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September 11, 2020

Will Malta, Europe’s best CBI Programme, continue its rise once re-launched?

For the first time, Malta has emerged as the best Citizenship by Programme in Europe, according to the CBI Index 2020. However, with the country’s programme having reached its cap of 1,800 and with its re-launch following new rules and guidelines from October 1, will the new iteration continue its upward trajectory?

There’s little doubt that Malta’s Individual Investor Programme (IIP), running for just six years, has achieved what it set out to do. As the first EU-approved citizenship by investment programme (unveiled in 2014), it was set up to ‘attract talent and individuals of high moral standards, who could prove they could add value to the country’, and also to make money. And the proof is most certainly in the pudding. Not only did Malta’s IIP reach its cap of 1,800 successful applicants, it brought valuable revenue to the country’s coffers, which has been poured into social housing, health centres and hospital upgrades.

“By welcoming just 300 new citizens a year, we have earned €1.4 billion in six years,” states Malta’s parliamentary secretary responsible for Citizenship and Communities, Alexander Muscat, who is now heading up the new unit that will deliver Malta’s IIP Version 2, set to launch in October 2020. Alexander adds that the funds are “a tremendous boost to the Maltese economy and will prove to be even more useful as we recover from the hit the economy has taken from Covid-19”.

Not only has Malta’s IIP been successful for the country, but it has just been crowned with the ‘best CBI programme in Europe’ title. So says the recently released CBI Index 2020 (published by the Financial Times), which evaluates and ranks all active CBI Programmes worldwide.

With its upward trajectory, reports the CBI Index 2020, Malta has overtaken Cyprus in the rankings, a reflection of Malta “being a more family-friendly jurisdiction than Cyprus” along with its very high scores in freedom of movement, due diligence and standard of living.

Spotlight on due diligence
However, like its nearest CIP competitor, Cyprus, Malta’s IIP has come under fire in recent years and has been the target of institutional criticism and negative publicity, including concerns raised by the European Commission regarding the programme’s alleged soft residency requirement and risks associated with tax evasion and money laundering.

The new programme, an overhaul rather than an update of the current IIP, launching in October 2020, is set to address these issues, say the Maltese government, with new rules on residency, checks and contributions, as well as increase in the real estate investment requirement.

It’s interesting however that despite the criticism directed at Malta’s IIP, much of which has focused on its due diligence processes, Malta continues to outrank most other CIPs for its stringent vetting procedures and is known industry-wide for its ‘gold-standard’ IIP. And in the latest CBI Index 2020, Malta’s programme attains a perfect score (along with Dominica, St Kitts and Grenada, all renowned for their stringent due diligence) for its “commitment to robust due diligence every year since the inception of the CBI Guide” and for only admitting the most reputable of applicants.

In fact, not only is Malta’s CBI Unit known for thoroughly investigating the applicants’ sources of funds, but along with just a handful of CIP-holding countries, it uses the latest in passport technology – biometrics and fingerprinting – to verify an applicant’s identity.

There are many countries offering similar opportunities “with far less stringent attention and due diligence processes”, remarked Alexander Muscat.

Under Alexander Muscat’s leadership, the new Malta IIP has been adapted following liaison with the European Commission and other bodies to ensure that all concerns regarding its current IIP are addressed and that the new programme will ultimately strengthen the programme.

Malta capital Valletta citizenship by investment

Passport power and standard of living
But it’s not just in stringent due diligence where Malta’s programme shines. Along with Austria, Malta achieved the highest scores for standard of living in the CBI Index 2020 for the fourth consecutive year. A combination of high scores in high life expectancy, safety levels, ability to uphold basic freedoms, high standard of education and GDP per capita yet again propelled Malta to top spot.

This is hardly a surprise, given the facts. While Malta may be one of the EU’s smallest countries, it’s one of its strongest and most economically stable.

Located in the heart of the Mediterranean sea, between Italy and Tunisia, this island operates under financially liberal rules, offers advantageous economic policies and is socially and politically stable, with a balanced two-party system and a highly developed culture. There is free universal childcare and education, and it boasts one of the best universal free healthcare systems worldwide.

