Malta has over the last two decades, but particularly over the past ten years, become a financial service centre of high repute. Its strategic geographic location in the heart of the Mediterranean and its highly regulated business and banking infrastructure has played a major role in its development as such.

In 2004 and 2008 Malta became a full member of both the European Union and the Eurozone respectively, events which have both contributed to the islands’ growth from a local and international perspective.  This growth has been noted on various occasions when Malta has ranked highly on both standard of living and business jurisdiction indexes.

Malta has the advantage of having two official languages being Maltese and English together with other ‘non finance’ related benefits such as a warm climate, good food, rich history and a general jovial and welcoming culture. The island is easily accessible through its modernized airport with a variety of international flight connections.

During Malta’s period of growth as an international business centre it became evident that various schemes’ for attracting foreign individuals wishing to relocate and take up residence and/or Citizenship in Malta should be introduced to sustain and increase this growth. This led to the introduction of the Residence Programme (‘TRP’), introduced to replace the already existent High Net Worth Individuals Scheme (‘HNWI’)[1], the Global Residence Programme (‘GRP’), the Malta Retirement Programme Rules (‘MRPR’), the Malta Residence and Visa Programme (‘MRVP’), and the Malta Individual Investor Programme (‘MIIP’).

The below table provides a summary of each programme:

 

 

Programme Name	Grants residence	Grants Citizenship	Applies to EU/EEA/Swiss	Applies to Non-EU	Reduced tax rate on remitted income
TRP	√	X	√	X	√
GRP	√	X	X	√	√
MRPR	√	X	√	X	√
MRVP	√	X	X	√	X
MIIP	√	√	√	√	X

All of the schemes discussed below cater for resident non-domiciled individuals and the aforementioned ‘remittance basis’ of taxation would apply to such persons. Furthermore, it is important to note that for all the schemes, separate Malta residence application procedures have to be carried out.It is important to note, at the outset that Malta adopts a ‘remittance basis’ of taxation in respect to Malta resident, non – domiciled individuals. This means that these individuals are subject to tax in Malta on income and capital gains arising in Malta and any foreign source income received in Malta. Foreign source income not remitted to Malta is not subject to tax in Malta whilst foreign source capital gains are not subject to tax in Malta whether remitted or not.

Malta's remittance basis of taxation		Received in Malta	Taxable in
(Resident non-domiciled persons)			Malta
Income/capital gains arising in Malta		N/A	Yes
Income arising outside of Malta		No	No
Income arising outside of Malta		Yes	Yes
Capital gains arising outside Malta		No	No
Capital gains arising outside Malta		Yes	No

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Residence Programme (‘TRP’) – EU/EEA/Swiss Nationals

The TRP, effective from the 1 July 2013 is an revised version of the HNWI, the latter scheme still being applicable to certain individuals that applied for it prior to 1 July 2013 in terms of the grandfathering provisions.

The TRP was introduced to attract high net worth individuals into taking up residence in Malta by taxing the foreign source income which such individuals remit to Malta, at a flat rate of 15% in terms of Article 56(23) of the Income Tax Act (‘ITA’). This income is subject to a minimum annual tax payable of €15,000 covering the applicant and dependants[2] with the possibility of claiming double taxation relief and Unilateral Relief if applicable. Income arising in Malta, however, is taxed at a flat rate of 35% with a 2% to 12% final tax applicable on the disposal of immovable property situated in Malta, subject to certain conditions.

In order to avail of the scheme an individual beneficiary has to apply to the Commissioner of Revenue (‘Commissioner’) for special tax status through the services of a person that qualifies as an Authorised Registered Mandatory[3] together with the payment to the Commissioner a non-refundable amount of €6,000.

In order to qualify as a beneficiary an applicant must prove to the Commissioner, on an ongoing basis, that:

 

• he/she holds a qualifying property holding which is defined as immovable property situated in Malta which was either (i) purchased for a consideration of not less than €275,000 (€220,000 for property in Gozo or the South of Malta); or, (ii) rented for not less than € 9,600 per annum (€ 8,750 per annum in Gozo and the South of Malta) and in all cases, the applicant, and his/her family have their habitual residence in such property as their principal place of residence;
• he/she is not a person who benefits from any other local residence programme;
• he/she is not a Maltese national or Permanent Resident and is a citizen of an EU Member State (other than Malta), Iceland, Norway, Liechtenstein or Switzerland;
• he/she is in receipt of stable and regular resources which are sufficient to maintain himself and his dependents without recourse to the social assistance system of Malta;
• he/she is in possession of a valid travel document;
• he/she is in possession of sickness insurance which covers himself and his dependents in respect of all risks across the whole of the EU normally covered for Maltese nationals;
• he/she is fluent in English or Maltese
• he/she is a fit and proper person.

