Permanent Residence Permit

Through the Residents Scheme Regulations, 2004 any foreigner, of whatever nationality, may submit an application under the scheme provided certain specific conditions are satisfied.

Subject to all conditions being satisfied, an individual should be provided with a certificate issued by the Commissioner of Inland Revenue that entitles him/her to the benefits of the scheme. The certificate shall constitute a permit issued under the Immigration Act entitling the holder to reside in Malta, subject to the conditions specified in the regulations.

There are various reasons why a considerable amount of foreigners are basing themselves in Malta and taking advantage of the various residency regulations. Just to mention a few, Malta boasts of:

• A very favourable climate
• Beautiful beaches and azure seas
• A rich cultural and historical heritage
• A high standard of living
• A safe living environment

Malta also offers other advantages such as:

• Forming part of the European Union
• English speaking people
• Tax Benefits
• Various double taxation treaties
• Access to all major European Airports
• Excellent access by Sea for both passengers and cargo

Towards the end of 2011 the Government of Malta published different sets of regulations as part of the revamp of the Permanent Residence Regulations. The included the Residents Scheme (Amendment) Regulations, the High Net Worth individuals Rules and the Highly Qualified Persons Rules.

The aim of the High Net Worth Individuals (HNWI) Rules is to attract persons to Malta who not only want to invest in property in Malta but who would also contribute to the local economy. Two separate sets of regulations have been enacted within the realm of high net worth individuals, one which applies to EU nationals (excluding nationals of Malta), EEA nationals and Swiss Nationals and the other set of regulations which applies to Non-EU nationals, Non-EEA nationals and Non-Swiss nationals.

Malta's efforts to develop itself as an onshore domicile have paid off as it is now recognized as an efficient and well regulated jurisdiction with a sound legal system. The underlying theme has long been stability and the availability of well trained staff, however, as the financial services and gaming industries, among others, began to thrive in recent years it became apparent that a significant need for additional, highly qualified workers developed. It is for this very reason that the Highly Qualified Persons Rules were enacted in a bid to attract the best of the breed to Malta.

Whatever Rules you are seeking to avail yourself of, at GM Corp we are here to walk you through every step of the process. From completing the application form, to finding the right property for you and your family as well as assisting and submitting your tax returns.
 
 

Ordinary Residence in Malta is aimed at both EU/EEA citizens and Non-EU/EEA citizens who are looking to transfer residence from a high-tax jurisdiction to a lower tax overseas country.

Any EU/EEA citizen shall have the right of entry and exit simply on production of a valid identification document and to move freely within Malta for a period of three months. However, in order to reside for a longer period a permit, issued by the immigration authorities, is required. The same would apply for Non-EU/EEA citizens.

The three month period is extendable to six months in the case of a person who provides evidence that, subject to the provisions of the relevant regulations, he is genuinely seeking employment and has a genuine prospect of securing employment within the additional three months.

EU/EEA nationals may obtain residence in Malta following the acceptance of employment in Malta or once an applicant proves to be self-employed or has set up a business in Mala for which he works. If a person does not work he must prove to be economically self-sufficient, that is to say, he is able to support himself and his family members accompanying or intending to join him in Malta and must be covered by sickness insurance against all risks whilst in Malta.

An individual holding a residence permit who qualifies as resident in Malta for Maltese income tax purposes, is subject to the normal income tax rules and rates applicable for every Maltese resident. An individual who is ordinarily resident, but not domiciled in Malta, is subject to income tax on income arising in Malta, on income arising outside Malta but received in Malta and on capital gains arising in Malta. No tax is chargeable on capital gains which arise overseas and remitted to Malta. Personal income tax is charged at progressive rates up to a maximum of 35 per cent.

Single Rates

 Married Rates

Long-Term Residence

Once the EU national (and his family members) has lived in Malta for a continuous period of five (5) years he is entitled to apply for confirmation of permanent residence. He will have to be living in Malta and be employed, self-employed, a student or an economically self-sufficient person throughout the five (5) year period. For residence in Malta to be considered continuous one must not have been absent from Malta for more than six (6) months each year. Longer absences for compulsory military service will not affect such residence. Additionally, a single absence of a maximum of 12 months for important reasons such as pregnancy, child birth, serious illness, study, vocational training or posting overseas, will also not affect the required continuous residence.

