Malta Retirement Program (Special Tax Status)
On 28th September 2012, the Government of Malta launched a special tax status for EU/EEA and Swiss nationals with the exclusion of Maltese nationals, who receive pension, as defined, provided that certain conditions are met.
Individuals who are granted the said special tax status under the terms and conditions as stipulated in L.N. 317 of 2012, shall be charged to tax on their income arising outside Malta which is remitted to Malta at the rate of 15% with the possibility to claim double taxation relief.
The eligibility and requirements for the special tax status are set out in the Malta Retirement Program Rules contained in L.N. 317 of 2012 (the Rules) and Guidelines issued by the Inland Revenue Department.
The Special Tax Status
Successful applicants who are granted the special tax status will be subject to a 15% tax in Malta on any income arising outside Malta, which is received in Malta by the beneficiary or by any of his/her dependents.
The beneficiary is also allowed the possibility to claim double taxation relief, with a minimum tax cap of € 7,500 in respect of any year of assessment. The scheme will also apply an additional minimum tax of € 500 per dependent of the applicant. The tax paid is non-refundable.
Related: Malta Tax Structure
Eligibility Criteria to Apply for the Special Tax Status
Applicants meeting all of the following criteria may apply:
#1 Are in possession of a Qualifying Property Holding being:
Owner of an immovable property (purchased post 1st January 2011) in Malta for a value of € 275,000 or € 250,000 (€ 220,000 if bought after 1st July 2013) in the case of property situated in Gozo; or
Rents an immovable property in Malta for not less than € 9,600 annually or € 8,750 annually in the case of property situated in Gozo.
The Rules allow that in the case of immovable property purchased before the 1st January 2011 for a value which is less than the above, such property shall still be considered as a qualifying property 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 applicant and his/her dependents have their habitual residence in such property as their principal place of residence; and
No person other than the beneficiary, his/her family members, his/her special carer or his/her household staff, reside in the Qualifying Property Holding.
Periodic payments paid to a former employee in respect of past employment including remunerations paid in respect of services rendered to a state or a political subdivision or local authority thereof; and
Remunerations paid as lifetime or temporary annuities, as well as regular income from an occupational retirement scheme, personal overseas retirement plan and insurance policies.
An occupation retirement scheme is defined as a ‘retirement scheme’ established for, or by, an employer; a number of employers; or an association representing employers, jointly or separately, for the benefit of employees and includes an overseas retirement scheme. The latter refers to as a scheme or arrangement, organised under the laws of a country outside Malta with the principal purpose of providing retirement benefits.
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.
Continuing obligations need to be satisfied by all successful applicants, being that the applicant:
Must retain holdings of the qualified property;
Must not become a Maltese national or a third-country national;
Must receive in Malta all the pension indicated in the documentary
evidence submitted to the Commissioner with the application form;
Must possess sickness insurance in respect of all risk covered for Maltese nationals, for himself and dependents; and
Must not establish a Maltese domicile.
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 thereto, 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 is authorised to act as such, and assist in relation 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.
Cessation of Special Tax Status
The special tax status will cease by choice of the beneficiary upon notification to the Commissioner of Inland Revenue, or 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.
Furthermore, where any of the eligibility conditions and continuing obligations mentioned above are no longer satisfied by the individual, and 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, or his her stay in Malta is deemed not to be in the public interest, the special tax status will cease with retrospective effect as from the date on which 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 (4) weeks of becoming aware of any such event, with the exception of special concessions where failure in relation to 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
An individual who benefits 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.
The applicant should not benefit from the 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, or 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, that is engaged in philanthropic, educational or research and development work in Malta.
Why Endevio as your Relocation Services Advisor?
In an ever-changing world, the decision to structure and manage wealth through a Family office can be complex.
Whether you are or working for, a private individual or a family office, we provide unified advice on a full range of services including taxation, investment structuring, corporate and regulatory.
Our scope is to help high-net-worth clients design and put in place a unified, holistic and workable structure to hold their assets and manage them in conjunction with other professional advisors. Whether your goal is to improve tax efficiency, dedicate efforts to philanthropy, increase asset protection or achieve the orderly transfer of wealth for the next generation, we will guide you through the process of realising these goals.
Through Endevio and Integritas strategic partners' international presence, we have vast experience in developing and providing holistic services that are suited for each client.
Endevio & Integritas are notable Malta-based firms that deliver excellence in the international market. The firms are known for their quality in dealing with the full range of corporate services and advising high-net-worth clients on their private affairs.