High Net Worth Residency Scheme

In September 2011, a new residency scheme was introduced by the Maltese government, granting special tax status to high net worth individuals. Referred to as the High Net Worth Individual Residency Scheme, it gives its holders the right to pay tax at a beneficial rate of 15% on foreign income with the possibility to claim double taxation relief, subject to a minimum payment.

Double Taxation Relief

Malta residents are afforded protection by double taxation agreements, which ensure that tax is never paid twice on the same income in different countries. Malta has an extensive network of double taxation treaties and where there is no double taxation treaty, another form of relief from double taxation available under domestic law, namely unilateral relief, largely achieves the same outcome.

Inheritance Tax

No death tax or duty is payable in Malta. However, duty on documents and transfers is payable by the heirs of the deceased or the purchaser on real estate situated in Malta, and upon the purchase of shares in Malta companies. However, no such duty is payable on share transfers effected by shareholders in or by trading companies which have business interests to the extent of more than ninety per cent outside Malta. Likewise, an exemption from duty on share transfers in holding companies exists where more than half of the ordinary share capital, voting rights and rights to profits are held by persons who are not resident in Malta. Subject to certain exceptions, duty is due at the rate of 5% in the case of real estate, and 2% in the case of shares.

Schengen Zone (Uniform Residence Permit)

Malta became part of the Schengen Zone in 2007. Non-EU citizens may obtain the Uniform Residence Permit, issued on the basis of one being a permanent resident. In this case, it grants its holder the possibility to travel throughout the Schengen Zone without the requirement of a visa for at least three months. In order to apply for the Uniform Residency Permit, the applicant must have a place of residence in Malta.

Taxation

For tax purposes an individual is normally regarded as being resident in Malta for a particular year if, in that year, his stay in Malta exceeds 183 days. As already noted, however, foreigners residing in Malta are not taxed on their worldwide income, but only on Maltese source income and capital gains and on foreign source income remitted to Malta. Foreign source capital gains are not taxed even if remitted to Malta. The applicable income tax rates are, however, the normal rates of income tax applicable to residents, which are as follows.

EU, EEA & SWISS NATIONALS

Property

Applicants are required to own property in Malta. Such “qualifying property holding” must have been purchased after the 14th of September 2011 for a value of not less than €400,000, and must serve as the applicant’s habitual residence, and that of any accompanying family members. Alternatively, the applicant may opt to rent property in Malta for not less than €20,000 per annum.

Financial Resources and Insurance

The applicant must also be in receipt of stable and regular resources which are sufficient to support himself/herself as well as any accompanying dependants. Applicants must therefore be economically self-sufficient and both the applicant and any dependants must hold adequate health insurance covering the EU territory. The individual must satisfy a “fit and proper test” in order to be granted a permit under this scheme.

Tax Treatment

The permit holder is given special tax status carrying the right to pay tax at a beneficial rate of 15% on foreign source income received in Malta together with the possibility of claiming double taxation relief. This is subject to a minimum yearly tax of €20,000 and €2,500 per accompanying dependant after claiming any applicable double tax relief. Other chargeable income of the beneficiary (and that of his or her spouse) that is not taxed at the special rate of 15% will be taxed at 35%. A beneficiary of this scheme and his or her spouse cannot opt for a separate tax computation. A one-time registration fee of €6,000 is levied by the Government. Permit holders are also allowed to carry on an economic activity in Malta.

THIRD COUNTRY NATIONALS

Property

Applicants being non-EU/EEA/Swiss nationals are required to own or rent a property in Malta . Such “qualifying property holding” must have been purchased after the 14th of September 2011 for a value of not less than €400,000, and must serve as the applicant’s habitual residence, and that of any accompanying family members. Alternatively, the applicant may opt to rent property in Malta for not less than €20,000 per annum.

Financial Resources and Insurance

The applicant must not already benefit from the Residence Scheme Regulations or from the Highly Qualified Individual Rules. As in the case of EU/EEA/Swiss nationals, the applicant must also be in receipt of stable and regular resources which are sufficient to support himself/herself as well as any accompanying dependants and be in possession of adequate health insurance cover for himself/herself and any accompanying dependants covering the EU Territory. The individual must satisfy a “fit and proper test” in order to be granted an order to be granted a permit under this scheme.

Tax Treatment

A 15% rate of tax is charged in respect of foreign income remitted to Malta with the possibility of claiming double tax relief. The minimum annual tax stands at €25,000 with an added €5,000 per dependent, after claiming any double tax relief.

Other chargeable income of the beneficiary (and that of his or her spouse) that is not taxed at the special rate of 15% will be taxed at 35%. A beneficiary of this scheme and his or her spouse cannot opt for a separate tax computation. A one-time registration fee of €6,000 is levied by the Government.

ENTRY AND STAY IN MALTA

Non-EU/EEA/Swiss nationals applying under the High Net Worth Individuals Residency Scheme have two options in relation to their entry and stay in Malta. The first is via the application for a visa to enter and stay in Malta, which needs to be renewed periodically or to apply for a qualifying contract.

A qualifying contract is an agreement that is entered into between the Government of Malta and the applicant wherein the applicant delivers to the Government of Malta a sum of €500,000 and €150,000 for every dependent (“the Bond”) which the Government of Malta holds by title of gratuitous voluntary deposit.

The Bond will be restored to the applicant if such applicant declares and proves to the Government of Malta that he/she has renounced to the special tax status granted under High Net Worth Individuals Rules, prior to the expiration of four years from the date of the qualifying contract.

On the other hand, if the applicant either has the intention of becoming, or has become a Long-Term Resident prior to the expiration of four years from the date on which he has applied for special tax status in terms of the High Net Worth Individuals Rules, he/she will lose all the rights over the Bond. Should an applicant be a Long-Term Resident, the qualifying contract will specify that the Bond amounting to the whole of the bond will be immediately forfeited in favour of the Malta Government.

SUBMISSION OF APPLICATIONS

An application for special tax status under the HNWI Rules may only be submitted to the Commissioner of Inland Revenue through the services of a person that qualifies as an Authorised Registered Mandatory, registered as such with the Commissioner of Inland Revenue under the HNWI Rules. EMD as an Authorised Registered Mandatory may assist you with your application for residency under this scheme as well as with any tax and legal requirements.

DOUBLE TAXATION RELIEF

Malta residents are afforded protection by double taxation agreements, which ensure that tax is never paid twice on the same income in different countries. Malta has an extensive network of double taxation treaties and where there is no double taxation treaty, another form of relief from double taxation available under domestic law, namely unilateral relief, largely achieves the same outcome.