A BRIEF COMPARATIVE STUDY OF THE CITIZENSHIP FOR INVESTMENT PROGRAMMES OFFERED BY MALTA AND CYPRUS.
Old images of Valletta
"Panoramic view of the village Moutoullas" (Cyprus) This image has been made by Phil Hassler on the 24th September 2007
In recent years many countries have initiated programmes allowing high net-worth individuals to acquire citizenship by means of investment. Certainly, one cannot deny that this process has been influenced by destabilization of certain regions, globalisation and migration for reasons of stability, prosperity and other personal reasons or financial reasons that such persons may have.
The desire to attract new investors and capital has for decades incentivised countries to conclude visa-free travelling arrangements and offer residence and citizenship programmes. Indeed, there is no doubt that citizenship by investment is one of the mechanisms that can be used for such purposes and whilst several countries have previously embarked on such programmes, Malta and Cyprus can nowadays be seen as two major players in this field. Other comparable programmes are offered by Antigua and Barbuda, The Republic of Austria, The Republic of Bulgaria, Grenada, St Kitts & Nevis, and The Dominican Republic.
Since both Malta and Cyprus are relatively similar in nature, being two islands in the sunny Mediterranean Sea, being predominantly English speaking, having similar Mediterranean cultures and offering similar lifestyle, the scope of this article has been restricted to the comparison of the relevant Maltese and Cypriot citizenship for investment programmes.
Opportunities enjoyed by expats under Maltese and Cypriot citizenship for investment programmes.
Whilst Cyprus and Malta offer wonderful climatic conditions with warm winters and hot summers that most people residing in the sub-zero climates of the northern Eurasia states would love to enjoy, undoubtedly, the weather is not the major reason that plays a part in such life choices. Some of these are discussed hereunder.
The economies of both countries are stable and offer interesting investment opportunities. To its credit, due to its conservative financial services policies, Malta has masterfully weathered the global financial crisis of the resent decade without a hint of a problem. Cyprus on its part, although having suffered a traumatic economic meltdown, has started to recover and is now gaining international confidence as having a positive economic outlook.
International Travel Benefits
Both countries have developed a Double Tax Treaty network and have concluded visa-free arrangements with several countries for purposes of tourism as well as facilitating business development. In particular, Malta enjoys a visa-free regime with about 173 states, benefits from US Visa Waiver Programme (“VWP”) wherein Maltese citizens can stay in the US up to 90 days, and to top this all up, Malta is a party to Schengen Agreement, giving Maltese citizens and residents free movement in all Schengen Member States without border control. Cyprus is slightly behind in this regards, having a visa-free regime with approximately 169 states. It’s citizens do not benefit from the US “VWP” and need to obtain a visa prior to visiting the US. Most remarkably, Cyprus (as at date of publication of the present article) is not a party to Schengen Agreement.
The corporate tax regimes adopted by Cyprus and Malta are distinctly different. In Cyprus, companies are taxed at a flat tax rate of 12.5%, whilst the Maltese corporate fiscal system taxes income of companies depending on the nature of the income and the residence of the ultimate beneficiaries. The result is that corporate taxation may vary between 35% and 5%, depending on the particular circumstance.
Some salient requirements introduced by the respective Citizenship Programmes
Having briefly analysed a few interesting advantages that Malta and Cyprus have on offer, it is crucial that attention is given to a number of crucial requirements that the applicants are expected to satisfy to be eligible to obtain citizenship by investment, since there would be no scope in applying should the applicant not be eligible in the first place. Some noticeable requirements of the Maltese programme include the following:
The investor is expected to either purchase or lease out an immovable property (Purchase value: €350,000 / Lease value: €16,000/annum). He/she is entitled to substitute rent to purchase and vice versa throughout a period of 5 years which is the minimum term wherein the applicant is required to own or lease the property;
2. A large circle of dependants is allowed to participate apart from the main applicant;
The is no obligation imposed to hold property for a life time. After the term of 5 years expires, the applicant can sell the property or terminate the lease.
Under the current rules, the maximum number of participants under the IIP programme is limited to 1,800 participants. However, Identity Malta which is the competent authority responsible for the programme has recently initiated consultations as to whether the number of participants should remain capped or not.
A more comprehensive list of requirements is contained in our Comparative Guide that may downloaded by clicking the link hereunder.
Some main requirements established by the Cypriot programme:
1. This programme offers the possibility to choose one among a number of possible investment options;
2. It is marketed that the application process should last 6 months;
3. The term applicable with respect to the holding of investments is 3 years. However, there is an obligation to hold a residential immovable property for a lifetime;
4. No maximum number of participants.
On a practical note, whilst technically this may not be considered as a requirement, neither Cyprus nor Malta oblige applicants to renounce to other nationalities prior to obtaining citizenship.
Although Malta was not the first country to initiate a citizenship for investment programme, it has undoubtedly gained a remarkable success. Stable economic growth coupled with an appropriate fiscal policies, mild climate, political stability and visa-free arrangements are the key factors that potential investors usually look for. Several of these advantages are equally reflected in Cyprus.
The weakest feature of the Maltese programme is the financial contribution required to be made by the principal applicant consisting in a one-time contribution of €650,000 to the government’s Social Fund. Unlike the Cypriot programme, there is however no life term property holding obligation and the overall initial financial obligation required under the Maltese programme is distinctly less than that of Cyprus. Furthermore, the Maltese programme offers opportunity to investors to substitute property ownership with rental and vice versa, thus offering a level of flexibility.
On its part, the Cypriot programme can be obtained in shorter time and does not involve a hefty one-time contribution but rather imposes a life time investment in immovable property of a minimum of €500,000.
The above summarily discusses some pros and cons of the two Citizenship Programmes as well as similarities and differences. From a professional perspective however, it is fascinating to compare the requirements adopted and question what really are the criteria that ultimately draw a high net worth individual to select one jurisdiction over another. Our guess is that it may be for a number of reasons coupled together; someone else may feel that it may be purely a financial matter; affinity to one jurisdiction over another could be another reason; for those who can afford to do so, please take your pick!
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