Long-term residence status may be granted to individuals who have been legally residing in Malta for a period of five continuous years. Temporary absences from Malta shall not interrupt this period and are construed to be period of absence which are shorter than six consecutive months in any given year of the said five-year period and not more than then months throughout the five year period.
 

An individual may apply for special tax status in accordance with the HNWI Rules prior to entering into Malta. The rules require that an individual must prove to the satisfaction of the Commissioner of Inland Revenue that the requirements as laid out in the regulations have been satisfied. These requirements include:

1. The applicant holds a Qualifying Property Holding, which in order to do so the applicant must:

a. Own an immovable property in Malta, purchased after the 1st January 2011, for a consideration no less than €400,000.00; or
b. Rents an immovable property in Malta for not less that €20,000.00 annually as lessee;
c. The applicant and his/her family members would need to declare that he/she occupies the qualifying property as his/her principal place of residence worldwide.

Certain criteria may differ for applicants who had already registered under the Residents Scheme Regulations, who would like to fall within the ambit of the HNWI Rules.

An applicant need not be the owner or lessee of a qualifying property at the time of the application. Such application would still be valid if a copy of the final deed of sale, promise of sale or lease agreement is not attached to the application form. However, individuals who would have acquired or rented a Qualifying Property by the date of application are required to attach a certified true copy of the relevant contract with the application form.

2. The applicant does not benefit from either the Residence Scheme Regulations or the Highly Qualified Persons Rules.

3. The applicant needs to be an EU citizen (but not a citizen of Malta), a citizen of Iceland, Norway or Liechtenstein, or a citizen of Switzerland.

4. The applicant is in receipt of stable and regular resources that are sufficient to maintain himself/herself and his dependents without recourse to the social assistance system in Malta.

5. The applicant is in possession of a valid travel document.

6. The applicant is in possession of sickness insurance which covers himself and his dependents in respect of all risks across the whole of the EU normally covered for Maltese nationals. The health insurance cover must be procured by a company licensed in Malta or by an international reputable health insurance company.

7. The applicant is not domiciled in Malta and does not intend to establish his domicile in Malta within five years from the day of the application for special tax status.

8. The applicant must satisfy the "fit and proper person" test, that is to say, an individual must prove to be of good conduct and good morals, has no criminal record or disqualifications or censorship by professional or regulatory bodies, is not adjudged bankrupt by a competent Court of authority, amongst other criteria.

An application for special tax status under these Regulations can only be submitted to the Commissioner of Inland Revenue through the services of an Authorised Registered Mandatory (ARM). An Authorised Registered Mandatory is a person who holds a warrant to practice as an advocate, legal procurator, has been appointed notary public, or holds a warrant to practice as an accountant, all in accordance with the relevant laws. Members of certain Maltese institutions may also be appointed as ARMs. A legal person which is at least 75% owned (directly or indirectly) by persons who meet the necessary criteria to be appointed ARMs, may also act as an Authorised Registered Mandatory. The ARM is tasked with submitting the form, and making certain declarations on behalf of the applicant, such as those stating that the applicant is in receipt of stable and regular resources, that the applicant is not domiciled in Malta, etc. The acknowledgement or request for more information of the application will be sent to the Applicant's Authorised Regulatory Mandatory.

From the date of confirmation of the special tax status under the HNWI Rules, an applicant will be subject to a rate of fifteen per cent (15%) on income that is received in Malta from foreign sources. The individual still retains the right to request a claim for double taxation relief, provided that, the minimum amount of tax payable by such individual is €20,000.00 for any year of assessment, and such individual with dependents must pay an additional €2,5000.00 for any year of assessment per dependent. The minimum amounts of tax payable are not refundable, and the minimum tax for the first year will be payable by not later than the tax return date and will not be subject to provisional tax payments. Income arising in Malta from any trade, business, profession or vocation will be subject to a flat rate of tax at 35% on all the income derived therefrom.
 

 An individual may apply for special tax status in accordance with the HNWI Rules prior to entering into Malta. The rules require that an individual must prove to the satisfaction of the Commissioner of Inland Revenue that the requirements as laid out in the regulations have been satisfied. These requirements include:

1. The applicant holds a Qualifying Property Holding, which in order to do so the applicant must:

a. Own an immovable property in Malta, purchased after the 1st January 2011, for a consideration no less than €400,000.00; or
b. Rents an immovable property in Malta for not less that €20,000.00 annually as lessee;
c. The applicant and his/her family members would need to declare that he/she occupies the qualifying property as his/her principal place of residence worldwide.

