Latitude Consultancy offers six concrete recommendations on the revision of Malta’s Individual Investor Programme (MIIP) following the government’s issue of an open consultation on the matter. This article is sponsored by the Latitude Consultancy Limited.
The Government of Malta has issued an Open Consultation on the Malta Individual Investor Programme, with the stated objective of updating and revising the Programme “to ensure it remains at the forefront in reputation, attractiveness and rigorousness, and at the same time to address those administrative processes which require revisiting following the experience gained in their implementation.”
Latitude welcomes the opportunity to provide its recommendation under Identity Malta’s Open Consultation and hereby shares its views and recommendations with industry participants and stakeholders for comment and debate.
We are proposing 6 major recommendations aimed at ensuring that the Malta IIP remains the most successful and reputable citizenship-by-investment programme in the world. These six recommendations are addressed within the eight consultation questions given in the Open Consultation document, which are reproduced below:
1. Should the number of accepted applications under the Programme be capped at law or should it be left at the open discretion of Government?
It should be left at the open discretion of the Government. Whilst there is merit in ensuring a regular re-adjustment of the Programme, as is currently being
undertaken, it need not be driven by the expiry of an application cap. Rather, the Government should make it policy to review and adjust the Programme every 5 years or so to ensure it remains fit for purpose.
2. a) Should there be changes in any form to any or all of the existing programme components? If so, please specify in detail.
We recommend two changes to the main components of the programme:
i. The requirement to purchase at least €150,000 in Government Bonds/Stock should be rescinded.
This requirement yields no real economic benefit to the country (i.e. Malta has no challenge funding its current debt stock) and is administratively cumbersome for both clients and stakeholders alike. Local financial institutions are generally not very keen in opening investment accounts to foreign nationals under the Malta IIP because of the relatively meager fee income generated from the bond portfolios (generally under 1.25% p.a.), which is why we do not expect there would be much protest for this requirement to be fully withdrawn.
ii. The donation to the NDSF should be increased as follows:
We argue that the amount paid by a single applicant is already quite high when considering the value of a donation vs. the present value of a 5-year investment in property or any other yielding asset. Indeed, the contribution amount is already quite higher than any other ‘Investment Migration’ programme in the marketplace. However, for larger families, the value of Maltese citizenship is quickly reduced on a per person basis under the current pricing, hence the proposed increase for Spouse and Dependants.
For example, a family of 5 comprising of a Main Applicant, Spouse and Dependants aged 22, 19 and 17 would require a donation of €900,000 under our proposal vs. previously €800,000. Furthermore, this increase in income to the NDSF will more than offset the cost of our proposal to implement a 4% marketing and distribution fee payable to all Authorised International Marketing Agent (see point immediately below).
b) Should new components be introduced? If so, should these new components substitute any or all of the above components or should they be in addition to the above? Please specify in detail.
We propose that the following new components be introduced:
iii. Since the launch of the program 4 years ago, a number of firms have been promoting the Malta IIP internationally, yet only the Concessionaire is currently benefiting from that activity by receiving 4% on all funds received by the NDSF, whether sourced by the Concessionaire or not. The number of applications (in
percentage terms) submitted to Identity Malta by Licensed Agents other than the Concessionaire has increased over the past few years, therefore, it is argued that the 4% should now flow to all Authorised International Marketing Agent who are identified on any particular application.
This point is particularly relevant when considering the precedent provided by other countries that have similar ‘Investment Migration’ programmes, such as Canada and the Caribbean programmes. These nations have long recognised that there is strength in numbers: governments that incentivise more than one firm generate more cases for their programme. Also, from a political standpoint, it is much more palatable to extend the commission to other approved participants than to keep the incentive to just one player.
iv. In conjunction with the 4% commission being offered to Authorised International Marketing Agents (“AIMA”), we propose the introduction of the following requirements for an AIMA to become authorised by Identity Malta to promote the programme internationally. To be an AIMA, a company would
Fill an application form and submit it to Identity Malta
Pay an annual fee of €25,000 to Identity Malta
Show that they have unrestricted access to a Due Diligence Database
Subscribe to a code of ethics and best practice (IMC standard)
Attend a mandatory briefing workshop
Identity Malta would appoint only service providers whose ability, resources, expertise, international network, integrity and conduct can conform to the guidelines issued by Identity Malta, as summarised above. AIMAs are required to renew their authorisation annually and show evidence of their marketing activities abroad. The fee paid to Identity Malta would more than cover the cost of the additional one or two resources required to manage this new element.
No promotional information or advertisement in relation to the Malta IIP would be allowed if not issued by an AIMA. Applications sourced by AIMAs are to be submitted to Identity Malta through the local Accredited Agents, as is currently the practice.
Creating such a regime would ensure better control of how the Programme is promoted abroad. It also provides another attractive set of revenues for the Agency.
3. Should there be any changes as to who ought to be considered as the spouse or dependant of the main applicant? If so, please specify in detail.
