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Possible arrangement on
free movement of capital
by Ivan Brincat
The European Commission has hinted at the possibility of Malta
obtaining a transition period vis-à-vis the free movement
of capital chapter.
The head of the European Commission’s Malta team Arhi Palosuo
said that Cyprus had been granted a five-year transition period
for the purchase of secondary residences by foreigners. “I
am not saying that Malta should copy this position but to show
what is happening with other candidate countries,” he said.
Malta has asked for a permanent derogation on the purchase of
a secondary residence by foreigners and the joint position of
the EU has so far been negative with the EU requesting more
information.
Finance minister John Dalli has explained that steps had been
taken recently so that the extra taxation on foreigners purchasing
property in Malta was totally removed and now the same level
of tax applies for Malta.
“There is little difficulty for foreigners to purchase
one property in Malta. Our position, because of our size, makes
the situation difficult and we need the tools to control any
possible problems that might arise,” Mr Dalli said.
On the other hand, Mr Palosuo maintained the position that any
decision on a permanent derogation will have to be taken by
all member states in unanimity.
“It is still to early to state whether there is the political
will to accept a derogation and how deep this will go. But it
is very difficult to derogate on some basic principles of the
internal market such as free movement of persons,” he said.
Turning to the free movement of capital chapter, Mr Palosuo
said the chances for a permanent derogation were limited but
the European Union was keeping an open mind. “We are working
on a solution and there are some possibilities.”Last week,
The Malta Business Weekly published parts of the draft European
Union’s Common position. In their position, the EU said
it 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. It has asked Malta to provide additional
information to justify its requests.
Mr Palosuo acknowledges that property ownership is a politically
sensitive issue and has to be looked into. “For example
we have had a complicated discussion regarding the purchase
of agricultural land. Malta does not have such a problem. Fear
existed in some candidate countries and they asked for an 18-year
transition period and in some cases 10 years. We are proposing
a seven-year transition period to allow the candidate countries
to carry out the necessary reform. Nationalist MP Michael Frendo
raised the issue of the purchase of property during the joint
parliamentary committee. Dr Frendo said that Malta had a law
which allowed non-residents to purchase property and measures
had been taken to encourage foreigners to purchase property.
“But land in Malta is at a premium and it is important
that government keeps some form of power. Whether by a derogation
or a special arrangement, the EU should give due recognition
for Malta on this subject and creatively try to find ways either
for a particular period of time or periodically reviewed.”
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