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Expat Briefing Editorial Team
22 September, 2016
Little more than two or three hours flying time from most places in Europe, Malta has an average of 300 days of sunshine each year, temperatures of between 14°C in winter and 32°C in summer, a typically laid-back Mediterranean lifestyle, and an array of tax incentive schemes designed to attract highly skilled and wealthy expats. Little wonder then that this island is one of the most popular bolt-holes for expats Britons and other Europeans.
Malta is in fact a collection of islands situated in the Mediterranean Sea, about 100 km from Sicily and 290 km from North Africa. The inhabited islands comprise Malta (390 sq km) Gozo (65 sq km) and Comino (2.5 sq km). Malta is the largest of the islands, and is home to the country's capital, Valletta. The total population of the islands is approximately 415,000.
With its strategic position in the Mediterranean, Malta has become an important cultural and commercial center. The islands' architecture, language and culture are an intriguing and unique blend of Mediterranean and Arabic influences, although after almost 150 years as a British colony, British influences abound and English stands alongside Maltese as the official language. Italian is also widely spoken.
Malta is a politically stable parliamentary democracy and has been a member of the European Union (EU) since May, 2004, adopting the euro in 2008. Unlike Cyprus, another location favoured by European – and particularly British – expats, Malta has survived the financial crisis and the Eurozone troubles relatively unscathed. Having exited the EU's excessive deficit procedure programme in December 2012, Malta has been able to cut taxes recently, in contrast with many of its neighbours in the region.
In terms of infrastructure, the islands are reasonably well equipped given their somewhat isolated location.
Malta – The EU's E-gaming Hub
Malta's economic policy encourages information technology operations, and the territory has invested heavily in state-of-the-art telecommunications. There are a number of Internet Service Providers in Malta, with clear interest being shown in offshore e-commerce development.
The most active e-commerce sector in Malta has been betting and gaming. Indeed, Malta was a pioneer in the early phases of this industry's growth, being the first EU member state to regulate internet gaming.
Malta's heavy investment in the remote gambling sector and the infrastructure upon which it depends has certainly paid off. Since the Lotteries and Other Games Act 2001 was put in place, the number of licensed operators grew from 12 to almost 250 holding over 400 licenses in 2014. In total, these companies employ over 5,000 people in Malta, with a further 3,000 in the servicing industry including telecom operators, data center operators, lawyers, auditors, and banking and payment institution staff. Having grown year-on-year, the industry constituted approximately 12 percent of the country's gross domestic product in 2014.
Malta And Financial Services
Malta's financial services system continued to expand in terms of size, reputation, and attractiveness in 2015, according to the recently released Annual Report of the Malta Financial Services Authority. The Authority said the growth was "backed by a resilient regulatory framework, prudential supervision, consumer protection, and strong money laundering prevention mechanisms."
The bulk of new licenses issued by the Authority in 2015 were in the area of payment services, electronic money, and alternative investment management sectors.
Malta Financial Services Authority Chairman, Joe Bannister, said that while "the world economy stumbled in 2015 [...] it was a different story in Malta where the economy experienced impressive growth, with financial services playing an important role in that. The Malta Financial Services Authority ensured good governance but also underwent major internal restructuring to make it future proof. This was a year in which the Malta Financial Services Authority continued to strengthen the regulatory and supervisory regime. It was a year of robustness and results."
The strong growth in Malta's financial services sector was matched by Malta's economy, which expanded by a robust 6.3 percent over 2014 in real terms - a multi-year high rate, it said. Growth is expected to remain strong in 2016, with consumer income boosted by personal income tax cuts and rising government spending.
The Health of Malta's financial services sector and economy in general was confirmed by an IMF report in January 2016. This concluded that Malta is among the fastest expanding economies in the eurozone and its banking sector remains resilient.
A Popular Expat Destination
Malta was ranked the best destination in Europe for expats, and second overall in the 2016 expat survey by Internations, behind only Taiwan. According to the survey, Malta is the best place in the world for expats to settle down, acclimatize to the local culture, and make new friends. Over four in ten expats (41 percent) say it is very easy to settle down in Malta, says Internations, well over twice the global average of 16 percent.
In terms of overall quality of life, Malta is in sixth place with exceptional ratings for the climate and weather. Three-quarters of expats say they are completely satisfied with their quality of life in Malta, with no respondents reporting anything negative in this respect. Unsurprisingly then, almost half (49 percent) of expats in Malta are planning to remain there permanently, significantly higher than the global average of 31 percent.
However, Malta fell from first place to fifth in 2016 in the Working Abroad Index. The survey found that expats working in Malta are more dissatisfied with their work-life balance as they were in 2015, with only 22 percent completely satisfied (27 percent in 2015). Nevertheless, this is still slightly above the global average of 17 percent. Internations concluded that the fact that 28 percent are part-time workers might have something to do with this result.
