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High Net Worth Individuals - Malta Tax Residence

2011-09-16

The Malta Permanent Resident Scheme, which was suspended at the beginning of 2011, was finally replaced by a new scheme earlier this week. The new scheme was officially launched by Malta‘s ministry of finance and seeks to attract high net worth individuals to take up residence in Malta.

It is understood that the new scheme is similar in scope to the Permanent Resident Scheme (PRS) it replaces such that individuals eligible to benefit under the new scheme would be taxable in Malta on foreign source income which is received in Malta at the favourable flat rate of 15% (such persons are not chargeable to tax in Malta on foreign source capital gains). Local source income and gains would be taxable in Malta at the higher rate of 35%.

Still, eligibility criteria and ongoing requirements have been enhanced and heightened, particularly in respect of non-EU/EEA/Swiss nationals.
Eligible individuals (HNWI) shall be required to acquire qualifying immovable property in Malta having a value of not less than €400,000 or to otherwise procure such qualifying immovable property under a lease agreement against aggregate rental consideration of not less than €20,000 per annum.

The qualifying immovable property must represent the applicant and his/her family‘s principal place of residence. Eligible individuals shall also be required to be in possession of appropriate health insurance and will be subject to a rigorous fit and proper test.

It is also understood that, on an ongoing basis once an application is accepted, beneficiaries under the scheme would be required to, inter alia, reside in Malta for a minimum of 90 days per annum and not stay in any other jurisdiction for more than 183 days (becoming tax resident therein). In addition, a minimum amount of €20,000 (plus €2,500 per dependant) would be payable by way of tax in Malta per annum by a beneficiary under the scheme. The said minimum amounts of Malta tax payable are increased in respect of non-EU/EEA/Swiss nationals to €25,000 (plus €5,000 per dependant) whilst further requirements apply in respect of such nationals seeking to establish or who are long-term residents in Malta.

Significantly, it is understood that individuals currently in possession of Permanent Residents Permits (under the now suspended Permanent Residents Scheme) shall continue to benefit under that scheme although, going forward, such persons shall additionally be required to:

-be in receipt of stable and regular resources which are sufficient to maintain him/herself and his/her dependents without recourse to the social assistance system in Malta; be in possession of sickness insurance in respect of all risks normally covered for Maltese nationals for him/herself and the members of his/her family.

In addition, the property declared as the Permanent Resident Permit holder‘s place of residence cannot be occupied by any person other than the holder of the certificate and his/her family members. Furthermore, should the permit holder transfer that property, s/he would be required to acquire a new property having a value at least equal to the minimum value prescribed under the new scheme in respect of qualifying immovable property.

Finally, any individual who applied for a Permanent Resident Permit (under the now suspended Permanent Residents Scheme) prior to 14 September, 2011, but who was not issued with such a permit before 1 January, 2011, would be entitled to apply to benefit under the new scheme – should s/he satisfy the eligibility criteria prescribed under the new scheme. Property purchased prior to 14 September, 2011, by any such person for a consideration of not less than €116,000 shall still be treated as a qualifying immovable property for the purposes of the new scheme.

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