High net worth individual who are eligible have the right to pay tax at a beneficial rate of 15% on foreign source income (with the possibility to claim double taxation relief), subject to a minimum payment of €20,000 per annum, plus an additional minimum tax of €2,500 per dependent
With effect from today the permanent resident (PR) scheme is giving way to a new scheme granting special tax status to high net worth individuals.
Speaking at the Malta Chamber of Commerce, Finance Minister Tonio Fenech said the new scheme truly targets high net worth individuals (HNWI) rather than residents and ensures that only fit and proper applicants are accepted.
Other aims of the new scheme are to ensure the individuals attracted leave proper value in the country, allowing economic activity for which they will be taxed, social cost liabilities to future generations are limited and the tax residency of these individuals will fall in line with Malta’s international obligations and current international tax norms.
The new scheme could be introduced after the Income Tax Act was amended last month enabling the Finance Minister to grant special tax status to persons who meet a number of criteria. European Union nationals, those from the European Economic Area and Swiss nationals who are eligible have the right to pay tax at a beneficial rate of 15% on foreign source income (with the possibility to claim double taxation relief), subject to a minimum payment of €20,000 per annum, plus an additional minimum tax of €2,500 per dependent.
The permanent resident, who must be a non-Maltese domiciliary and be in possession of a health insurance along with stable, regular resources, must own a property worth €400,000 or rent a property for €20,000 per annum. An exception is being made for property purchased up to yesterday worth the previous minimum of €116,000.
The qualifying property holding must not be a shared property, and the HNWI must pass a fit and proper test through an international due diligence exercise. Only an Authorised Registered Mandatory can handle the application and communication process. There is an application fee of €6,000.
Permanent residents must retain their qualifying property holding, their health insurance and stable resources. Although they must reside in Malta for a minimum of 90 days a year they cannot become Maltese domiciles and cannot stay in any other jurisdiction for more than 183 days a year (becoming tax residents there). There are also special reporting obligations and notifications.
HNWIs who are not EU, EEA and Swiss nationals have the same rules as EU, EEA and Swiss nationals along with a few other special rules: if the beneficiary 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 dependant to cover potential social costs. He/she must be fluent in one of the official languages of Malta and, should the beneficiary become a long-term resident he/she must enter into a qualifying contract.
Existing PRs will not lose their status but those who sell the property to which their permit refers must upgrade their qualifying property to the new thresholds. They also need to submit evidence of stable resources, have a health insurance and must prove that the property where they reside is not occupied by persons other than the permit holder and his/her family members.
The application fee of €6,000 is being waived for all applications made up to yesterday. These can opt to apply under the new HNWI and property already purchased in Malta by that date that qualified under the PR scheme would be accepted as qualifying property under the new rules.
Mr Fenech explained that the old scheme gave residence advantages that were never intended originally. Although they were paying tax of around €4,000 a year and buying property, they were getting far greater benefits from the state. The new rules include higher thresholds and the proviso that they spend at least 90 days here.
The ministry intend to organise detailed information sessions. Guidance notes are available on the IRD website www.ird.gov.mt. Further queries not covered by these notes to be sent through e-mail to firstname.lastname@example.org. This will serve as a basis to prepare and publish detailed FAQs on the new arrangements.