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Purchasing property in another Member State
The free movement of capital as a fundamental freedom enshrined in the Treaties means far more than simple currency exchanges. The free movement of capital also includes the rights of citizens and businesses to purchase shares in companies established in a different Member State, or to purchase property such as a holiday home or secondary residence. While free movement applies to all Member States, at the time of the accession of the new Member States, transitional periods and some exceptions were negotiated for the free movement of capital. These concern, to a highly limited extent, the purchase of property and agricultural and forest land in specific States. It must be stressed that the free movement of capital between Member States remains fully assured.
Treaty of Accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia signed in Athens on 16 April 2003 - Annexes V to XIV [Official Journal L 236 of 23.9.2003]
Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic and the adjustments to the Treaties on which the European Union is founded - Protocol No 6
on the acquisition of secondary residences in Malta [Official Journal L 236 of 23.9.2003]
Treaty between the Kingdom of Belgium, the Czech Republic, the Kingdom of Denmark, the Federal Republic of Germany, the Republic of Estonia, the Hellenic Republic, the Kingdom of Spain, the French Republic, Ireland, the Italian Republic, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Grand Duchy of Luxembourg, the Republic of Hungary, the Republic of Malta, the Kingdom of the Netherlands, the Republic of Austria, the Republic of Poland, the Portuguese Republic, the Republic of Slovenia, the Slovak Republic, the Republic of Finland, the Kingdom of Sweden, the United Kingdom of Great Britain and Northern Ireland (Member States of the European Union) and the Republic of Bulgaria and Romania, concerning the accession of the Republic of Bulgaria and Romania to the European Union [Official Journal L 157 of 21.6.2005]
Act concerning the conditions of accession of the Kingdom of Norway, the Republic of Austria, the Republic of Finland and the Kingdom of Sweden and the adjustments to the Treaties on which the European Union is founded - protocol No 2 on the Åland islands [Official Journal No C 241 of 29.8.1994]
Treaty on European Union - Protocol No 1 on the acquisition of property in Denmark [Official Journal No C 191 of 29.7.1992]
Article 56 of the Treaty establishing the European Community enshrines the free movement of capital as a fundamental freedom. It is intended to remove all restrictions on the movement of capital so that European citizens may take full advantage of the single market. However, with the successive accessions of new Member States to the Community, transitional periods of varying lengths governing the possibility of purchasing property and/or cultivated land and forest areas in another Member State were negotiated. This was notably the case for the new Member States that joined the Union on 1 May 2004 (Cyprus, Estonia, Hungary, Latvia, Lithuania, Poland, the Czech Republic, Slovakia, Slovenia and Malta) and on 1 January 2007 (Bulgaria and Romania), but is also true of Denmark and Finland.
Accession criteria and negotiations
The conditions under which a candidate country is to become a member of the Union are the result of negotiations. Candidate countries must first of all satisfy the Copenhagen criteria by meeting the following political, economic and legal conditions. They must:
- be a democratic state based on the rule of law: they must be democracies with stable institutions guaranteeing the rule of law and human rights, and respect for and protection of minorities.
- have a market economy: states wishing to join the Union must have a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union.
- be able to take on the obligations of membership: candidate countries must in particular transpose the acquis into their national legislation and be able to put it into practice. The acquis is the body of EU legislation, made up of all the rules, legislation and common policies.
The Union's capacity to absorb new Members while maintaining the momentum of European integration is another important consideration with each accession.
Negotiations clarify the conditions under which each country's accession is to take place. Transitional periods may be agreed. Negotiations are conducted in Intergovernmental Conferences involving Member States and the candidate country in question. The Council adopts the EU's common positions on a proposal from the Commission. The candidate States nominate a chief negotiator, backed up by a team of experts, who directs negotiations according to the positions that have been set out. Parliament receives reports about the progress of the negotiations, and gives its assent to the accession that results. For the treaty to come into force, Member States and the candidate country in question must ratify the accession treaty according to their respective internal procedures.
