Malta: Malta Residence

Malta is an ideal place to take up residence. Besides its pleasant climate, safe environment and hospitable English-speaking population, it offers a range of benefits to individuals seeking to acquire residence on the island, given its advantageous tax regime and competitive cost of living.

Any EU/EEA or third country national who resides in Malta for more than three months requires a permit from the immigration authorities, which is granted on specific grounds, some of which are listed below.

Ordinary Residence

Ordinary residence in Malta requires individuals to physically live on the island for a period of six months or more. The transfer of one's residence from a high-tax jurisdiction to a lower tax overseas country is available to both EU/EEA and non-EU/EEA nationals. There is no minimum value property requirement for non-residents seeking to obtain ordinary residence in Malta, unless there is the need for an Acquisition of Immovable Property (AIP) permit, which applies in specific circumstances.

The qualifying criteria, which vary according to whether the individual seeking to obtain ordinary residence in Malta is an EU/EEA national or a third country national, can be easily complied with, thus making the attainment of Maltese ordinary residence even more attractive.

EU/EEA Nationals

There are different grounds on which EU/EEA nationals may become ordinarily resident in Malta, including economic self-sufficiency, employment, education and opening a business, the most popular of which are being set out hereunder.

Economic Self-Sufficiency

This criterion requires that such individuals show that they are able to provide for themselves and for their accompanying dependants by being financially stable and not being in need of any financial support from the Maltese government. The current thresholds for EU/EEA nationals are set at a minimum capital of €14,000 or a weekly income of €92.32 for single persons, and at a capital of at least €23,300 or a weekly income of €108.63 for married couples. Moreover, an extra €8.15 is required per any added dependent.

Employment

A second ground on which EU/EEA nationals may obtain ordinary residence in Malta is employment. Hence, an individual must accept offers of employment or seek employment in Malta, work in Malta as an employee or be self-employed. Alternatively, an individual may opt to set up a business in Malta and work for his/her own business.

Education

Temporary residence is granted for the entire period of education to students in any Private School, College, or at the University of Malta. If the student is underage, his or her legal guardian can apply for Malta residence to accompany him or her. Such person has to confirm that he or she is in receipt of stable and regular income and has a suitable place to live.

Family Members

Family members of an EU/EEA national are granted the right to accompany the applicant, however, his/her extended relatives and his/her partner, are not given the automatic right to live in Malta. Such relatives and partner must prove that they are dependent on the applicant. Furthermore, the partner must prove that their relationship has been stable and durable for the last two years.

Permanent Residence

Permanent residency may be applied for by EU/EEA nationals and their family members, upon completing a continuous five year period of legally living in Malta. Such a 'continuous' period entails that applicants must not have absented themselves from Malta for more than six months a year. Throughout the said five-year period, such individuals must be employed or self-employed, studying or economically self-sufficient.

Third Country Nationals

The qualifying criteria for Malta ordinary residence in respect of third country nationals vary from those applicable to EU/EEA nationals. We are setting out below a few of these possibilities.

Employment

An employment licence is required in order for non-EU/EEA nationals to work in Malta. This is granted upon satisfying certain criteria. Candidates qualified in the financial services and information technology fields are sought after, and therefore, it may be easier for such individuals to get an employment licence.

Self-Employment

In order to qualify to apply for self-employed status, a third country national must meet at least one of the following criteria:

• Invest in Malta capital expenditure of at least €100,000 within 6 months from the date on which the employment licence is issued. Capital expenditure shall solely consist of fixed assets (such as immovable property, plant and machinery) used for the business purposes as reflected in the business plan submitted with the application. Rental contracts do not qualify. Likewise, expenses such as salaries and legal fees cannot be paid from the €100,000 invested by way of minimum investment;
• Be a highly-skilled innovator with a sound business plan (to be submitted with application), who commits to recruiting at least three EEA/Swiss/Maltese nationals within eighteen months of establishment;
• Be the sole representative of an overseas company (with a sound reputation and established for at least three years abroad) wishing to open a branch in Malta;
• Be a person leading a project that has been formally approved by Malta Enterprise and formally notified by the latter to ETC.

Applications containing a firm commitment to engage EEA/Swiss/Maltese nationals as part of their staff complement will assist in the favourable consideration of an application.

Shareholders / Ultimate beneficial owners of a Malta resident company

In order to apply for Malta residence under this ground, one of the following criteria must be fulfilled by the third country national:

• A fully paid up share capital of at least €100,000 which may not be redeemed, reduced or transferred to a third party during the first two years following the issuing of the Employment Licence;
• A capital expenditure of at least €100,000 that is to be used by the company. Capital expenditure shall solely consist of fixed assets (such as immovable property, plant and machinery) used for the business purposes as reflected in the business plan submitted with the application. Rental contracts do not qualify;
• The company is leading a project that has been formally approved by Malta Enterprise and formally notified by the latter to ETC.

