New Global Residency Rules Scheme replaces former High Net Worth Individual Scheme

Source: Dr Mariyln Mifsud¸ PKF Malta¸ July 2013

Legal Notice 167 of 2013 has officially launched the long-spoken of and awaited global residency scheme. These new rules were made effective as at 1 July 2013 and apply to third country nationals who are not long term residents of Malta and which benefits them at the special rate of 15%¸ (typical of special tax schemes in Malta) on income arising outside Malta and received in Malta.

These new rules have substituted the former Permanent Residency Rules Scheme- and actually supplement the provisions of the High Net Worth Individual Rules as far as third country nationals are concerned. The new rules provide lower thresholds than those contained in the High Net Worth Individual Rules and this reflects a well thought out move after the High Net Worth Rules for third country nationals had reportedly proved unpopular for having cappings that where considered too exorbitant when this scheme (High Net Worth Individual Rules) replaced the Permanent Residency Rules Scheme that was suspended back in 2011.

Under the new global residency rules property demarcations are at a minimum EUR9¸600 p/a if leased in Malta ( EUR 8750 pa if leased in Gozo) and EUR 275¸000 if bought in Malta (EUR 220¸000 if bought in Gozo). The minimum tax payable is EUR 15¸000 p/a. The new rules continue the growing trend of such fiscal scheme being accompanied by a non-refundable administrative fee¸ this time of EUR 5¸000 or EUR 6¸000¸ with the cheaper option occurring if the qualifying property is held in the South of Malta (the same which are defined in a listed schedule in the law).

More recently on the 9th July 2013¸ Legal Notice 178 of 2013 was issued officially shutting off the High Net Worth Individuals Scheme for third country individuals retrospectively as at 30 June 2013. Additionally the legal notice provides that persons already in possession of special tax status under the High Net Worth Individuals Scheme for third country nationals are to apply under the newly launched Global Residency Scheme in order to extend their status as beneficiaries.

OECD and Maltese Government bring forth new convention for mutual assistance in tax matters.

LN 180 of 2013 also published on the 9th July 2013 contains the new convention on mutual assistance (replacing the 2011 version) in relation to OECD member states.

The new convention was ratified on the 23 May 2013 and stems from the realisation that the expansion of the 4 freedoms of movement: of capital¸ goods¸ persons and services has in fact created a giant loop-hole for tax avoidance which is greatly and inadvertently enhanced by the same.

The new convention comprises exchange of information with or without request by the other party¸ as far as information can be deemed ‘reasonably relevant’ parties bind themselves to automatically exchange this. Spontaneous and simultaneous exchange also features.

Article 22 speaks of secrecy and allows the production of obtained information in court proceedings. Basically it would seem to override the provisions of our professional secrecy act since it is a convention introduced under article 76 ITA whereby it is an agreement between multiple sovereign states.

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