The application by the individual could also cover the dependants of such an applicant and such individual should ensure that even though there is no minimum stay in Malta he/she is not resident in any other jurisdiction for more than 183 days in any calendar year. 

It can be noted that in order for the applicant to purchase immovable property in Malta in accordance with the TRP a substantial investment is required. The table below shows an increase of over 150% in the value of immovable property from the year 2000 to 2016.

An investment in immovable property in Malta is stereotyped as being a safe investment. The growth of the property market in Malta could potentially see an increase in applicants of the HNWI who besides looking for a preferable tax rate are also interested in making a sizeable, relatively safe investment in immovable property.

Period[MM1]				Total		Apartments		Maisonettes	Terraced Houses	Others ¹
	2000			100.0		100.0		100.0	100.0	100.0
	2001			105.1		103.9		106.7	105.8	104.3
	2002			114.2		113.0		115.3	114.0	110.6
	2003			129.3		128.2		128.0	130.5	122.8
	2004			155.6		157.0		155.4	151.1	153.8
	2005			170.9		173.7		176.7	188.9	160.3
	2006			177.0		178.3		187.0	196.2	175.0
	2007			178.9		183.3		181.4	205.3	171.9
	2008			174.1		172.7		181.4	201.5	173.7
	2009			165.3		162.2		173.7	207.8	169.6
	2010			167.1		166.4		171.8	199.4	178.5
	2011			169.3		173.0		174.5	197.6	172.5
Notes:
1 Consists of town houses, houses of character andvillas.
Source: Central Bank of Malta estimates

The Global Residence Programme Rules – An Overview

The GRPR introduced by virtue of LN 167 of 2013,  is a programme which is aimed at non-EU, non-EEA individuals  and non-Swiss nationals who wish or intend to take up residence in Malta.

 

Tax Treatment

 

Further to the granting of a special tax status, the tax treatment of an individual that is a beneficiary [4] of the GRPR should be subject to tax in Malta on a source and remittance basis due to the fact that they are Malta resident but not Malta domiciled individuals. Income earned outside of Malta that is remitted to Malta is taxed at flat rate of 15%. Other Malta source income, such as bank interest and Malta source employment income[5] is taxed at a flat rate of 35%. Foreign source capital gains would not be taxed in Malta irrespective of whether they are remitted to Malta or not.    

 

The tax treatment of the dependants of the beneficiary could on the other hand be twofold. The same tax treatment applicable to the beneficiary himself is applicable to the beneficiary’s spouse, minor children and non-minor children with special needs. In the case of other dependants, these would be required to be registered with the Inland Revenue and tax would be charged in terms of the progressive rates pursuant to Article 56 of the Income Tax Act (‘ITA’).

 

The beneficiary is subject to a minimum tax of €15,000 annually[6] which is payable in full both in the year that the special tax status is granted and that in which it is withdrawn. 

 

Conditions for application

 

In order for an individual to become a beneficiary of the GRPR this individual must not be a Long Term Resident and must prove to the Commissioner that:

 

• he/she is a third country national and is not a Maltese, EEA or Swiss national;

 

• he/she is not a beneficiary in terms of the Residence Scheme Regulations, the High Net Worth Individuals Rules, the Malta Retirement Programme Rules, the Qualifying Employment in Innovation and Creativity Rules or the Highly Qualified Persons Rules;

 

• he/she holds a qualifying property holding;

 

• he/she is in receipt of stable and regular resources which are sufficient to maintain himself/herself and his/her dependants without recourse to the social assistance system in Malta;

 

• he/she is in possession of a valid travel document;

 

• he/she is in possession of sickness insurance in respect of all risks across the whole of the European Union normally covered for Maltese nationals for himself/herself and his/her dependants;

 

• he/she is fluent in one of the official languages of Malta; and

 

• he/she is a fit and proper person.

 

Qualifying Property Holding[7]

The GRPR distinguish between property in the South of Malta, Gozo and the rest of the island. In order to qualify as a qualifying property holding immovable property situated in the South of Malta or Gozo has to have been purchased for a consideration of not less than €220,000 or rented for not less than €8,750 per annum. Property situated anywhere else in Malta has to be purchased for a consideration of not less than €275,000 or rented for not less than €9,600 per annum.

 

For the purpose of the GRPR rules the following localities have been classified as forming the ‘South of Malta’:

 

Table 1
Name of localities
Birzebbugia	Luqa	Santa Lucija
Cospicua	Marsascala	Senglea
Fgura	Marsasxlokk	Siggiewi
Ghaxaq	Mqabba	Tarxien
Gudja	Paola	Vittoriosa
Kalkara	Qrendi	Xghajra
Kirkop	Safi	Zabbar
Zurrieq	Zejtun

 

Application Process and compliance obligations

In order for an individual to be granted special tax status under the GRPR an individual has to submit an application, questionnaire and all the required documentation to the Commissioner through the services of an authorized registered mandatary (hereinafter ‘ARM’)[8] together with a non-refundable administrative fee of €6,000 unless the qualifying property owned is situated in the South of Malta, in which case the administrative fee would amount to €5,500.