Applications containing a firm commitment to engage EEA/Swiss/Maltese nationals as part of their staff complement of the company will assist in the favourable consideration of an application.

In cases where a director is not a shareholder, the application does not need to meet the above criteria, however, it will be processed from a labour market consideration. Many aspects are involved in such labour market consideration, including the national situation in respect of surpluses or shortages in the given occupation and sector, and the third country national's skill level, relevant experience and overall suitability for the position in question.

Long-Term Residence for Third Country Nationals

Long-term residence status may be granted to individuals who have been legally residing in Malta for five continuous years. The term "continuous" means that such individuals must not have absented themselves from Malta for more than six consecutive months in any given year of the said five-year period and further must not have been absent from Malta for more than a total of ten months throughout this five-year period.

Furthermore, a third country national who has been granted long-term residence status by another Member State other than Malta may reside in Malta, for a period exceeding three months, for the exercise of an economic activity in an employed or self-employed capacity, provided that such person is in possession of an employment licence, is pursuing studies or vocational training, or is engaged in other such activities.

A third country national who has been granted long-term residence status in Malta shall enjoy equal treatment as any other Maltese national in terms of access to employment or self-employment, conditions of employment, and education, amongst others.

Temporary Residence on the basis of education

Temporary residence is granted for the entire period of education to students following an approved course of studies in any Private College, or at the University of Malta. If the student is underage, his or her legal guardian can apply for Malta residence to accompany him or her. Such person has to confirm that he or she is in receipt of stable and regular income and has a suitable place to live.

Partners

Foreign partners of Maltese citizens are given the opportunity to apply for residency in Malta, if it is demonstrated that there is a regular and stable income of at least €8,885, and that the relationship has subsisted for at least two years. In the event that the partnership has subsisted for five years, a residence permit for three years would be issued.

Family Members

A third country national who resides legally in Malta is given the right to apply for the reunification of his family members, namely for spouses being 21 years of age or over, and minor unmarried children under the age of 18. Such a right is given to the third country national if he/she has reasonable prospects of permanent residence in Malta, has satisfactory accommodation for the family, and has stable and regular means of resources being tantamount to the average wage in Malta and an addition of 20 per cent of the average wage for each family member. Furthermore, the third country national who sponsors his family, must have resided in Malta for at least two years. The reunited family will be able to work and study just like the applicant. Once the family would have resided in Malta for five years, family members will be entitled to an autonomous residence permit.

Third country nationals who do not satisfy the abovementioned conditions and are legally residing in Malta may nonetheless submit a residence permit application for their family members, as cases are considered on their own merits with regards to the sponsor's income, length of stay and nature of employment.

Income Tax

Individuals who are ordinarily resident, but not domiciled in Malta, are subject to income tax on income and capital gains arising in Malta, and on income arising outside Malta but received in Malta. No tax is chargeable on capital gains which arise overseas but which are remitted to Malta. Personal income tax is charged at progressive rates up to a maximum of 35 per cent, as illustrated by the following tables:

In order to qualify for this computation, a parent must satisfy these conditions:

1. he / she maintained under his/her custody a child or paid maintenance (established or authorised by courts) in respect of his or her child;
2. such child was not over 18 years of age, or not over 21 years if receiving full-time instruction at a tertiary education establishment;
3. such child did not earn income in excess of €2,400 from gainful occupation.

Currently there are discussions lobbying for the highest rate of tax, being that of 35 per cent, to be reduced to 25 per cent.

Temporary Residence

Third country nationals who are economically self-sufficient may reside in Malta on a temporary basis. Such individuals ought to have a minimum annual income of €13,976 if single, and €16,305 if married. In addition to this, the annual sum of €2,329 must be added for every dependent child under the age of 18.

Individuals staying in Malta for some temporary purpose with no intention of establishing their residence here and who have not resided in Malta for a period longer than six months in a calendar year shall not be taxed in Malta on their foreign income and gains, whether these are remitted to Malta or otherwise. They are liable to tax in Malta solely on Maltese sourced income and capital gains.

The High Net Worth Individuals Residency Scheme

EU/EEA/Swiss nationals

Property

Applicants are required to own a Qualifying Property Holding, being property in Malta purchased after the 1st January 2011 for a value of not less than €400,000. This must serve as the applicant's habitual residence, and that of any accompanying family members. Alternatively, an applicant may opt to rent property in Malta for not less than €20,000 per annum.

Such Qualifying Property Holding may not be let or sub-let.

