Individuals granted the said special tax status shall be charged tax on their income arising outside Malta, which is remitted to Malta at the rate of 15%. This is under the terms and conditions stipulated in L.N. 317 of 2012 by the Inland Revenue Department.
The beneficiary is also allowed the possibility to claim double taxation relief, with a minimum tax cap of € 7,500 (an extra € 500 per dependant). The tax paid is non-refundable.
Eligibility Criteria to Apply for the Special Tax Status
An occupation retirement scheme is defined as a scheme jointly or separately established for, or by, an employer or employers, or an association representing employers for the benefit of employees. It includes an overseas retirement scheme. The latter refers to a scheme or arrangement organised under the laws of a country outside Malta with the principal purpose of providing retirement benefits.
Individuals for Malta’s Special Tax Status meeting all of the following criteria may apply:
1. Own a Qualifying Property Holding
- Owner of an immovable property (purchased post 1st January 2011) in Malta for € 275,000 or € 250,000 (€ 220,000 if bought after 1st July 2013) if the property is in Gozo.
- Rents an immovable property in Malta for not less than € 9,600 annually or € 8,750 annually if the property is in Gozo.
Immovable property purchased before the 1st January 2011 for less than those mentioned above shall still be considered qualifying property. This is as long as the value of such property, in terms of an architect’s valuation as at the date of application under the Rules, is not less than the values indicated above.
The rules also mandate that:
- The applicant and their dependents have their principal residence on this property.
- No person other than the beneficiary, family members, special carer, and household staff resides in the Qualifying Property Holding.
The term ‘household staff’ is defined as an individual who has been in an employment relationship, as evidenced by a contract of service, with the beneficiary for at least two years before the application. This is provided that the Commissioner is satisfied that the service is required to be provided in whole or in part within the qualifying property.
2. In receipt of a pension, as supported by documentary evidence, received in Malta and constitutes at least 75% of the applicant’s chargeable income.
For the Rules, the term ‘pension’ is defined to include the following:
- Periodic payments paid to a former employee in respect of past employment, including remunerations paid for services rendered to a state or a political subdivision or local authority.
- Remunerations paid as lifetime or temporary annuities and regular income from an occupational retirement scheme, personal overseas retirement plan, and insurance policies.
4. In possession of medical insurance across the European Union.
5. Neither a Maltese national nor a third-country national.
6. Neither of a Maltese domicile nor has the intention to establish a Maltese domicile within five years from the date of application under the Rules.
7. Are healthy.
8. Have applied for a Registration Certificate in Malta.
The rules do not cover pensions in the form of lump-sum payments without periodic pension payments and any capital sum received by way of commutation of pension; retirement; death gratuity; or received as consolidated compensation for death; or injuries that are exempt in terms of article 12(1)(h) of the Income Tax Act.
Cessation of Special Tax Status
The special tax status will cease by choice of the beneficiary upon notification to the Commissioner of Inland Revenue. It could also be by default of the Income Tax Act, such as defaults in routine compliance obligations and failure to reply to the Commissioner of Inland Revenue when requested.
It will also cease if:
- The individual no longer satisfies any of the eligibility conditions and continuing obligations mentioned above.
- The beneficiary of the status resided in Malta for less than 90 days or stayed in any other jurisdiction for more than 183 days in a calendar year.
- The stay in Malta is deemed not to be in the public interest.
The special tax status will cease with retrospective effect from the date the Commissioner of Inland Revenue had determined in writing the special tax status. An administrative penalty of € 5,000 applies where the individual does not notify the Commissioner of Inland Revenue within four weeks of becoming aware of any such event, except for special concessions where failure about any of the above conditions was due to unforeseen circumstance and proof that best efforts were exercised to remedy the indicated failure.
Annual Income Tax Return
Individuals who benefit from the special tax status must submit an annual tax return. The Commissioner of Inland Revenue may require the individual benefiting from a special tax status to produce information and documents, including certifications and declarations within a time specified by the Commissioner in the request itself.
Continuing Obligations and Other Matters
Successful applicants must satisfy the following continuing obligations:
- Must retain holdings of the qualified property.
- Must not become a Maltese national or a third-country national.
- Must receive all the pension indicated in the documentary evidence submitted to the Commissioner with the application form in Malta.
- Must possess medical insurance for all risk covered for Maltese nationals, for himself and dependents.
- Must not establish a Maltese domicile.
The applicant should also not benefit from the following:
- Residents Scheme Regulations
- The High-Net-Worth Individuals - EU/EEA/Swiss Nationals Rules
- The High-Net-Worth Individuals Rules - Non-EU/EEA/Swiss Nationals Rules
- The Highly Qualified Persons Rules.
Individuals benefiting under these Rules may hold a non-executive post on the board of directors of a company resident in Malta but are prohibited from being employed by the company in any capacity.
Such individuals may also participate in activities related to any institution, trust or foundation of a public character and any other similar organisation or body of persons, which are also of a public character engaged in philanthropic, educational or research and development work in Malta.
The Special Tax Status Application
An application is to be submitted together with an administration fee of € 2,500 (non-refundable) to be paid by bank draft payable to the Commissioner of Inland Revenue.
An application for special tax status, and any changes to it, may only be submitted to the Commissioner of Inland Revenue through the services of a person who qualifies as an Authorised Registered Mandatory.
Endevio, with its affiliate, is registered as an Authorised Registered Mandatory with the Malta Inland Revenue and qualified to assist to the application for the special tax status. Upon qualification for the specific tax status, the Commissioner of Inland Revenue will notify the Authorised Registered Mandatory in writing.
Final confirmation of the special tax status will be issued to the Authorised Registered Mandatory. Where the application is successful, the Commissioner shall determine in writing that the applicant qualifies for the special tax status under the Rules.
Retire in Malta with Endevio
Retirement is the next step in life. Malta offers some of the most attractive tax benefits on offer in Europe, offering many excellent options to consider. The Malta Retirement Programme Rules clarify concerns for individuals considering Malta as their top option.
As an E.U. member state, Malta provides the security and stability required to make it a home for retirees. The country also has one of the lowest costs in Europe, allowing retirees to stretch their pension far more than in any other location in the region. Malta is a jewel of the Mediterranean and offers a fantastic quality of life.
Endevio can assist you with specialised advice for your retirement in Malta. We can guide you in your application for the Special Tax Status, easing your concerns and allowing you to concentrate on the important things – the finer details of your Malta retirement.