It is to be noted that unless the applicant is to benefit from the reduced administrative fee of € 5,500 he/she is not required to be the owner of a qualifying property at the time of the application and may submit the final deed or lease agreement at a later stage. It is important to keep in mind, however, that before the confirmation of the granting of the special tax status the final deed or lease agreement is to be submitted accordingly.

Following the successful processing of the application, a letter of intent will be forwarded to the ARM which will be valid for twelve months. The applicant will then have to sign and submit within the 12 month period a declaration of primary residence, in original and submit the lease agreement or final deed in order for the confirmation letter to be issued.

The annual compliance obligations in terms of the GRPR require the beneficiary to submit to the Commissioner an annual tax return in terms of Article 10 of the Income Tax Management Act together with a declaration stating that the circumstances affecting his/her special tax status have not changed.

 

Cessation of Status

In the case that a beneficiary ceases to possess the special tax status granted by the Commissioner, due to the individual not abiding to certain conditions prescribed by the minister which are listed below,  the beneficiary, upon becoming aware of any such event has to give notice to the Commissioner within four weeks or an administrative penalty of €5,000 will apply.  These conditions include the beneficiary (i) staying in another jurisdiction for more than 183 days in a calendar year, (ii) not holding a qualifying property, (iii) becoming a long term resident, (iv) becoming a Maltese national or a national of another EU Member state, (v) not being in possession of sickness insurance (vi) the beneficiary’s stay in Malta is deemed not to be in the public interest.

If any of the above events take place the individual would lose GRPR status with retrospective effect as from the date of the granting of the special tax status. 

Special tax status may also cease either by choice, or due to the non-compliance with the provisions of the Income Tax Act, or due to the death of the beneficiary.

Conclusion

The introduction of the GRPR is focused on making Malta a more attractive jurisdiction for high net worth individuals who are non-EU, non-EEA individuals and non-Swiss nationals. The scope of the new rules go beyond this and are also an attempt to boost the real estate market in both Gozo and the South of Malta while consolidating on what has already been achieved with in other areas.    The effectiveness of this is yet to be seen, however, it is surely a step in the right direction.

Malta Retirement Programme Rules (MRPR)

The Malta Retirement Programme Rules take advantage of Malta’s various benefits as a retirement destination and are prescribed by the Minister pursuant to Article 56(23) of the ITA. These rules provide notably different and less onerous conditions than the TRP and are discussed below.

The MRPR applies only to EU/EEA/Swiss nationals (other than Maltese nationals). The application has to be made through an Authorised Registered Mandatory and is subject to the payment of an administrative fee of €2,500. The tax rate applied to foreign source income remitted to Malta by individuals granted a special tax status under these rules is a flat 15% which is the same as in the case of individuals granted special tax status under the TRP.

The beneficiary, however, has to receive a pension as supported by documentary evidence, all of which is received in Malta and constitutes at least 75% of the beneficiary’s chargeable income. The beneficiary cannot be in an employment relationship, subject to certain exceptions.

The individual must hold a qualifying property holding which was either (i) purchased after the 1^st January 2011 for a consideration of not less than €275,000 (€250,000 for a property situated in Gozo); or, (ii) rented for not less than € 9,600 per annum (€8,750 for a property situated in Gozo), and in either case occupies such property as his/her primary residence and the persons who reside in the qualifying property are not persons other than the beneficiary, his dependents and special carers. The beneficiary or his dependents cannot be persons benefitting from any other local residence programme.

The beneficiary is also subject to a minimum annual tax of €7,500 in respect of himself and € 500 per beneficiary and special carer. This minimum tax is substantially lower than that in the case of a beneficiary under the TRP.

The beneficiary is required to stay in Malta for a minimum of 90 days averaged over a five year period, and may not reside in any one jurisdiction for more than 183 days in a calendar year.

Ordinary Residence

There is also the option for an individual to take up ordinary residence in Malta without availing of any of the above mentioned schemes. Ordinary residence is open to all EU/EEA/Swiss nationals however very restrictive conditions apply to non-EU nationals in this regard.

In order to take up residence in Malta EU/EEA/Swiss nationals are required to show an intention to reside in Malta which is ascertained through the conclusion of a purchase or lease contract in respect to immovable property situated in Malta. There is no minimum annual tax payable and the individual would be taxable on the ‘remittance basis’ of taxation as explained previously. Foreign source income remitted to Malta and any income arising in Malta would be taxed in accordance with the progressive tax rates.