We would amend the current definition of dependants under Legal Notice 47 as follows:
(a) the spouse of the main applicant in a monogamous marriage or in another relationship having the same or a similar status to marriage, including civil union, domestic partnership or common-law marriage. The term is also gender neutral unless the Minister authorises otherwise on a case by case basis;
(b) a child, including an adopted child, of the main applicant or of his spouse who is less than eighteen years of age (“Minor Dependant”);
(c) a child of the main applicant or of his spouse who is between the age of eighteen and twenty-six years and who is not married (“Adult Dependant”)
and who proves, to the satisfaction of the Minister, that he is wholly maintained by the main applicant;
(d) a parent or grandparent of the main applicant or of his spouse above the age of fifty-five years (“Parent Dependant”) who prove to the satisfaction of the Minister that they are wholly maintained or supported by the main applicant and form part of the household of the main applicant; or
(e) a child of the main applicant or of the spouse of the main applicant who is at least eighteen years of age, is physically or mentally challenged, and who is living with and is fully supported by the main applicant:
Provided that such person has the capacity to take an oath of allegiance;
This would widen the potential number of individuals that can be included in each application, which is an attractive feature for applicants in general and would make the Malta IIP more competitive vis-à-vis Cyprus’ citizenship programme, yet in the process raise additional funds for the NDSF given the adjusted pricing we suggested under point 2 above. More importantly, taking out the need to demonstrate that dependants are being ‘maintained and supported’ by the Main Applicant will greatly reduce the administrative burden on both the applicants and Identity Malta.
4. Should the eligibility criteria of the main applicant and/or his spouse/dependants be reviewed? If so, in what way?
Yes, as presented in our reply under Question 3 immediately above.
5. Currently, the processing of applications under this Programme has three main stages, each with a stipulated time frame, as follows:
a. Attainment of resident status: 12 months;
b. Applying for and obtaining approval for citizenship: 4 months; and
c. Fulfilment of obligations and taking the Oath of Allegiance: 4 months. Should there be any changes to the current processing procedure as outlined above?
Should any or all of the above time frames be (i) increased or (ii) decreased or (iii) open for change in the case of proven special circumstances which may be
considered as such?
We do not recommend reducing the residency requirement below 12 months, for four reasons. Firstly, the average time required by an applicant to address and satisfy the citizenship selection criteria under the programme usually takes 8-12 months. Secondly, the process for Identity Malta to receive, review and opine on an application takes on average 12 months when done at the highest international standard. Thirdly, as the experience with the European Commission in 2013 has shown, it is important to have applicants acquire resident status first before graduating to citizenship, in support of the ‘genuine links’ argument.
Finally, applicants accept a 12-14 months process for acquiring such an important privilege and benefit, so there is no need to reduce it in our experienced view.
6. Should there be provisions at law clearly enabling the Regulator of the Programme and/or the Head of the Agency to decide in special and unforeseen circumstances which type of documentary evidence should be provided or accepted to substantiate a specific declaration or assertion by the main applicant in lieu of a documentary evidence which is usually produced in normal circumstances by way of such proof?
Yes, absolutely. Many of the documents that would generally be required under normal circumstances simply cannot be obtained by applicants in certain times, due to geo-political conflict, war, etc. Therefore, the Head of the Agency should be given discretion and be allowed to use his/her judgement to make such determination, as long as such decisions are properly documented in each case for audit purposes. This principle is also accepted in other countries, such as in Canada where they have the notion of ‘substitution of evaluation’ which gives the Visa Officer discretion (positive or negative) for those odd and peculiar situations that sometimes simply fall outside of the general framework.
7. Are there any other services which the Agency should offer to High Net Wealth individuals who can invest in Malta?
The Agency should hire qualified staff to engage with applicants post issuance of their passports, to develop opportunities with the applicants and foster more business opportunity, charitable activity or artistic contribution to Malta.
We would suggest having Identity Malta issue letters of invitation to successful applicants to hold an annual Gala Event hosted by the Honourable Prime Minister
aimed at honouring their new citizenship and exploring how they can more actively participate in Malta’s social, business and artistic life.
8. Do you have any additional comments or recommendations which you would like to put forward to enhance the Individual Investor Programme?
We have two additional suggestion to make:
1) The NDSF should start making investments into the Maltese economy using the proceeds raised under the Programme and should start communicating
to the electorate its good deeds, similarly to what one sees with projects that are funded by the European Union (billboard announcements, ads in the newspaper, etc.).
Quarterly reporting of the decisions and investments made by the National Development and Social Fund should be made public. The more people see the benefit from the use of funds, the more support there will be for the Programme in the public domain. For now, this is the biggest missing piece to the viability and sustainability of the Programme and is something that should be implemented immediately.
2) Implementing the recommendations presented in this document will lead to an increase in international demand for the Malta IIP, so Identity Malta will need to hire qualified staff to support this growth. We would suggest an increase of at least 33% of its current staff complement so that the Agency can reach and maintain a level of output of 500 case-decisions per year.
A well-structured citizenship program is an important vehicle to stimulate job creation and economic development. Malta is now reaping the benefit of its current Programme but we at Latitude believe that there is much more that the Government can do to secure even greater economic benefit and in the process ensure long-term sustainability of the Programme. The principals of Latitude Consultancy Limited are intricately familiar with the Malta IIP and have been part of its journey since its inception to today. The Programme as seen a lot of operational changes and challenges over the last 5 years but has now achieved a certain level of stability and consistency, which is important and positive.
The recommendations proposed under this submission are meant to enhance (a) the international marketability and (b) local operation of the Programme, leading to an increase in funds raised and ancillary benefits to the nation, but also (c) to ensure its long-term viability in the eyes of the Maltese electorate.
This article is sponsored by the Latitude Consultancy Limited