Foreign nationals may apply for the Individual Investor Programme, which allows for the grant of citizenship by a certificate of naturalisation to those who contribute to the economic development of Malta. This Programme ruffled many feathers and has been the subject of many a-discussion during the last quarter of 2013 and the first quarter of 2014.
The January 2014 discussion in the European Parliament, proved to be crucial for the Maltese Government to affect the umpteenth set of changes to the Legal Notice governing the matter. This discussion examined the proposals that would allow applicants to be naturalised as Maltese citizens, thereby enjoying rights of free movement within the European Union, without first having to reside in Malta for any particular period of time.
Beginning of February 2014, the Maltese Government incorporated the recommendations put forward by the European Commission, and the Programme now includes a “mandatory” minimum residency requirement of 12 months, which residency requirement has become infamous overnight.
The Individual Investor Programme, has been under fire until only recently (April 2016), where Maltese –Members of Parliament alleged that the government had failed to advertise the tender correctly – which tender was eventually won by Henley and Partners. Following this, the European Commission has been urged by the MPs to take action.
Citizenship under the Programme is available to those who can meet the demanding requirements of the Programme, while the investment required is fourfold:
- Property – buy a property in Malta having a minimum value of €350,000 (and retain it for at least 5 years), or lease a property for a minimum annual rent of €16,000 (and retain it for at least 5 years);
- Investment - invest in Malta an amount of at least €150,000, stocks, bonds, debentures, special purpose vehicles, or other investment vehicles, and retain them for at least 5 years;
- Contribution – contribute a minimum of €650,000, for the main applicant, €25,000 for the spouse and for each and every child below 18 years of age, and €50,000 for each and every unmarried child between 18 years of age and 26 years of age and for each and every dependant parent above 55 years of age;
- Residence - the main applicant must prove that he has been a resident of Malta for a period of at least 12 months, preceding the issuance of the naturalisation certificate.
The application process is not exceptionally laborious but the KYC requirements and the collation of documents needed, might take some time for the prospective applicant. The application process in terms of Legal Notice 47 of 2014 provides that the prospective applicant first receives the in-principal approval prior to providing the settlement of the contribution and evidence of the investment and the purchase/lease of property.
The recurring issue which service providers are facing is that of residence, and how is it defined. Over the years, residence has proved to be a difficult topic and a concept which has not been defined and also that there is no specific period of time which brings about residence of a particular country. In fact the UK Court decision in Commissioners of Inland Revenue v Zorab (1926) came to the conclusion that no duration (to determine residence) is prescribed by statute and it is necessary to take into account all the facts of the case. Likewise, in Dr Austin Sammut noe et vs Comptroller of Customs, the Court of Appeal in 1993 established that there is no hard and fast rule on how one can establish residence in Malta, but the facts of each case need to be examined and considered on their own merits.
Maltese law provides no definition of residence; however there have been various interpretations of residence by both UK and Maltese Courts. The Court, in Mary Debattista vs George Debattista, on the 16th of October 1961 established that residence means the place where materially the person is living and not necessarily where that person is domiciled.
The Court of Magistrates in J Bianco vs P Flores, on the 3rd of November 1982, stated that the element of residence has been interpreted by our jurisprudence that it is not enough if there is the mere physical presence, but the country would need to be the applicant’s ordinary residence permanently and his only residence.
R.H. Graveson in ‘Conflict of Laws’ defines residence as ‘habitual physical presence in a place during a period of limited or unlimited duration.’
Residence, thus, does not require continuous presence in that particular country, but a habitual presence, according to the circumstances of the case and of the person. It is up to the court to decide, taking into consideration all the relevant circumstances, whether the person’s absence from Malta was continuous and permanent as to lead to the conclusion that that person has severed all links and interests he/she had with the country.
The difference between residence and ordinary residence is not clear and in fact in the English judgment Hopkins vs Hopkins – 1951, it was stated that the adjective does not add meaning to the noun and that neither of the two terms requires continuous physical presence in a country but ‘physical presence with some degree of continuity’ which in every case depends on the particular circumstances of the case.
The Court in the English judgment of Cooper vs Cadwalader (1904) noted that the taxpayer had a three year lease of property to which he could come (to the UK) at any time; he travelled over with his valet; he stayed there continuously for 2 months, had food and servants provided by a London caterer, he hosted resident guests while he stayed in the property. Therefore, there were many factors in operation which created the impression of “residence” – of having set up an establishment in the UK.
The leading Maltese judgement on this matter is Dr Harry Vassallo, as mandatory of the absent Prof Arnold Cassola vs the Electoral Commission and Jimmy Magro (representing the Malta Labour Party), decided by the Constitutional Court on the 21st of March 2003. It is vital to mention the fact that this case was decided by the Constitutional Court, which is the highest Court in Malta, and therefore carries a certain weight.
Although the above-mentioned judgment was with respect to the right of a Maltese citizen to vote, which right is derived from the Constitution, Judge Mallia has raised the following points with respect to residence:
- The term ‘residence’ does not merely mean physical presence in a country but also includes the link to the country and allows absence. A person who is absent from the country because of work, study, health or missionary cannot and should not be considered as not resident in Malta;
- As long as the person is habitually resident in Malta for a period of 6 months, within an 18 month period (before the publication of the Electoral Register), this person will be considered to be a resident of Malta;
- To assess whether one satisfies the elements required for residence one has to investigate the person’s lifestyle and the reason for his absence. This exam cannot then be considered as violating that person’s right to privacy, freedom of expression or free movement. The activities carried out abroad, being the reason for the person’s absence are taken into consideration, however, these do not automatically exempt the person from judicial scrutiny.
The English judgment Lysaght v Commissioners of Inland Revenue (1928), provides an excellent summary of what has been examined above when stating that short but regular periods of physical presence may amount to residence, especially if they stem from performance of a continuous obligation (such as business obligations) and the sequence of visits excludes the elements of chance and of occasion.
One can come to the conclusion that if a person has sufficient links with the country (property, bank account, memberships, philanthropic links, employing personnel etc), physical presence for a continuous period of 12 months would not be required. From the outset it would seem that a shorter period would satisfy the requirement.
There have also been arguments made stating that, the more links one has with the country the less time spent in that county is required. However, this argument is yet to be examined further and substantiated.
For assistance with respect to residency by investment or citizenship by investment matters kindly contact us on [email protected].
About the Author
Dr. Ann Bugeja joined CSB Group in January 2011 where her areas of interest cover Ship and Malta Yacht Registration, Employment Law, Contract Drafting, Global Residence and Work Permit applications and applications for Special Tax Status.