It is also important to note, that subject to certain conditions, an individual transferring his/her residence to Malta is entitled, under the Motor Vehicles Registration and Licensing Act (Cap. 368), to an exemption from Motor Vehicle Registration Tax on an M1 vehicle (a vehicle used for the carriage of not more than eight passengers in addition to the driver) or a motorcycle which is registered in the name of that person.

All in all, there are various options available for an individual wishing to relocate and take up residence in Malta.

Malta Residence and Visa Programme (‘MRVP’)

The Malta Residence and Visa Programme Regulations, 2015 (‘MRVP’) was launched in 2015. The MRVP applies to non-EU / EEA / Swiss Nationals and is available to the applicant and qualifying dependents. A certificate granted in terms of the MRVP willgive a beneficiary and his qualifying dependents to reside in

Malta indefinetely

 

In order for an individual to receive a certificate in terms of the MRVP this individual must prove that:

• He/she is at least 18 years of age, has a clean criminal record and is a ‘fit and proper’ person.
• He/she meets all application requirements.
• He/she commits himself to provide proof of title to a qualifying property which may be either of the following:

 

A qualifying owned property purchased at a consideration of not less than two hundred and seventy thousand euro (€270,000) for a property situated in Gozo or in the south of Malta, or three hundred and twenty thousand euro (€320,000) for a property situated elsewhere in Malta

A qualifying rented property, taken on lease for a rent of not less than ten thousand euro (€10,000) per annum for a property situated in Gozo or in the south of Malta, or not less than twelve thousand euro (€12,000) per annum for a property situated elsewhere in Malta.

 

• He/she commits himself to a qualifying investment of an initial value of €250,000 which must be held for a minimum of period of 5 years from the date of certificate.
• He/she Commits to pay a contribution of €30,000     
• He/she is not be benefiting from any other local residence programme

A non-refundable administrative fee of five thousand five hundred euro (€5,500) on application, which will be deducted from the contribution. The applicant will need to provide an affidavit declaring that from the date of the application onwards he has either an annual income of not less than hundred thousand euro (€100,000) arising outside Malta or has capital of not less than five hundred thousand euro (€500,000).

The beneficiary must hold both the qualifying property and the qualifying investment for a minimum five (5) year period following the appointed date.

Malta tax treatment

There is no minimum annual tax payable and the individual would be taxable on the ‘remittance basis’ of taxation as explained previously. Foreign source income remitted to Malta and any income arising in Malta would be taxed in accordance with the progressive tax rates.

Malta Individual Investor Programme – Citizenship Programme (‘MIIP’)

The Individual Investor Programme of the Republic of Malta (IIP), by virtue of Legal Notice 47 of 2014, allows for the granting of citizenship by a certificate of naturalisation to individuals and their families who contribute to the economic and social development of Malta. Subject to a stringent vetting and diligence process, including thorough background checks, the applicants and their dependants are granted citizenship in exchange for such contribution.

In order to qualify for the MIIP, the following requirements must be met:

• The Main Applicant should be at least 18 years old
• The Main Applicant should provide proof that he/she was a resident of Malta for a period of 12 months preceding the issuing of a certificate of naturalization.
• The main applicant should hold a residential property in Malta having a minimum value of €350,000 or lease residential property in Malta for a minimum annual rent of €16,000. This property should be held for a minimum period of 5 years from the date of purchase/lease;
• The Main Applicant and his/her dependents should be covered by a global health insurance policy;
• The Main Applicant should invest €150,000 in Government Bonds.
• The Main Applicant should have a clean criminal record and satisfy an extensive due diligence check.

The following dependants of the main applicant are also eligible for consideration under the Citizenship Programme:

• Spouse.
• Child (including adopted child) of applicant or spouse and who is less than 18 years old.
• Child of applicant or spouse who is between the age of 18 and 26 years, and who is not married and who is maintained by the applicant.
• Parent or grandparent of the applicant or spouse who is more than 55 years old and who is maintained by the applicant and forms part of the household of the applicant.
• Child of the applicant or spouse who is more than 18 years old, is physically or mentally challenged and who is living with and is supported by the applicant.

Contributions

The following non-refundable contributions to the Malta National Development and Social Fund / Consolidated Fund are required to be made following the receipt of the Letter of Approval in Principle in terms of the Citizenship Programme:

Main applicant	€650,000 of which a non-refundable payment of €10,000 is required prior to submission of application
Spouse	€25,000
Children < 18 years of age	€25,000 each
Unmarried children > 18 years of age but < 27 years of age	€50,000 each
Dependent parent > 55 years of age	€50,000 each

Fees payable to Identity Malta

The following non-refundable fees are payable to Identity Malta and are required to be made with the application:

Main applicant	€7,500
Spouse	€5,000
Children < 18 years of age	€3,000 each
Children > 13 years of age but < 18 years of age	€5,000 each
Unmarried children > 18 years of age but < 27 years of age	€5,000 each
Dependent parent > 55 years of age	€5,000 each