The Government of Malta has launched a programme providing a special tax status for EU/EEA, Swiss and third country nationals, with the exclusion of Maltese nationals, who are in receipt of a widow’s/widower’s benefit or Pension from the United Nations Joint Staff Pension Fund, under certain established conditions.
Individuals, who qualify for the said special tax status under the stipulated terms and conditions shall benefit from an exemption on pension or a widow’s/widower’s benefit of which at least 40% must be received in Malta. Successful applicants shall also benefit from a reduced tax rate of 15% on income arising outside Malta and which is remitted to Malta with the added possibility to claim double taxation relief. Meanwhile, any income or capital gains arising in Malta are taxable at a flat rate of 35% with the exception of transfers of immovable property situated in Malta and for which a final withholding tax is applicable.
The eligibility and requirements for the exemption and the special tax status are set out in the United Nations Pensions Programme Rules by virtue of Legal Notice 184 of 2015 (the Rules).
Eligibility Criteria to Apply for the Special Tax Status
Applicants meeting all the following criteria may apply:
#1 Are in possession of a Qualifying Property Holding being:
Owner of an immovable property situated in Malta for a value of € 275,000, or € 220,000 in the case of property situated in Gozo or in the south of Malta.
The Rules allow that in the case of immovable property purchased before the 5th June 2015 for a consideration which is less than the above amount, such property shall still be considered a qualifying property as long as the value of such property in terms of an architect’s valuation as at date of application under the Rules, is not less than the values indicated above; or
Rents an immovable property situated in Malta for not less than € 9,600 annually or € 8,750 annually in the case of property situated in Gozo or in the south of Malta. A list of localities has been published for the purpose of identifying towns defined in the Rules as the ‘South of Malta’ and is set out below.
Birżebbuġia Cospicua Fgura Għaxaq Gudja Kalkara Kirkop Luqa Marsascala Marsaxlokk Mqabba Paola Qrendi Safi Santa Lucija Senglea Siġġiewi Tarxien Vittoriosa Xgħajra Ħaż-Żabbar Żejtun Żurrieq
The lease needs to be taken out for a period of not less than 12 months and is to be supported by a certified lease agreement.
Additional requirements in relation to the Qualifying Property:
The applicant and his/her dependents have their habitual residence in such property as their principal place of residence;
No person other than the beneficiary and his/her family members, or household staff may reside in the Qualifying Property: and
The Qualifying Property may not be let or sublet.
For this purpose, the term household staff has been 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 prior to the application provided that the Commissioner is satisfied that the service is required to be provided in whole, or in part, within the qualifying property. The household staff will be subject to tax in Malta and will not benefit from the 15% special tax rate.
#2 Are in receipt of a UN pension, as supported by documentary evidence, of which at least 40% is received in Malta;
#3 Have a valid travel document;
#4 Are in possession of sickness insurance which also covers the dependents for all risks across the EU;
#5 Are not Maltese nationals;
#6 Are in receipt of stable and regular resources which are sufficient to maintain themselves and their dependents without recourse to the social system in Malta;
#7 Can adequately communicate in one of the official languages of Malta; and
#8 Are fit and proper persons.
A set of continuing obligations need to be satisfied by all successful applicants, being that the applicant must:
Retain holding of the qualified property;
Not become a Maltese national;
Receive in Malta at least 40% of the pension indicated in the documentary evidence submitted to the Commissioner with the application form; and
Possess sickness insurance in respect of all risks covered for Maltese nationals, for him/herself and dependents.
The Special Tax Status
Beneficiaries who are granted the special tax status will be exempt from taxation on their UN pension income or widow/widower’s benefit received in Malta. A special tax rate of 15% is applicable on any income (excluding UN pension income and widow’s/widower’s benefit) arising outside Malta, but which is received in Malta by the beneficiary, or by any of his/her dependents. Any income or capital gains arising in Malta are taxable at a flat rate of 35% with the exception of transfers of immovable property situated in Malta, where a final withholding tax rate is applicable.
The minimum annual tax liability payable on any income excluding UN pension income and widow’s/widower’s benefit, which arises outside Malta, and received in Malta, is € 10,000 in the case of the beneficiary and an additional € 5,000 in the event that both spouses are in receipt of a UN pension. The tax paid is non-refundable.
United Nations Pensions Program Application
An application is to be submitted together with an administration fee of € 4,000 to be paid by bank draft or cheque issued by the Authorised Registered Mandatory (ARM) payable to the Commissioner of Inland Revenue and is non-refundable. Applications in respect of which the qualifying owned property is situated in the south of Malta or Gozo, carry an administrative fee of € 3,500.
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 that qualifies as an ARM. 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 any obligations tied to the Income Tax Act. This applies to default in routine compliance, 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 resides in Malta for less than 90 days or stays 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, through the ARM, within 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 circumstances. In the case of the latter, proof that best efforts were exercised to remedy the indicated failure must be presented.
Annual Income Tax Return
An individual who benefits from the special tax status must submit an Annual Declaration together with the Income 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, who are also of a public character, engaged in philanthropic, educational or research and development work in Malta.
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