Residence Programme Rules 1 An EU, EEA or Swiss national who is not domiciled in Malta is taxable in Malta only on his Malta source chargeable income and capital gains, and on his foreign source income which is received in Malta (foreign source capital gains are not chargeable to Maltese income tax even if received in Malta) – the remittance basis of taxation. A “beneficiary” who is an EU, EEA or Swiss national but not a Maltese national, can be granted special tax status in Malta subject to the satisfaction of a number of conditions set out in the Rules. Individuals who qualify under these rules are taxable at the rate of 15% on receipt of foreign source income in Malta and also have the possibility of claiming double tax relief on such income. These rules were introduced by virtue of Legal Notice 270 of 2014 and shall be deemed to have come into force with effect from 1st July 2013. The Residence Scheme Regulations and the Malta Retirement Programme Rules have also been amended and brought in line with the below-mentioned rules mainly in relation to the thresholds of the “Qualifying Property”. Who is eligible to apply? To apply under these Rules, an individual must primarily be an EU, EEA or Swiss national who is not a “permanent resident” of Malta – which term is not used to denote beneficiaries under this or similar expatriate schemes but rather in the sense set out below. Furthermore, the particular individual must also satisfy certain criteria which are applicable to all applicants, i.e.: i. The applicant must hold a ‘Qualifying Owned Property’ situated in Malta of not less than €275,000 or if in Gozo or in the south of Malta, of not less than €220,000; ii. Alternatively, the applicant must lease ‘Qualifying Rented Property’ situated in Malta of not less than €9,600 per annum or not less than €8,750 per annum for a property situated in Gozo or in the south of Malta; iii. The applicant must not be benefitting from any other tax incentive programme in Malta; iv. The applicant must be in receipt of stable and regular resources that are sufficient to maintain himself and his dependants; www.pwc.com/mt The Residence Programme Rules, 2014 Human Resources Services
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Residence Programme Rules 1
An EU, EEA or Swiss national who is not domiciled in Malta is taxable in Malta only on his Malta source chargeable income and capital gains, and on his foreign source income which is received in Malta (foreign source capital gains are not chargeable to Maltese income tax even if received in Malta) – the remittance basis of taxation.
A “beneficiary” who is an EU, EEA or Swiss national but not a Maltese national, can be granted special tax status in Malta subject to the satisfaction of a number of conditions set out in the Rules.
Individuals who qualify under these rules are taxable at the rate of 15% on receipt of foreign source income in Malta and also have the possibility of claiming double tax relief on such income.
These rules were introduced by virtue of Legal Notice 270 of 2014 and shall be deemed to have come into force with effect from 1st July 2013.
The Residence Scheme Regulations and the Malta Retirement Programme Rules have also been amended and brought in line with the below-mentioned rules mainly in relation to the thresholds of the “Qualifying Property”.
Who is eligible to apply?
To apply under these Rules, an individual must primarily be an EU, EEA or Swiss national who is not a “permanent resident” of Malta – which term is not used to denote beneficiaries under this or similar expatriate schemes but rather in the sense set out below.
Furthermore, the particular individual must also satisfy certain criteria which are applicable to all applicants, i.e.:
i. The applicant must hold a ‘Qualifying Owned Property’ situated in Malta of not less than €275,000 or if in Gozo or in the south of Malta, of not less than €220,000;
ii. Alternatively, the applicant must lease ‘Qualifying Rented Property’ situated in Malta of not less than €9,600 per annum or not less than €8,750 per annum for a property situated in Gozo or in the south of Malta;
iii. The applicant must not be benefitting from any other tax incentive programme in Malta;
iv. The applicant must be in receipt of stable and regular resources that are sufficient to maintain himself and his dependants;
www.pwc.com/mt
The Residence Programme Rules, 2014 Human Resources Services
Residence Programme Rules 2
v. The applicant must be in possession of a valid travel document;
vi. The applicant must be in possession of health insurance which covers himself and his dependants in respect of all risks across the EU as are normally covered for Maltese nationals;
vii. The applicant can adequately communicate in one of the official languages of Malta;
viii. The applicant must be a fit and proper person (an international due diligence exercise is carried out by the Inland Revenue Department prior to granting the special tax status);
ix. A non-refundable one-off registration fee of €6,000 must be paid upon application. However, applications in respect of which the qualifying property holding is situated in the south of Malta, the non-refundable administrative fee shall be that of €5,500.
Tax Treatment
Once the special tax status has been acquired, the person is chargeable to tax on his/her income as follows:
• Foreign source income, which is received in Malta is taxable at the rate of 15% with the possibility of claiming double taxation relief on such income subject to the minimum annual tax liability referred to below;
• The individual must pay a minimum tax liability of €15,000 per annum;
• Other income that is not chargeable to tax under these Rules is charged separately at the rate of 35%;
• The minimum tax of €15,000 will be payable by not later than the 30th April of the year in which the income is received in Malta and such payment must be accompanied by a return made to the Commissioner that provides proof that all the requirements continue to be satisfied.
An individual who has been granted the special tax status must comply with the following obligations:
i. The individual must not become a Maltese or a third country national;
ii. The individual must not become a “permanent resident” in the sense set out below;
iii. The applicant must retain the holding of a qualifying property;
iv. The applicant must retain the health insurance and continue to have stable resources;
v. The individual must not stay in any other jurisdiction for more than 183 days in a calendar year;
vi. Special reporting obligations (the filing of an annual tax return) and notifications must be complied with.
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Authorised Registered Mandatary
An application for the special tax status must be made through the services of a person that qualifies as an ‘Authorised Mandatary’ and is registered as such with the Inland Revenue Department. PwC Malta is able to offer this service as it is registered as an Authorised Mandatary.
Where a beneficiary becomes a permanent resident
If an individual who was granted special tax status in terms of the Residence Programme Rules, specifically applies to become a permanent resident of Malta, i.e. a person who:
a. has right of permanent residence in terms of article 6 and is in possession of a permanent residence certificate issued in terms of article 7 of the Free Movement of European Union Nationals and their Family Members Order; or
b. applies for right of permanent residence in terms of article 6 of the Free Movement of European Union Nationals and their Family Members Order;
may not / no longer benefit from the tax treatment referred to above and will be taxable on a worldwide basis at the normal tax rates which may reach up to 35%.
Kevin Valenzia Territory Senior Partner (356) 2564 [email protected]
This means that the imposition of this worldwide basis of taxation applies only for those individuals who actually apply for and obtain the said permanent residence certificate or who actually apply for the right of permanent residence in terms of the above-mentioned distinct Order.
Hence this does not affect individuals who take up residence in Malta and benefit from the Residence Programme or other similar Maltese expatriate incentive programmes, as long as they do not apply for and obtain the specific status referred to in the Free Movement of European Union Nationals and their Family Members Order.
This also applies in the case of non-EU/ EEA/ Swiss nationals benefitting from the Global Residence Programme as long as they do not apply for the specific status of “long-term residents” under the Status of Long-Term Residents (Third Country Nationals) Regulations.
Thus, expatriates residing in Malta merely on the basis of one of Malta’s popular expatriate incentive programmes should not be subject to a worldwide basis of taxation. However, one should pay due attention not to apply for the different status of “permanent resident” or “long-term resident” under the above-mentioned distinct Order/ regulations.
