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New Rules for High Net Worth Individuals Launched |
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31 Oct 2011
Malta’s Ministry of Finance, the Economy and Investment recently announced the introduction of new criteria qualifying eligibility to Special Tax Status for high net worth individuals. Intended to serve as a parallel scheme and eventual replacement to the Permanent Residence Scheme Regulations, which remain in force with regard to applications submitted prior to the 14th of September 2011, the newly-introduced High Net Worth Individuals Rules establish new grounds for eligibility to Special Tax Status within the Republic of Malta.
Whilst current holders of a permanent residence certificate as issued under the previous scheme shall retain permanent residency and will be regulated by the same Permanent Residence Scheme Regulations of 1988, individuals submitting their applications for permanent residency prior to the 14th of September 2011 may opt to convert their application into one for Special Tax Status, provided they fulfil the eligibility criteria as dictated by the new Rules.
The Effects of Special Tax Status
Similarly to all other persons residing in Malta, individuals enjoying Special Tax Status (or ‘beneficiaries’) are legally bound to submit their Annual Tax Return form. Once Special Tax Status is conferred upon an applicant, any income received in Malta is taxed at a rate of 15%, save for any claims to double taxation relief in cases where the minimum amount of tax payable exceeds €20,000. In cases where the tax due is inferior such the minimum amount, the total amount to be paid shall be the minimum. Any other income earned by the beneficiary which is not subject to the aforementioned rate is taxable at 0.35cents per every Euro.
Beneficiaries are also liable to pay €2,500 annually for every dependant residing with them in Malta and may not elect to have their tax computed separately from their spouses.
Criteria for Eligibility
Mirroring the Permanent Residence Scheme Regulations, the High Net Worth Individuals Rules are applicable to:
· All nationals of EU Member States save for citizens of Malta; · Nationals of Iceland Lichtenstein and Norway; · Swiss nationals · All individuals who are not citizens of an EU Member State.
Pursuant to an application for Special Tax Status being filed with the Commissioner of Inland Revenue, EU, EEA and Swiss nationals must additionally satisfy several conditions to be awarded Special Tax Status.
Qualifying Property Holding
All applicants are required to be holders of a Qualifying Property Holding, which is defined as being:
i) immovable property owned by the applicant and acquired after the 14th of September 2011 for not less than €400,000; ii) immovable property leased by the applicant for not less than €20,000 per annum.
In cases where the applicant has already filed for permanent residency under the Permanent Residence Scheme Regulations and which application has been received and acknowledged by the Commissioner for Inland Revenue, a Qualifying Property Holding may be defined as a property which is owned by the applicant and which was purchased prior to the 14th of September 2011 for a sum exceeding €116,000 or one in respect of which the applicant has entered into a contractual agreement prior to the same date with the intention of finalising the deed of purchase by not later than the 31st of March 2012.
The applicant, along with any members of his family, must habitually reside in the qualifying property holding, which may not be let or sub-let.
Special Tax Status shall only be accorded upon submission of evidence regarding the Qualifying Property Holding.
Income
Individuals applying for Special Tax Status must demonstrate that they have a regular and stable income sufficient for maintaining themselves and their families.
Travel Documents
Applicants must be in possession of a valid travel document and/ or national identity card.
Health Insurance
For reasons attributable to the ever-increasing burden placed upon Malta’s social and healthcare services, all applicants are required to be holders of a health insurance policy. The health insurance policy shall cover the applicant and his descendants for all health risk on an EU-wide basis and shall be obtained from an insurance company duly licensed to operate in Malta or any other international health insurance company of good repute.
Fit and Proper Individuals
Convictions for criminal acts and fraud, disqualification from professional bodies, personal bankruptcy and other matters of personal conduct and morality shall be taken into account whilst processing applications. The Commissioner for Inland Revenue shall only confer Special Tax Status upon ensuring the applicant is a ‘fit and proper’ persons.
Domicile
Special Tax Status shall be denied to those individuals domiciled in Malta, or to individuals planning to acquire domicile within five years from the acquisition of Special Tax Status.
Long-Term Residents
Individuals already considered to be long-term residents in Malta or those benefiting from the Residence Scheme Regulations or the Highly Qualified Persons Rules are not eligible for Special Tax Status.
Third Country Nationals
In addition to the general requirements imposed upon Swiss nationals and individuals who are citizens of EU Member States or EEA states, Third Country Nationals seeking to apply for Special Tax Status are required to satisfy a number of other conditions.
Such applicants may apply under the High Net Worth Individuals Rules, subsequently to which application an entry visa would be required in order to stay in Malta. Prolonged stays in Malta would necessarily required periodical renewal of a beneficiary’s visa, in which case a Qualifying Contract would not be required. Alternatively, applicants may apply under the High Net Worth Individual Rules and subsequently apply for special rights of residence by entering into a Qualifying Contract.
Qualifying Contract
Indispensable for applicants seeking to become long-term residents in Malta, the Qualifying Contract entails an agreement between the individual and the Government of Malta whereby the applicant deposits with the Government authorities the sum of €500,000 and an additional €150,000 for each dependant. Such a deposit shall be refundable if the individual in question relinquishes his Special Tax Status within four years from the date of the said contract.
The deposited bond shall be forfeitable in cases where the applicant intends to become a long-term resident within four years from the date of the qualifying contract or if the beneficiary becomes a long-term resident within four years from the granting of Special Tax Status. Applicants who are already long-term residents shall immediately forfeit the deposited bond.
Language
Applicants must be fluent in either Maltese or English.
Special Tax Status for TCN’s
Third Country national beneficiaries who are granted Special Tax Status shall be taxed at a rate of 15%, whilst maintaining the right to request a claim for relief of double taxation in case the minimum amount of tax to be paid by the beneficiary is of at least €25,000 annually. In cases where the tax due is inferior such the minimum amount, the total amount to be paid shall be the minimum. Any other income earned by the beneficiary which is not subject to the aforementioned rate is taxable at 0.35cents per every Euro.
Third Country beneficiaries are also liable to pay €5,000 annually for every dependant residing with them in Malta and may not elect to have their tax computed separately from their spouses.
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