Certain criteria may differ for applicants who had already registered under the Residents Scheme Regulations, who would like to fall within the ambit of the HNWI Rules.

Any person who declares that he does not intend to become a long-term resident of Malta may not spend more than nine months in a calendar year in Malta and such individual would therefore be expected to leave Malta for a minimum period of three months in a calendar year. Such individual will not became eligible for long-term residency status and need not enter into a qualifying contract to benefit from the High Net Worth Individuals Rules.

However, in the case of a person who declares that he intends to become a long-term resident of Malta would need to become a party to a qualifying contract, which is an agreement entered into between the Government of Malta and the applicant, wherein an applicant contributes an amount to the Government of Malta.

2. The applicant does not benefit from either the Residence Scheme Regulations or the Highly Qualified Persons Rules.

3. The applicant is in receipt of stable and regular resources that are sufficient to maintain himself/herself and his dependents without recourse to the social assistance system in Malta.

4. The applicant is in possession of a valid travel document.

5. The applicant is in possession of sickness insurance which covers himself and his dependents in respect of all risks across the whole of the EU normally covered for Maltese nationals. The health insurance cover must be procured by a company licensed in Malta or by an international reputable health insurance company.

6. The applicant is not domiciled in Malta and does not intend to establish his domicile in Malta within five years from the day of the application for special tax status.

7. The applicant must satisfy the "fit and proper person" test, that is to say, an individual must prove to be of good conduct and good morals, has no criminal record or disqualifications or censorship by professional or regulatory bodies, is not adjudged bankrupt by a competent Court of authority, amongst other criteria.

8. The applicant needs to be fluent in Maltese or English.

9. The applicant cannot be an EU national, a national of Iceland, Norway or Liechtenstein or a national of Switzerland.

An application for special tax status under these Regulations can only be submitted to the Commissioner of Inland Revenue through the services of an Authorised Registered Mandatory (ARM). An Authorised Registered Mandatory is a person who holds a warrant to practice as an advocate, legal procurator, has been appointed notary public, or holds a warrant to practice as an accountant, all in accordance with the relevant laws. Members of certain Maltese institutions may also be appointed as ARMs. A legal person which is at least 75% owned (directly or indirectly) by persons who meet the necessary criteria to be appointed ARMs, may also act as an Authorised Registered Mandatory. The ARM is tasked with submitting the form, and making certain declarations on behalf of the applicant, such as those stating that the applicant is in receipt of stable and regular resources, that the applicant is not domiciled in Malta, etc. The acknowledgement or request for more information of the application will be sent to the Applicant's Authorised Regulatory Mandatory.

Any public documents executed in the territory of a country other than Malta which will be produced in Malta together with an application for special tax status under the HNWI Rules needs to be accompanied by an Apostille Certificate in terms of the Hague Convention of the 5th October 1961 Abolishing the requirement of Legalisation for Foreign Public Documents.

From the date of confirmation of the special tax status under the HNWI Rules, an applicant will be subject to a rate of fifteen per cent (15%) on income that is received in Malta from foreign sources. The individual still retains the right to request a claim for double taxation relief, provided that, the minimum amount of tax payable by such individual is €25,000.00 for any year of assessment, and such individual with dependents must pay an additional €5,0000.00 for any year of assessment per dependent.

The minimum amounts of tax payable are not refundable, and the minimum tax for the first year will be payable by not later than the tax return date and will not be subject to provisional tax payments. If the tax payable according to the tax computation (including any credit for relief of double taxation) is such that it is less that the minimum tax required to be paid, then the said minimum would be due. Income arising in Malta from any trade, business, profession or vocation will be subject to a flat rate of tax at 35% on all the income derived therefrom.
 

Legal Notice 106 entitled Highly Qualified Persons (HQP) Rules, 2011 (as amended) was introduced in order to attract highly qualified persons to occupy certain positions described as "eligible office" within companies licensed and/or recognized by the relevant Competent Authority that is, the Malta Financial Services Authority (MFSA) and/or the Lotteries and Gaming Authority (LGA). The HQP Rules apply to income which is brought to charge in year of assessment 2011 (basis year 2010) and apply to individuals not domiciled in Malta.

