, and routinely rejects people whose sources of wealth or criminal records raise red flags.

Experts estimate that about 20 percent of all applications are ultimately rejected.

Many successful applicants come from the former Soviet bloc, with China and the Gulf region also accounting for large numbers of applicants. “These are applicants coming from reputable jurisdictions, and going through a very rigorous due diligence process,” says Chris Curmi, director of the international tax department at Deloitte Malta.

Malta’s citizenship program and the revenues it generates do plenty of good for the island, Curmi adds. “The contribution is in effect a contribution to the wellbeing of the economy in Malta,” he says.

Seventy percent of contributions under the citizenship program go to a sovereign fund that invests in infrastructure projects, road construction and maintenance, education and social housing; the remainder goes to the government’s consolidated fund. “The 30 percent that goes to the consolidated fund has gone a long way towards eradicating the minimal budget deficit that Malta had previously had,” Curmi says.

Still, the IIP wasn’t meant to simply be a cash cow for the government. Instead, Curmi explains, it was intended to attract investors and entrepreneurs who would bring lasting economic value to the island.

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