EU rejects Malta’s requests, asks for more information

by Ivan Brincat

The European Union has not accepted requests made by Malta for a permanent derogation vis-à-vis the acquisition of real estate by foreigners as a secondary residence and has asked Malta to provide additional information to justify its requests.
“On the basis of the information provided by Malta, the EU sees no reason to accept these requests,” the draft European Union Common Position presented to Malta states.
It has now asked the Maltese government to substantiate its motivation for these requests by providing the EU with an in-depth analysis of the geographical, economic, social and political circumstances, which may have led it to put forward the requests. Moreover, it is asking that where possible, these should be substantiated by empirical data.
Foreign Affairs Minister Joe Borg told The Malta Business Weekly this did not mean that Malta would not get a special arrangement to prohibit the purchase of a secondary residence.
“Malta will have to prove its case and justify its requests,” he said.
The government is still working on the request for information made by the European Union but is confident an agreement can be reached which would safeguard Malta’s interests in this field.
In its position paper, the Maltese government had stated that despite the obligations under the Treaties on which the European Union is founded, Malta requests to maintain on a permanent basis the legislation in place on the date of accession regarding secondary residences and the acquisition of real estate for speculative purposes.
The factors dictating Malta’s request are the size of the country, the density of the population and the social effects that a substantial increase in demand for property would cause.
However, in the draft EU’s Common Position, extracts of which are being published for the first time today in The Malta Business Weekly, the EU recalled that the principle of free movement of capital and payment is one of the cornerstones of the Single Market.
It stressed the significance of the principle of free movement of capital which is of paramount importance for the proper functioning of the Single Market.
The common position of the member states notes that Malta has requested a permanent derogation concerning the restrictions on the acquisition of real estate by non-
residents (foreigners) for secondary residence purposes and for speculative purposes that will be in place by the date of accession. The EU also noted that Malta had declared its intent to maintain its present prohibition of foreign participation in unlisted Maltese companies seeking to acquire real estate for speculative purposes.
“On the basis of the information provided by Malta, the EU sees no reason to accept these requests.”
The EU has invited Malta to provide the following information:
• an exhaustive listing of the types of real estate acquisition it considers to be acquisitions for “speculative purposes”. In particular, since the freedom to acquire real estate for the purposes of renting concerns the freedom to provide services as well as the freedom of capital movements, Malta should clarify whether it intends to liberalise such acquisitions or considers them to be acquisitions for “speculative purpose”.
• in view of the requested derogation concerning restrictions on real estate acquisition that will be in place by the date of accession, Malta should explain in detail its plans for changing its present regime before accession.
• since it does not present any substantive motivation for its requests, Malta should provide an in-depth analysis of the geographical, economic, social and political circumstances, which may have led it to put forward those requests, as well as to substantiate those circumstances, as far as possible by empirical data.
This chapter is deemed to be very sensitive both by the Maltese government and by the European Commission.
Dr Borg said the government was hoping that this chapter could be closed by December, under the Belgian presidency.
So far, this chapter has been closed by Cyprus, Estonia, Latvia, Lithuania and Slovenia.
The biggest problem being faced by the government in convincing the European Union is that Cyprus has accepted a five-year transition period in this regard.
However, this in general is the position which has been taken by the European Union. In fact, the EU has set five years as the limit for a transition period in this area.
The chairman of the core negotiating group Richard Cachia Caruana said earlier this year that Malta had a case to make since more than 20 per cent of the land is developed in Malta. “The Netherlands, the member state which has the most developed land has only five per cent which is developed. The acquisition of property had to be managed well. We do not foresee a problem in the next five to 10 years but have to plan for a situation where in 20 years time we would need a sort of regulation like Denmark has.”