States that have been Members since 1 May 2004
The ten Member States that joined the Union on 1 May 2004 all negotiated transitional periods. These are recorded under the heading "free movement of capital" in the Annexes to the Treaty of Accession:
- Cyprus obtained a transitional period of five years (starting from the date of accession) for legislation in force on 31 December 2000 on the acquisition by aliens of residences for secondary use;
- Estonia, Latvia, Lithuania and Slovakia negotiated a transitional period of seven years regarding the acquisition of agricultural land and forests. Self-employed farmers from other Member States who have been legally resident and active in farming in Estonia for at least three years are not subject to this restriction. The transitional period may be extended for a maximum of three years if these countries demonstrate the need for a safeguard clause;
- Hungary enjoys a five-year transitional period regarding the acquisition of secondary residences. Nationals of the Member States and States party to the European Economic Area (EEA) Agreement who have been legally resident in Hungary for at least four years continuously are not subject to the restrictions. Hungary also enjoys a seven-year transitional period for the acquisition of agricultural land and forests. Self-employed farmers who have been resident and active in farming in Hungary for at least three years are not subject to the restriction. The transitional period may be extended by a maximum of three years if Hungary demonstrates the need for a safeguard clause;
- Poland negotiated a transitional period of five years regarding the acquisition of secondary residences. This does not apply to EU nationals and nationals of States party to the EEA Agreement who have been legally resident in Poland for at least four years continuously. There is also a twelve-year transitional period for the acquisition of agricultural land and forests. Self-employed farmers from the EU and EEA who have been legally resident and leasing land in Poland for at least three years or seven years continuously (depending on the region) are not affected by these measures;
- The Czech Republic negotiated a transitional period of five years for the acquisition of secondary residences by EU and EEA nationals who do not reside in the Czech Republic. Regarding the acquisition of agricultural land and forests, the country applies provisions similar to those in force in Estonia, Latvia, Lithuania and Slovakia;
- Slovenia: as regards the real estate market, Slovenia may resort to the general safeguard clause provided for in Article 37 of the Treaty of Accession for a period of up to seven years after the date of accession. This general economic safeguard clause (normally valid for a period of up to three years only after accession) is intended to mitigate the effects of any serious deterioration in the economic or competitive situation resulting from accession in certain sectors or regions;
- Malta negotiated a specific protocol which is part of the Treaty of Accession: Protocol 6 on the acquisition of secondary residences in Malta. The country may maintain in force the restrictions contained in its national legislation on the acquisition of secondary residences by nationals of Member States who have not legally resided in Malta for at least five years.
States that have been Members since 1 January 2007
Bulgaria and Romania have been Member States of the European Union since 1 January 2007. The Treaty of Accession of these two countries was signed by the Heads of State and Government in Luxembourg on 25 April 2005. It provides for transitional periods for the acquisition of secondary residences and agricultural land and forests:
- a five-year transitional period for the acquisition of secondary residences by Community citizens not resident in Bulgaria/Romania;
- a transitional period of no more than seven years for the acquisition of agricultural land and forests. This period will not apply to self-employed farmers residing in Bulgaria or Romania.
The European Commission has drawn up a report on the results of the negotiations with Bulgaria and Romania [pdf].
Scandinavian countries: Denmark and Finland (the Åland Islands)
Protocol 1 on the acquisition of secondary residences in Denmark is part of the Treaty on European Union. It stipulates that, notwithstanding the provisions of the Treaty on the free movement of capital, Denmark may maintain the existing legislation on the acquisition of second homes. However, it should be underlined that any discrimination on grounds of nationality is strictly forbidden under Article 12 of the Treaty establishing the European Community. A European national residing in Denmark may therefore acquire a secondary residence under the same conditions as a Danish national. A Danish national not residing in Denmark, by contrast, is subject to the same conditions as any other European national residing outside the country. In short, nationals should not enjoy any privileged treatment in their Member State.
Finland has sovereignty over the Åland Islands, which enjoy special status under international law, with relative autonomy as negotiated in the League of Nations in 1921. Protocol No 2, which is part of the Finnish Accession Treaty, stipulates that the provisions of the EC Treaty apply with certain derogations. The Åland Islands may therefore maintain the national provisions in force on 1 January 1994 regarding, inter alia, restrictions on the right of natural and legal persons to acquire and hold real property without permission by the competent authorities of the islands. There should be no discrimination concerning such acquisition of property. Finland must ensure that the same treatment applies to all natural and legal persons of the Member States in the Åland Islands.