Maltese plans to start selling EU passports for €650,000 have sparked security concerns among member states, and raised questions in the UK about how its more modest investor visa scheme will compete.

But the small Mediterranean country is not the first to broach the idea – there have been a flurry of investor programmes as crisis-hit EU nations have battled to attract wealthy foreigners.

In the past two years, several southern European nations including Cyprus, Greece and Portugal have introduced programmes that aim to attract investment in the ailing property and construction sectors. Chinese and Russian investors make up the majority of those who have obtained residence permits this way.

Portugal’s “Golden Residence” programme, set up in October 2012, has been particularly attractive. It has generated €203m so far. Most permits have been awarded to Chinese, but Russians, Brazilians and Angolans – with whom Portugal has historic economic ties – have also invested.

Perhaps the closest comparison with Malta’s plan – which awards buyers an EU passport as soon as their application has been approved – can be found in Cyprus, which operates a direct citizenship-by-investment scheme.

Introduced this year, it allows those who invest at least €5m in properties or businesses in Cyprus or have €5m in bank deposits to apply for citizenship. It includes a provision that applicants must have a house in the country worth at least €500,000. The Cypriot scheme is also open to investors whose Cypriot bank deposits have incurred impairments of at least €3m due to measures taken in response to the financial crisis.

By comparison, the UK’s scheme is far more stringent – even those investing the maximum of £10m must wait two years before they can apply for permanent residence. Furthermore, investors must spend no more than 180 days out of the country each year if they are to qualify.

Jurga McCluskey, partner and head of private clients at PwC Legal, said that the Malta scheme had generated significant interest due to its “generous terms”. But she warned that in the past, economic citizenship schemes had had “troubled histories and uncertain futures” – and states such as the US with concerns about the plans might retaliate by imposing new visa restrictions on Maltese nationals.

This was the fate of a scheme set up in the late 1990s by the Caribbean island of Grenada. It eventually closed, after Canada dropped its visa waiver for Grenadian nationals, and the island was beset by criticism that it was effectively allowing criminals to set up new identities for a price.

The Malta programme hopes to avoid these pitfalls by promising rigorous due diligence on applicants, to be carried out by Henley & Partners, a consultancy. Eric Major, the company’s chief executive, admits that economic citizenship schemes “have a tendency to self-implode” because they are “not set up properly or because the hands of government are too close”.

But he said that critics of the scheme who had analysed the application process were satisfied. “Once they see this, they say: you guys have wrapped your heads around this properly,” Mr Major told the FT.

If the Maltese scheme goes ahead as envisaged, it will be highly competitive. But Ms McCluskey said that the benefits of investing in Britain meant that its own investor route was safe. “The stability of the UK investor programme means it is still a more attractive option for those who want to live in the UK,” she said.

This is borne out by research by law firm Mishcon de Reya, who surveyed investor clients living in the UK.

It found that the top of the list of attractions of the UK was the rule of law, followed by the security of assets, with schooling opportunities coming third. Given this list of priorities, it may be that southern European nations find themselves struggling to compete.

European citizenship …. any offers?

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The “Golden Residence” programme requires investors to buy a property worth at least €500,000 or transfer at least €1m in capital to Portugal. In return investors can obtain a residence permit, which can be made permanent after five years. Citizenship can be acquired after six years.
A year since its introduction, 327 “Golden Residence” permits have been granted, while an additional 398 resident permits were given to families of those investors.

Provides residence permits for owners of real estate worth more than €250,000. Greece also allows strategic investors – those investing at least €100m – to obtain ten-year residence permits for up to ten additional people.
The real estate investor programme has had about 300 enquiries since its introduction in April 2013. So far 15 permits have been granted.

An individual investor programme, open for applications in January 2014, grants citizenship to those who make a €650,000 contribution to the National Development Fund. Additional costs apply for family members, due diligence and legal fees.
None issued so far, but 200-300 citizenships are expected to be granted per year.

Buyers of property worth more than €300,000 can obtain fast track residence permits. Investors with direct investments of €5m in real estate or business or €5m in bank deposits can obtain citizenship directly. The citizenship-by-investment scheme is also open to investors whose deposits have incurred impairments of at least €3m due to the financial crisis. Applicants also have to own a permanent residence worth at least €500,000.
Since its introduction earlier in the year, 25 citizenships have been granted under the citizenship programme, while 691 residence permits were given to investors as part of the property programme.

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