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The Residence Programme Rules (EU Nationals)

By virtue of Legal Notice L.N. 270 of 2014 ‘The Residence Programme Rules 2014’ have been enacted. These are effective retrospectively from the 1st of July 2013.

This Programme is very similar to the existing Global Residence Programme which is available only to Non-EU persons.

The Residence Programme introduces a similar programme tailored for Expats who are EU, EEA or Swiss nationals. Such applicants cannot be Maltese nationals/citizens and must not be currently benefiting from any other special tax status in Malta. In order to be eligible for the programme the applicant must hold a qualifying property, is in receipt of stable and regular resources which are sufficient to maintain himself and his dependants without recourse to the social assistance system in Malta, is in possession of a valid travel document, 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 and his dependants, can adequately communicate in one of the official languages of Malta and be considered as a fit and proper person.

Qualifying property holding

The beneficiary must purchase or rent an immovable property in Malta at a particular established amount. The property value established reflects the threshold which is established for the Global Residence Programme available for non-EU, non-EEA and non-Swiss nationals. A qualifying owned property is a property which is purchased at a consideration of not less than:

-          € 275,000 if such property is located in Malta (excluding the South of Malta); or

-          € 220 000 if the property is located in Gozo or in the South of Malta. 

In terms of a rented Qualifying Property, the Rules stipulate that the immovable property must be leased out for a rental value of not less than either € 9 600 per annum for property located in Malta (excluding the South of Malta) or € 8,750 per annum for property located in Gozo or the South of Malta. 

Who is considered to fall within the definition of a Dependant?

The rules define dependants in the same manner as the Global Residence Programme. Any dependant must be residing together with the beneficiary of such special tax status. The following is a list of individuals considered as dependants:

1.     The spouse or person with whom the beneficiary is in a stable and durable relationship with;

2.     Minor children including adopted minor children and children who are in the care and custody of the beneficiary;

3.     Children who are under the age of 25, including adopted children and children who are in the care and custody of the beneficiary

4.     provided that such children are not economically active; 

5.     Children including adopted children and children who are in the care and custody of the beneficiary, who are not minors by who because of circumstances of illness or disability of a serious gravity, are unable to maintain themselves;

6.     Dependant brothers, sisters and direct relatives in the ascending line of the beneficiary;

Similarly the dependents must also not be benefitting from any other special tax status in Malta, namely under any of the following incentives:

- Residents Scheme Regulations,

- High Net Worth Individuals - EU / EEA/Swiss Nationals Rules

- High Net Worth Individuals – Non EU / EEA / Swiss Nationals Rules

- Malta Retirement Programme Rules

- Global Residence Programme Rules

- Qualifying Employment in Innovation and Creativity Rules or the Highly Qualified Persons Rules

The rules also provides that in the case of the death of a beneficiary, the special tax status granted to such a beneficiary, shall be granted to his dependant/s who satisfy all the requirements set out in Rule 4 therein and who have either inherited the property that was the primary residence of the deceased beneficiary, or who rent the qualifying rented property immediately after the death of the said beneficiary

The Procedure

The individual must be represented by an authorised registered mandatory, duly registered with the Commissioner of Inland Revenue to act on behalf of an individual, who shall file an application on his behalf with the Commissioner in regard to the special tax status.

An application on behalf of the applicant is filed with the Commissioner against a non-refundable administrative fee of €6,000. With respect to applications of which the qualifying property is a qualifying owned property situated in the south of Malta, the non-refundable administrative fee shall be that of five €5,500 to be paid upon application.

The Commissioner shall have the authority to request from the individual or his authorised registered mandatory to produce information and documents that the Commissioner would consider as necessary.  Such request shall be made to ensure that the individual’s rights entitled through these rules and their proper application is ensured. 

Once reviewed by the Commissioner and if the application process is successful then the Commissioner shall grant in writing such special tax status to the applicant who shall become the beneficiary of such special tax status.  One should note that any authorised registered mandatory may be removed from the list upon a request being made to the Commissioner.

The Benefits

The scheme entitles the beneficiary to enjoy a tax rate of 15% for income which arises outside of Malta in the year immediately preceding the year of assessment which is received in Malta (including income arising outside Malta and received in Malta during the whole of the year in which the special tax status was granted) by the beneficiary, the beneficiary’s spouse and children with the possibility to claim relief of double taxation. The Rules stipulate a minimum amount of tax payable which is that of €15 000 for any year of assessment.

Under Maltese tax laws, individuals are subject to tax in Malta on the basis of their residence and domicile. Individuals who are deemed to be both resident and domiciled in Malta are subject to income tax on a worldwide basis. Income earned, accrued or derived in Malta or elsewhere is subject to tax in Malta irrespective of whether the foreign source income is remitted to Malta or not. 

Due to the strict interpretation of domicile which our law adopts, it is legally difficult for an expatriate who has taken up a Maltese residence, to also attain a Maltese domicile. Hence expats who have taken up a Maltese residency are usually not taxed on a worldwide basis - but only on income and capital gains arising in Malta (unless exempt) and on foreign sourced income which is remitted to Malta.  Foreign source income which is not remitted to Malta is not subject to Maltese tax and capital gains earned abroad are not taxable even if they are remitted to Malta.

This makes Malta an attractive jurisdiction for people looking to set up a residence in a tax effective jurisdiction.

The Minimum tax shall be payable by not later than 30th April of the year immediately preceding the relevant year of assessment.  Which payment shall be accompanied by a return made to the Commissioner as proof that the requisites established for the beneficiary continue to be satisfied.  The return does not need to be submitted in the year in which the special tax status is granted. During the year when the special tax status is granted, if it is evident that the status will not be given before April 30th, then the minimum tax amount payable shall be paid at any time after the status is granted.  Moreover, the tax paid is not refundable.

How can we help?

As registered authorised mandatories, this office can assist applicants throughout all stages of the application process.