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

A 15 per cent 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 €20,000 with an added €2,500 per dependant, after claiming any applicable double tax relief. Income arising in Malta will be taxed at 35 per cent. A beneficiary of this scheme and his or her spouse cannot opt for a separate tax computation. A beneficiary is also subject to the payment of Provisional Tax payments. The above minimum amounts of tax payable are not refundable, and the minimum tax for the first year will be payable by not later than the tax return date and will not be subject to Provisional Tax payments.

Non-EU/EEA/Swiss Nationals

Property

Applicants are required to own a Qualifying Property Holding, being property in Malta purchased after the 1st January 2011 for a value of not less than €400,000. This 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.

Such Qualifying Property Holding may not be let or sub-let.

Financial Resources and Insurance

The applicant must 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 a permit under this scheme.

Furthermore, Non-EU/EEA/Swiss applicants must be fluent in English or Maltese.

Tax Treatment

A 15 per cent 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 dependant, after claiming any applicable double tax relief. Income arising in Malta will be taxed at 35 per cent. A beneficiary of this scheme and his or her spouse cannot opt for a separate tax computation. A beneficiary is also subject to the payment of Provisional Tax payments. The above minimum amounts of tax payable are not refundable, and the minimum tax for the first year will be payable by not later than the tax return date and will not be subject to Provisional Tax payments.

Entry and stay in Malta

An applicant for High Net Worth Individual status who declares in the application that he does not intend to become a Long-Term Resident of Malta may not spend more than 9 months in a calendar year in Malta. Such individual would be expected to leave Malta for a minimum period of 3 months in a calendar year, and will not be eligible for Long-Term Residency status. In such cases, the applicant need not enter into a Qualifying Contract to benefit from the High Net Worth Individuals Rules. However, in the case of an applicant who declares that he intends to become a Long-Term Resident of Malta in the application form, such individual would need to become a party to a Qualifying Contract, being a contract in a form prescribed by the Minister, whereby an amount of €500,000 is contributed to the Malta Government.

It is important to note that the special tax status granted by the High Net Worth Individuals Rules does not grant the beneficiary a right to enter, stay and reside in Malta, at any time throughout the duration of such status. Although, on the basis of such status, one would be able to apply for the appropriate immigration documentation.

Conditions applicable to both EU nationals and non-EU nationals

Minimum Stay Requirements

Applicants may not spend more than 183 days in any other jurisdiction.

Registration Fee

A one-time registration fee of €6,000 is levied by the Malta Government. Permit holders are also allowed to carry on an economic activity in Malta.

Annual Return

An individual who benefits from this special tax status must submit an Annual Tax Return which should include any material changes that affect the beneficiary's special tax status.

Submission of applications

An application for special tax status under the High Net Worth Individuals 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 High Net Worth Individuals 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.

The Malta Retirement Programme Rules 2012

The Malta Retirement Programme Rules 2012 which apply to pensioners, introduce a new tax Programme conferring a Malta special tax status to EU/EEA/Swiss nationals, with the exclusion of Maltese nationals. Beneficiaries have the right to pay tax at a flat rate of 15 per cent on foreign source income received in Malta, by them or their dependants, subject to a minimum tax payment of €7,500, with an additional €500 per dependant and special carer, if any. The Scheme also confers the right to claim double taxation relief. Any income arising in Malta would, in turn, be taxable at a rate of 35 per cent.

The said Programme requires its applicants, namely pensioners, to purchase or rent immovable property in Malta, or in Gozo, which property must be solely occupied by the applicant, his/her family members and any special carers accompanying them. The property in question must have been purchased for a value of not less than €275,000 if situated in Malta, or €250,000 if situated in Gozo. The rental thresholds are set at a minimum of €9,600 per annum for a property situated in Malta, or €8,750 per annum for a property situated in Gozo. Such property must serve as the applicant's habitual place of abode worldwide.

Furthermore, in order to become eligible to apply for this Programme, the whole amount of the pension must be received in Malta, which pension must constitute at least 75 per cent of the beneficiary's chargeable income. Applicants and their accompanying dependants must also be covered by a health insurance policy, providing coverage for all risks across the EU normally covered for Maltese nationals.

The beneficiaries of such Programme must be domiciled overseas, and should not have the intention to establish their domicile in Malta within 5 years from the date of application for such Programme. Moreover, applicants must not be in employment, or benefit under any other Malta scheme conferring a special tax status, and must hold a valid travel document.

Beneficiaries under this Programme are, however entitled to hold a non-executive post on the board of a company resident in Malta, or partake in activities related to any institution, trust or foundation of a public character, or any similar organisation or body of persons, also having a public nature, or be engaged in philanthropic, educational or research and development work carried out in Malta.

An important point to note is that beneficiaries of this Programme must spend in excess of 90 days per calendar year in Malta, averaged over a period of 5 years, and may not spend more than 183 days in any other foreign jurisdiction. Finally, applicants must satisfy a fit and proper test set by the pertinent Maltese authorities.