Notably, Malta made a significant jump in the Personal Finance Index, from 42nd to 6th place. One-quarter of respondents said they are completely satisfied with their financial situation, well above
the global average of 15 percent. This is despite the fact that one-third of working expats say their income is generally lower than back home.
Expat Tax Schemes
The Global Residence Programme
Malta recently enhanced the terms of the incentive scheme offered to high net worth individuals (HNWIs) seeking to obtain a residence permit. As under the former program, wealthy persons seeking a permanent residency visa will have to purchase high-value property and make a minimum tax contribution each year to Maltese coffers. Applicants must purchase immovable property worth at least EUR275,000 (USD310,000) in Malta or EUR220,000 in Gozo or the south of Malta, where property prices are generally lower (the previous requirement was EUR400,000). Alternatively, the individual may rent property for no less than EUR9,600 in Malta (equating to a monthly rent of EUR800 per month), or EUR8,750 in south Malta or Gozo (equal to EUR730 per month). Again, this represents a large reduction to the former minimum annual rent threshold to qualify for the programme, of EUR20,000 per year in both areas.
To avail of the new scheme, expats must make an annual upfront tax contribution of no less than EUR15,000, regardless of where they live in the islands. This is markedly less than under the old scheme, which required a revenue contribution of EUR25,000 plus EUR5,000 per dependant.
The improved scheme also removed the requirement that non-EU and non-EEA (European Economic Area - EU countries plus Norway, Iceland and Liechtenstein) nationals provide a EUR500,000 bond to the Government, plus an additional EUR150,000 per dependant.
Malta Highly Qualified Person Scheme
The Maltese Government also runs a scheme designed to lure highly-skilled and highly-valued employees to the islands. The Highly Qualified Persons Rules, 2011, brought into force tax incentives and served to create a scheme to attract highly qualified persons to occupy an 'eligible office' with companies licensed and/or recognized by the Malta Financial Services Authority. The rules apply to individuals not domiciled in Malta. In essence, "not domiciled" in Malta means not having born there.
Under the scheme, individual income from a qualifying contract of employment in an "eligible office" is subject to tax at a flat rate of 15 percent provided that the income amounts to an annual minimum which is adjusted each year in line with the Retail Price Index; this amounts to EUR81,457 in 2015. The 15 percent flat rate is imposed up to a maximum income of EUR5m; the excess is exempt from tax.
The 15 percent tax rate applies for a consecutive period of five years for EEA and Swiss nationals and for a consecutive period of four years for third country nationals. EEA and Swiss nationals may apply for a one-time extension to the scheme.
An individual may benefit from the 15 percent tax rate if he or she derives employment income subject to income tax in Malta (please see the Malta Personal Taxation section of www.lowtax.net for a description of Malta's personal taxation rules). The employment contract
must also be subject to the laws of Malta and should be drawn up for exercising genuine and effective work in Malta. Other stipulations include that:
An application for a formal determination relating to eligibility under the Highly Qualified Persons Rules must be made to the Chairman, Malta Financial Services Authority on the appropriate form, found on the tax authority website.
For a more detailed overview of the Malta Highly Qualified Persons Rules, the Maltese tax authority also has a page on its website dedicated to the Tax Guidelines of the Rules.
Individual Investor Program
The Individual Investor Program was introduced in 2014 and allows for the granting of citizenship by a certificate of naturalization to individuals and their families who contribute to the economic and social development of Malta. Subject to a stringent vetting and diligence process, including thorough background checks, the applicants and their dependents are granted citizenship in exchange for such contribution.
To qualify for citizenship, the main applicant must be at least 18 years of age, provide proof of having been a resident of Malta for a period of 12 months preceding the issuing of a certificate of naturalization and meet the following investment requirements:
Applicants must have global health insurance coverage for at least EUR50,000 for the main applicant and each of the dependents and must give proof that they can maintain the same for an indefinite period.
Principal Applicants can include in their IIP application:
The following contributions and fees are required as a minimum to qualify for citizenship under the IIP:
There are also due diligence fees as follows:
There is also a passport fee of EUR500 per person, and bank charges of EUR200 per person.
Applications must be accompanied by supporting identification and verification documents authenticated in English, as set out in the Checklist and Guidelines, together with:
According to figures announced by Henley & Partners, which runs the scheme on behalf of the Maltese Government, the IIP had attracted over 400 applicants from more than 40 countries by January 2015. In a statement, the company explained that letters of citizenship approval in-principle have been issued to the first applicants and that certificates of naturalization will follow soon after contribution, investment, and residency requirements have been fulfilled.
Malta's Prime Minister, Joseph Muscat, has said that the program will enhance the island's competitiveness by increasing its talent pool and global network. A more detailed explanation of Malta's residence rules can be found on our partner website, www.lowtax.net, which also contains tax and residence information for more than 70 other jurisdictions.
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