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Qualifying Employment in Innovation and Creativity (Personal Tax) Rules

Following the success introduction of the ‘Highly Qualified Persons’ scheme, with effect from the 1st of January 2013, Malta introduced another scheme intended for expatriates working in Malta named the Qualifying Employment in Innovation and Creativity (Personal Tax) Rules. The scheme is intended for individuals who fulfil a role directly engaged in the development of innovative and creative digital products.

These rules provide an opportunity for individuals working in the development of innovative and creative digital products in Malta in opting to have their employment income in respect of work exercised in Malta to be chargeable at a reduced rate of 15%.

In fact, income from a qualifying contract of employment in an “eligible office” is subject to tax at a flat rate of 15% provided that the taxable income is at least €45,000. This minimum amount of income shall be adjusted annually in line with the Retail Price Index as published in the Gazette by the National Statistics Office.

The 15% tax rate applies to income up to a maximum €5,000,000. Thus should any income exceed the maximum amount of €5,000,000, no further tax would be charged on the excess income.

What is considered to be an ‘eligible office’?

The term “eligible office” refers to specific eligible employments or offices in a role directly engaged in the development of innovative and creative digital products. Such office is ascertained by the Malta Enterprise Corporation. These include the roles of Chief Executive Officer, Chief Technical Officer, -Chief Creative Officer, Head of Writing, Lead In-World Writer, Lead Game Programmer, Software Engineering Director, Game Developer, Director of Online Community, Head of Art Design and Visualization, Art Director, Digital Artist, Commercial Director (Digital Licensing), Head of Game Design, Game Director, Game Designer, Audio Director, Video Director, Producer, Head of Marketing. 

The Beneficiaries

For a beneficiary to qualify as a beneficiary, such person must:

a.  derive employment income in respect of work or duties carried out in Malta, or in respect of any period spent outside Malta in connection with such work or duties, or on leave during the carrying out of such work or duties;

b.  be in possession of the requisite qualifications and experience to be able to hold the eligible office;

c.  be protected as an employee under Maltese law for the purpose of exercising genuine and effective work for or under the direction of someone else and has the requisite adequate and specific competence as approved by the Corporation;

d.  prove to the satisfaction of Corporation that he performs the activities of an eligible office;

e.  fully disclose, for tax purposes and declares all emoluments received in respect of income from a qualifying contract of employment and all income received from a person related to his employer paying out income from a qualifying contract as chargeable to tax in Malta;

f.   be in receipt of stable and regular resources, which are sufficient to maintain himself and the members of his family without recourse to the social assistance system in Malta;

g.  have a sickness insurance policy in place which covers him and his family in respect of all risks while in Malta;

h.  reside in a suitable accommodation regarded as normal for a comparable family in Malta and which meets the general health and safety standards in force in Malta;

i.   be in possession of a valid travel document.

j.   not be domiciled in Malta

Exclusions

Income shall not be construed to be income from the qualifying contract of employment if the income is paid by the employer who has received a benefit or benefits under business incentive laws or arrangement in terms of the business incentive laws or if the income is paid by a person who is related to the employer who has received a benefit or benefits under any business incentive laws or arrangement in terms of business incentive laws

Duration 

This scheme is applicable for a consecutive period of not more than three years irrespective of whether the beneficiary is an EEA/Swiss national or a Third Country national. The period commences from the year preceding the first year of assessment in which that person is first liable to.

Cessation of rights

Rights granted to beneficiaries under this scheme may be withdrawn rights with immediate effect if the grant of benefits under these rules and the beneficiary’s stay in Malta are not in the public interest. Moreover rights are deemed to be withdrawn with a retrospective effect if the beneficiary is a third-country national and he either physically stays in Malta, in the aggregate, for more than 1,460 days or directly or indirectly acquires real rights over immovable property situate in Malta or holds a beneficial interest directly or indirectly consisting, inter alia, of real rights over immovable property situated in Malta

However any person who is benefiting from these rules shall not lose the benefit if he is offered a new contract of employment which is also considered as an eligible office and there is not more than fifteen days between the termination of one contract and the commencement of the other contract of employment

How can we help?

Advocates Primei can help any prospective applicants all throughout the application process and act as liaison with the Malta Enterprise.

For further information, kindly contact us.