The above-mentioned qualifying criteria must be complied with on a yearly basis. Therefore, beneficiaries must retain their property or lease as per the above requirements annually, renew their pertinent health insurance policies on a yearly basis, and comply with the minimum stay requirements as outlined above each year of their holding such status.

An application fee of €2,500 is payable to the Maltese authorities, and applications may only be filed through the services of an Authorised Registered Mandatory (ARM). EMD, as a licenced ARM, may assist you throughout the entire application process, as well as with the compliance obligations required by the Programme.

Highly Qualified Professionals

By means of Legal Notice 106 of 2011, titled the 'Highly Qualified Persons Rules, 2011', new rules have been issued by virtue of which individuals in receipt of employment income from an 'eligible office' will be subject to a flat rate of tax of 15 per cent on their employment income instead of the progressive rates of tax which are capped at 35 per cent. The rationale behind the implementation of such rules is to attract expatriates who work within particular specialised sectors to relocate to Malta, thereby continuing to increase Malta's attractiveness as a reputable services centre of excellence.

Employment income from an eligible office will benefit from a reduced tax rate of 15 per cent, if it amounts to at least €75,000 per annum. In the event that the income exceeds €5 million, the excess is exempt from tax. An eligible office is defined, as an employment with a company licensed and/or recognised by the Malta Financial Services Authority (MFSA) or the Lotteries and Gaming Authority (LGA). Moreover, this incentive has recently been extended to cover eligible offices within companies which fall within the remit of the Authority for Transport in Malta (TM), namely undertakings holding an air operator's certificate (AOC) issued by TM. The following are the eligible offices:

1. With effect as from the 1st January, 2011

2. With effect as from the 1st January, 2010

3. With effect as from the 1st January, 2012

The conditions which need to be satisfied in order for the professional to benefit from the 15 per cent reduced rate of tax are the following:

• The individual derives employment income which is subject to tax in Malta in respect of work carried out in Malta or in respect of any period spent outside Malta in connection with such work;
• The individual is in possession of professional qualifications and has at least five years experience;
• The individual has not benefitted from any other deductions available to investment services expatriates;
• The contract of employment is subject to Maltese laws for the purposes of carrying out genuine and effective work;
• The individual fully declares in his Maltese personal income tax return all income derived from his contract of employment;
• The individual is not domiciled in Malta.

Any rights are withdrawn with retrospective effect if the individual is a third country national and he either physically stays in Malta, in the aggregate, for more than four years, or directly or indirectly acquires any immovable property, including any rights thereon, situated in Malta.

The reduced rate of tax applies for a consecutive period of five years for EEA and Swiss nationals and for a consecutive period of four years for other nationals. Persons who were employed under a contract of employment requiring the performance of their duties in Malta before 1st January 2009 cannot benefit from the flat rate of 15 per cent.

Highly Qualified Individuals Returning to Malta to Work Herein

Any individual, established in a field of excellence returning to Malta as an ordinary resident to work in Malta may benefit from a reduced rate of tax of 15 per cent on income from employment exercised in Malta. This is subject to the individual having been ordinarily resident in Malta for at least twenty years. Moreover, the said individual must not have been ordinarily resident in Malta for the ten consecutive years prior to his/her return.

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. Most treaties are based on the OECD Model Convention, and relief is granted under the credit method whereby a credit for the foreign tax paid is given. 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 and Transfer Tax

No death tax 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 inheritance or 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 five per cent in the case of real estate, and two per cent in the case of shares.

Purchase of Real Estate

Non-residents may freely purchase one property in Malta, subject to obtaining an AIP permit. This restriction does not apply to properties in Special Designated Areas and, in the case of EU citizens who have not been resident in Malta for at least five continuous years, to property which is to serve as their primary residence. On the other hand, EU citizens who have been resident in Malta for at least five continuous years may purchase any number of properties they wish.

Where one of the spouses is an EU citizen and the other spouse is a non-EU citizen, both can likewise benefit from the exemption outlined above and acquire property without the necessity of obtaining an AIP permit, provided the acquisition is being made to establish therein their primary residence.

Also excepted is the acquisition of immovable property by an EU national for the conduct of one's business activity or for the supply of services by such person. In such a case, a declaration reflecting the purchaser's intention for the acquisition should be inserted in the relative contract of purchase.

Where the purchaser requires an AIP permit, the property must satisfy a certain minimum value which changes periodically.

Importation of Household Goods and Furniture

Individuals taking up residence in Malta may import their household goods and furniture into Malta free of VAT and import duties. Residents who are third country nationals may be required by the customs authorities to make a deposit or provide a bank guarantee for the amount of VAT/duty in question. Upon evidence of stay in Malta for a cumulative period of 200 days in a period of 365 days, the deposit will be refunded.

Information current as at 16th January 2013

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.