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Contributed by M Meilak and Associates
30 September, 2015
After introducing its Individual Investor Program in 2014, Malta now has an extensive array of special incentives schemes designed to encourage skilled and well-heeled expats to take up residence in the country.
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 and a typically laid-back Mediterranean lifestyle. 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 400,000.
With its strategic position in the Mediterranean, Malta has become an important cultural and commercial centre. 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's economic policy encourages information technology operations, and the territory has invested heavily in state-of-the-art telecommunications. There are already 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; there are said to be more than 360 betting and gaming e-commerce operations in total on the island.
A Popular Expat Destination
Malta was ranked the best destination in Europe for expats, and third overall in the latest annual expat survey by Internations, behind Ecuador and Mexico. In the survey, Malta scores highest in the Working Abroad Index, mostly due to the high job satisfaction among survey respondents. Expats are also generally happy with their career prospects (67 percent), work-life balance (67 percent) and working hours (69 percent). Malta is also popular for its ease of settling in and makes it to fourth place in this sub-index. Indeed, almost three-quarters (73 percent) of respondents said that they find it easy to make friends in Malta and an even higher proportion (77 percent) said they feel at home there.
The survey also found that unlike other popular expat destinations, there is no real language barrier in Malta, with English one of the country's official languages, and 40 percent of the expat population originating from Britain.
Malta does not achieve a perfect score, however. One issue is that incomes are generally lower in Malta than elsewhere. Almost half (46 percent) of the respondents reported a fall in income since moving to Malta, with 38 percent falling into the lowest income bracket of USD25,000 and below. Malta only makes it to 42nd place (out of 64 countries) in the Personal Finance Index, although 62 percent said they are happy with their financial situation overall. Transport infrastructure also leaves something to be desired according to the findings of the survey, with Malta ranked in 39th place in the Travel and Transport sub-index. About one-third (36 percent) of expats said they are dissatisfied with Malta's transport infrastructure.
However, expats in Malta appear to be happy with their socializing and leisure options (79 percent), the quality of healthcare (80 percent), and the climate and weather (97 percent).
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.
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