Relocating to Malta – Special Tax Status for High Net Worth Individuals

Source: Mario Sammut¸ PKF Malta¸ 14th May 2012

On the 30th September 2011¸ the government of Malta launched a special tax status for High Net Worth Individuals. Individuals who are granted the special tax status under the term and conditions stipulated in L.N. 400 of 2011¸ shall be charged tax on their chargeable income at a rate of 15% with the possibility to claim double taxation relief.

The special tax status addresses two categories of applicants:

  • EU/EEA/Swiss National
  • Non-EU/Non-EEA/Non-Swiss Nationals

All Applicants are required to hold a Qualifying Property Holding for a value of €400¸000 or rent an immovable property in Malta for not less than €20¸000 annually. However the rules allow the purchase of an immovable property in Malta before 14th September 2011 for a value of not less than €116¸000 where the Commissioner would have received and acknowledged the application under the Residence Regulations 2004.

Successful applicants¸ who are EU nationals¸ nationals of Iceland¸ Norway and Liechtenstein and nationals of Switzerland will benefit from a 15% tax rate that allows the possibility to claim double tax relief¸ with a minimum tax cap of €20¸000 in respect of any year of assessment. The scheme also applies an additional minimum tax of €2¸500 per dependent of the applicant. The tax paid is non-refundable.

On the other hand a set of specific rules applies to individuals who are not EU nationals¸ not nationals of Iceland¸ Norway¸ Liechtenstein and Switzerland. Mainly they have two options with regard to their entry requirements and stay in Malta.

The applicant would need to apply for a visa to enter and regularly renew his/her visa to stay and reside in Malta without acquiring any special rights to enter and reside freely in Malta. Alternatively if the applicant intends to become a Long-Term Resident or is already a Long-Term Resident¸ he/she must enter into a qualifying contract that contemplates a financial bond of €500¸000 and an additional €150¸000 per dependent so as to cover potential social costs.

However if the applicant declares and proves to the Government of Malta that he/she has renounced to the special tax status granted under the High Net Worth Individuals Rules¸ before the expiration of 4 years from the date of the qualifying contract¸ the aforementioned bond will be restored to the applicant.

Furthermore if the applicant either intends to become a Long-Term Resident or becomes a Long-Term Resident before the expiration of 4 years from date of application for special tax status he/ she will forfeit all the rights over the said bond. In the case where the applicant is already a Long-Term resident¸ the qualifying contract will specify that the Bond is immediately forfeited upon the applicant becoming a party to such qualifying contract.

With respect to third country nationals¸ the tax rate will be the same (15%) but the minimum tax cap is placed at € 25¸000 with an additional €5¸000 per dependent and tax paid is non-refundable.

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