Malta And Its Expat Tax And Residence Schemes

Expat Briefing Editorial Team, 18 September, 2017

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 416,000.

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.

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, particularly in the remote gambling sector and ancillary industries, and the territory has invested heavily in state-of-the-art telecommunications to facilitate growth in these areas. 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. According to the Malta Gaming Authority, the sector's regulator, in the first half of 2016, the gaming industry directly contributed 12 percent of the total economic value-added generated in the Maltese economy, with employment in the gaming industry rising by 31 percent year on year.

The sector also contributes to the public purse, with tax revenues amounting to EUR28m during the first half of 2016, representing 4.6 percent of the total indirect tax intake of the Maltese Government.

As at the end of June 2016, there were 250 registered remote gaming operators, holding 490 licences collectively.

Malta And Financial Services

Malta's financial services system continues to expand in terms of size, reputation, and attractiveness.

There were a total of 28 credit institutions in Malta at the end of 2016, including 126 branches with 215 Automated Teller Machines (ATMs) located around the Maltese Islands. These offer a wide variety of banking services.

Investment services remains one of the fastest growing segments within Malta's financial services sector, thanks in large part to the EU Alternative Investment Fund Managers Directive (AIFMD), which has expanded market access at a European level.

At the end of 2016 there were 156 licensed investment services companies in Malta. The aggregate net asset value of funds domiciled in Malta stood at just under EUR10bn at the conclusion of last year.

Malta is also an attractive jurisdiction for the setting up or redomiciliation of captive and other insurance and reinsurance business.

A Popular Expat Destination

With its favourable climate, career opportunities for skilled foreigners in the technology and financial services sectors, and opportunities for leisure, Malta is a strong draw for expats, particularly from the UK, given the countries' historic and cultural links.

The 2005 census showed that the number of non-Maltese persons living in the islands was over 12,000, representing about 3 percent of the overall population. Almost 5,000 of these were of British origin.

Malta has been attempting to attract higher numbers of skilled foreign workers and wealthy retirees with special tax schemes, which are summarized below.

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 property and make a minimum tax contribution each year to Maltese coffers. However, successful applicants can avail of a reduced rate of tax on foreign-source income of 15 percent.

The scheme is open to those from outside the EU, the EEA, and Switzerland. Applicants must purchase immovable property worth at least EUR275,000 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 a minimum 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; in 2017, the minimum annual salary is EUR82,881. 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. 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.

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. For further information on numerous aspects of expat life in Malta, please visit the Malta country page of Expat Briefing.

Tags: business | Investment | Europe | Invest | Investment | individuals | investment | Switzerland | Iceland | Malta | Liechtenstein | Norway | law | services | banking | financial services | insurance | gambling | fees | tax | tax incentives |


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