Malta offers a wide range of schemes and programmes to those individuals opting to establish their permanent residence in its jurisdiction. The High Net Worth Individual Scheme, introduced in 2011, proved to be particularly attractive for those seeking to benefit from a special tax status in a country which suits their standard of living.
The special tax status acquired under this scheme allows an individual to benefit from a tax rate of 15% on any foreign tax income received in Malta. A separate tax rate of 35% applies to any additional income not covered under this scheme. When it comes to capital gains, high net worth individuals are subject to a final withholding tax of 12% of the transfer value of all capital gain arising in Malta, including the transfer of immovable property. Conversely, no tax is payable on capital gains arising outside Malta, even if such gains are consequently received in Malta.
This scheme also entitles individuals to claim double taxation in terms of Article 74 (a) and (b) of the Income Tax Act, Chapter 123 of the Laws of Malta. This is subject to a minimum amount of tax payable, this being €20,000 for any year of assessment. If such person has any dependents, then the amount of €2,500 has to be paid for each dependent.
In order for an individual to be eligible under this scheme, s/he must satisfy a number of conditions. Most importantly, an applicant cannot be a Maltese national nor a third country national. An applicant would neither be eligible if he is domiciled in Malta and must prove that he has no intention of establishing his domicile in Malta within five (5) years from the date of the application for special tax status. Neither may an applicant be a long-term resident in Malta. In fact, upon filing the necessary Application Form, all interested individual must make a declaration to this end.
Another essential condition refers to the Qualifying Property Holding. This means that a person must own an immovable property in Malta purchased after the 14th September 2011 for a consideration of not less than €400,000. Otherwise, should an applicant have already previously filed an application under the Residents Scheme Regulations, which application has been duly received and acknowledged by the Commissioner of Inland Revenue, then such an individual would be eligible to benefit from this scheme provided further that he either
(i) owns an immovable property in Malta which was purchased before the 14th September 2011 for a consideration of not less than €116,000, or
(ii) has entered into a contractual commitment before the 14th September 2011 to purchase an immovable property for a consideration of not less than €116,000 and actually purchases the property to which the contractual commitment refers by not later than the 31st March 2012.
If an applicant does not fall under either of these categories, he may still satisfy the condition of a Qualifying Property Holding if he rents an immovable property in Malta for not less €20,000 payable annually by him as a lessee.
In all cases, the applicant and his family members must have their habitual residence in such property as their principal place of residence. However, it is important to note that no person, other than the beneficiary and his/her family members may reside in the Qualifying Property Holding and that such property may not be leased or sub-leased. Where the applicant has already acquired a Qualifying Property Holding by the application date, an authenticated copy of the contract providing evidence of such ownership or lease needs to be attached to the application.
In order to satisfy the eligibility criteria under this scheme, the applicant must make a declaration to the effect that s/he is in receipt of stable and regular resources which are sufficient to maintain himself and his/her dependents without recourse to the social assistance system in Malta. Furthermore, the applicant must be in possession of a valid travel document as well as a sickness insurance which covers himself and his/her dependants 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.
Ultimately, in order to be eligible for this scheme, an individual must prove that s/he is a fit and proper person. Should the applicant be aware of any circumstances that affect this condition, then the applicant needs to identify such circumstances accordingly in the Application Form.
An application for special tax status under the High Net Worth Individuals Rules may only be submitted by a person that qualifies as an Authorised Registered Mandatory. The applicant needs to authorise such mandatory to carry out these services by completing Part 5 of the Application form. The latter must then submit the application to the Commissioner of Inland Revenue.
A non-refundable fee of €6,000 must be paid for every application form submitted. The said fee needs to be paid by bank draft payable to the ‘Commissioner of Inland Revenue’ and attached to the Application form.
Once an individual has been granted the special tax status, s/he is still required to comply with a number of obligation on a yearly basis. In fact, it is imperative that an applicant not only continues to satisfy the above conditions, by for instance retaining a health insurance policy, stable income and a Qualifying Property Holding, but he is also obliged to submit an Annual Tax Return, wherein any material changes that affect the person’s special tax status are to be indicated. Furthermore, the applicant may not stay in any other jurisdiction for more than 183 days per calendar year.
Overall, given the benefits accrued from the special tax status awarded to eligible high net worth individuals, Malta truly proves to be an attractive low-tax jurisdiction for one to establish his permanent residence in.
For more information you can contact one of our Team Members at Mifsud & Mifsud Advocates.