Eligible office comprises employment in one of the following positions:

• Actuarial Professional;
• Chief Executive Officer;
• Chief Financial Officer;
• Chief Commercial Officer;
• Chief Insurance Technical Officer;
• Chief Investment Officer;
• Chief Operations Officer;
• Chief Risk Officer (including Fraud and Investigations Officer);
• Chief Technology Officer;
• Chief Underwriting Officer;
• Head of Investor Relations;
• Head of Marketing (including Head of Distribution Channels);
• Head of Research and Development; (including Search Engine Optimisation and Systems Architecture)
• Portfolio Manager;
• Senior Analyst (including Structuring Professional);
• Senior Trader/Trader;
• Odds Compiler Specialist.

Requirements

In order to benefit under the HQP Rules the person concerned must adhere to the following conditions:

1. Individual income must be made from a qualifying contract of employment in an eligible office;

2. The contract of employment must be with a company licensed and/or recognised by a competent authority, i.e., the MFSA and/or the LGA;

3. Income must amount to at least €75,000 (seventy five thousand euro) exclusive of the annual value of any fringe benefits, adjusted annually in line with the Retail Price Index. The 15% flat rate is imposed up to a maximum income of €5,000,000 (five million euro) with the excess being exempt from tax altogether.

4. Prove to the satisfaction of the MFSA and/or LGA that:

i. Employment income is subject to income tax in Malta;
ii. The employment contract is subject to the laws of Malta for exercising genuine and effective work in Malta;
iii. That he/she is in possession of professional qualifications;
iv. That he/she has at least five years of professional experience;
v. That he/she performs activities of an eligible officer.

5. He/she has not benefitted from deductions available to investment services expatriates with respect to relocation costs and other deductions under article 6 of the Income Tax Act;

6. He/she fully discloses for tax purposes and declares emoluments received in respect of income from a qualifying contract of employment and all income received from a person related to his employer paying out income from a qualifying contract as chargeable to tax in Malta;

7. He/she is in receipt of stable and regular resources which are sufficient to maintain him/herself and the members of his/her family without recourse to the social assistance system in Malta;

8. He/she resides in accommodation regarded as normal for a comparable family in Malta and which meets the general health and safety standards in force in Malta;

9. He/she is in possession of a valid travel document;

10. He/she is in possession of sickness insurance in respect of all risks normally covered for Maltese nationals for him/herself and the members of his/her family.

It is imperative to note that any person who was employed for a period exceeding two years preceding the 1st January, 2010, under a contract of employment requiring the performance of his/her duties in Malta is not eligible to benefit under the HQP Rules. However, an individual employed in Malta after 1st January 2008 and subject to the above, may benefit from the 15% tax rate. European Economic Area (i.e. EU countries plus Norway, Iceland and Liechtenstein) and Swiss nationals can benefit for a consecutive period of five years whilst third country nationals can benefit for a consecutive period of four years.

Individuals who already have a qualifying contract of employment in an "eligible office" two years before the entry into force of the scheme (1st January 2010) may benefit from the 15% tax rate for the remaining years of the scheme. Therefore, by way of example, if a CEO who is a national of an EEA country who has a qualifying contract of employment starting in 2008 (basis year) will benefit for three years from the scheme, that is, basis years 2010, 2011 and 2012, while an American citizen holding the same eligible office would benefit from the 15% tax rate for basis years 2010 and 2011.

Non-eligibility under the HQP Rules

The individual income derived from employment in an "eligible office" will not qualify for the 15% reduced rate if:

1. It is paid by an employer who receives any benefits under business incentive laws; or

2. It is paid by a person who is related to the employer who received any benefits under any business incentive laws; or

3. If the individual holds more than 25% (directly or indirectly) of the company licensed and/or recognised by the Competent Authority; or

4. If the individual is already in employment in Malta before the coming into force of the scheme either with a company not licensed and/or recognised by the Competent Authority or not holding "eligible office" with a company licensed and/or recognised by the Competent Authority;

5. A claim is made for any relief, deduction, reduction and credit or set-off of any kind except for any income tax deducted at source.