Add to this, the beautiful scenery (its capital Valletta is a UNESCO World Heritage site), the Mediterranean climate (the weather rarely dips below 9C and above 32C) and the fact that English is widely spoken and you’re never too far from a beach, and it’s easy to see the pull of Malta’s passport.

And it’s the power of its passport literally that puts Maltese citizenship centre stage. This little island in the Med has again emerged as the best country for citizenship in terms of freedom of movement, along with Austria, scoring a perfect 10 in the latest CBI Index 2020.

As a member state of the EU and Schengen Area, Maltese citizens have visa-free or visa-on-arrival access to 184 countries, including to almost all of the main top global business hubs, making its passport the eighth most powerful worldwide, according to the most recent Henley Passport Index and Global Mobility Report (published June 2020). EU citizenship further means that Maltese citizens can live, work and study anywhere in the EU.

And while Malta’s programme is known to be expensive (currently with a minimum investment of €1,150 million), giving Malta’s programme a score of just 4/10 in the CBI Index 2020, it currently remains more affordable than its immediate competitor, Austria, and offers value for money considering its EU location/passport, standard of living and other strengths.

This is especially true considering the fact that Malta is family-friendly (scoring 9/10 in the CBI Index 2020) allowing for the parents and grandparents of the main applicant or spouse to be included in the application, though they must be above the age of 55 years, living with and maintained or supported by the main applicant.

One of the main downsides, for investors, and one area where Malta’s current IIP scored the lowest (2/10 in CBI Index 2020) is that of mandatory travel or residence. In comparison to the Caribbean nations which impose no travel or residence requirements on applicants, Malta is strict in this regard, requiring applicants (under the current IIP) to take two trips to Malta – the first to provide biometric data and the second to take the oath of allegiance – and to spend a minimum of 12 months in the country pre-citizenship.

This requirement, which is in line with the country’s aim of attracting investors who are interested in, and committed to, the country, and which offers a further level of due diligence has come under fire, however, as the 12-month residency requirement hasn’t always been enforced with physical presence not monitored. That is set to change with the new programme. See below.

Along with strict residency requirements comes a longer application processing time and Malta, along with Austria and Bulgaria, remain the slowest CBI Programmes, with application for citizenship to Malta taking around 13 months. This is partly due to the fact that the programme requires applicants to invest in tangible assets (real estate), which takes longer. That said, when it comes to the processing itself, Malta delivers a streamlined, organised and straightforward process, all helped by the fact it has a dedicated CBI Unit. According to the CBI Index 2020, when it comes to ease of processing, “of all the European programmes, Malta ranks highest with a score of 9/10”.

Malta citizenship by investment programme Henley overhaul

What will the new Maltese programme bring?
While the current Malta programme has for the first time emerged as the best CBI Programme in Europe, it is now fully capped and came to an end on September 30, 2020, with a more regulated (and more expensive) programme now replacing it.

Under Malta’s new CBI programme, the minimum investment amount for property is set to be doubled, from €350,000 to €700,000, while a new category will require applicants to donate €10,000 to a charitable organisation, and applicants will have to pay an additional €50,000 for each dependent.

A further significant change is the introduction of two contribution alternatives (currently, there is only one contribution option within the three-tier investment), each corresponding to a different residency period. Rather than contributing a flat €650,000 as per the current IIP, applicants will be able to choose between either contributing €600,000 and qualifying for citizenship within three years of becoming residents or contributing €750,000 and qualifying for citizenship following just one year of residency.

Currently, applicants can begin their one-year residency upon submission of their citizenship application, but the new rules mean that their citizenship application would not be able to be filed until the 12-month residency period had been completed.

Further pre-application checks will also be put in place under the new CBI unit/agency and will further include a greater emphasis on applicants demonstrating a connection to Malta. And the programme will have an overall cap of 1,500 with 400 applicants allowed per year.

Contact Vistra Malta
For the latest expert advice on Malta’s new programme, visit our partner page, Vistra Malta, who are experts in Citizenship by Investment. Alistair Schembri, the MD of Vistra (Malta) Limited, is authorised by the Malta Individual Investor Programme Agency (‘MIIPA’) and the Malta Residency & Visa Agency (‘MRVP’) to act as Accredited Person and by the Malta Inland Revenue to act as Authorised Registered Mandatory (‘ARM’).