Life in the Sun: The Ease of Benefitting from Tax Residence in Malta

21 Aug 2012

5 min read

The below text has been updated. Its latest version can be found here.

Further to the suspension of the Permanent Residents Scheme in December 2010, the Government of Malta has put in place a scheme for special tax status aimed at attracting internationally mobile, high net worth individuals to become tax resident in our islands and benefit from a favourable tax rate of 15% on any income remitted into Malta.

Citizens from any jurisdiction could apply for this special tax status in Malta subject to the satisfaction of certain conditions. The special tax status was issued by the Minister of Finance in the last quarter of 2011 in the form of  the “High Net Worth Individual Rules”, and is currently being administered by the International Tax Unit, housed within Malta Financial Services Authority premises.

This special tax status is valid for an indefinite period, provided that all the applicable conditions are satisfied on a continuing basis. An application for a special tax status in terms of the High Net Worth Individuals Rules may only be submitted by an Authorised Registered Mandatory (ARM). A list of the Authorised Registered Mandatories may be found here on the Inland Revenue Website.

The application for a High Net Worth Individual is available for both EU/ EEA/ Swiss Nationals and Non-EU/ EEA/ Swiss Nationals.

The conditions which must be satisfied are the following:

  • The beneficiary must hold a Qualifying Property Holding, which would be either owning a property of not less than €400,000 or renting a property for not less than €20,000 per annum. In either case the applicant and his family will have their habitual residence in such property as their principal place of residence.
  • The beneficiary must not benefit from the Residence Scheme Regulations or the Highly Qualified Persons Rules (other schemes under the Income Tax Act).
  • The beneficiary is in receipt of stable and regular resources that are sufficient to maintain the applicant and his dependants, without any recourse whatsoever to the local social assistance system.
  • The beneficiary must be in possession of a valid travel document.
  • The beneficiary is in possession of sickness insurance which covers himself and his dependants in respect of all risks across Europe. The above-mentioned health insurance must be procured by either a Maltese registered company or an international reputable health insurance company.
  • The beneficiary must declare that he is a fit and proper person and should the applicant be aware of any condition/ circumstance, this must be stated clearly in the application. In this respect the applicant must procure a clean conduct certificate (i..e. “no convictions” certificate”) for himself and any other dependant.
  • A copy of the marriage certificate is required in the case of a married couple, a married woman who is applying on her own behalf, a divorced woman or a widow.
Furthermore, any non-EU/ EEA/ Swiss beneficiary declaring  his intent to become a long-term resident, would need to be a party to an agreement with the Government of Malta for the purpose of effecting a voluntary deposit of a sum of €500,000, plus €150,000 for each dependant, which will be held by the Government of Malta until the applicant renounces to this special tax status and also state that he has no intention of establishing his domicile in Malta within 5 years from the date of applicationAlthough the High Net Worth Individuals Rules do not require the applicant to reside in Malta for any minimum period of time, it is important that he does not spend more than 182 days in any other jurisdiction as this may cause him to become tax resident in that other jurisdiction.

Applications must be supported by various documents including a birth certificate and marriage certificate (where applicable) and accompanied by a non-refundable administrative fee of €6,000.

Once that the above conditions are satisfied and the special tax status is acquired, the income of the individual who has been granted the special tax status that is received in Malta from foreign sources is taxed at the rate of 15%. Such beneficiary has the right to request a claim for relief for double taxation provided that the minimum amount of tax payable in Malta is €20,000 per annum for EU/ EEA/ Swiss and €25,000 for non-EU/ EEA/ Swiss, and a beneficiary with dependants must pay an additional €2,500 per annum per dependant for EU/ EEA/ Swiss and €5,000 for Non-EU/ EEA/ Swiss.  Any income arising in Malta and any other chargeable income which does not fall within the above-mentioned bracket will be charged at a rate of 35%.

Malta has a network of almost 60 double taxation treaties, which effectively provide scheme beneficiaries with effective protection from the risk of any double taxation claims raised in another treaty country in respect of the income already taxed in Malta.

Given the simplicity of the application process, the practicality of tax administration procedures and the benefit of a 15% tax rate, Malta’s HNWI scheme provides a truly attractive proposition to internationally mobile individuals looking for a low tax jurisdiction to establish their residence within the European Union.

The below text has been updated. Its latest version can be found here.