The European Commission said on Thursday it would file a legal challenge against Malta for its so-called golden passport programme that allows wealthy foreigners to buy citizenship in exchange for an investment of around 1 million euros ($970,000).
Holding a Maltese passport allows them to live and work in any EU country.
In recent months, Malta suspended the programme for Russian and Belarusian nationals following the start of the war in Ukraine, but it continues to operate the scheme for all other nationalities and "has not expressed any intention to end it", the Commission said in a statement.
Brussels believes the scheme is in breach of EU law because citizenship is granted without any real obligation for the beneficiaries to live in the country.
Malta disputes that view, insisting again on Thursday that it was correct in its interpretation of EU treaties.
"The government of Malta believes that it is not in breach of the principle of sincere cooperation as stipulated in Article 4 (3) of the Treaty of the European Union," the Malta Home Affairs Ministry said in a statement.
The referral of the case to the EU Court of Justice comes after years of wrangling with Malta about tweaks to the scheme. An infringement procedure about the programme was initiated by the EU Commission in October 2020, but led to no tangible changes, the Commission said.
Pressure from Brussels has led to the suspension or abolition of golden passport schemes in other EU countries, with Cyprus and Bulgaria being the latest to halt their programmes.
That leaves Malta alone in the EU, although many other countries operate programmes to sell visa.
The sale of passports generated more than 800 million euro ($780 million) for Malta between 2014 and 2020 and was celebrated by the Labour government for helping it fund workers' salaries at the height of the COVID-19 crisis.