HIGH NET WORTH INDIVIDUALS RULES
RELEASE DATE: 27 JANUARY 2012
The treatment under Maltese law of foreigners that wish to take up residence in Malta depends on nationality of the person concerned: nationals of an EU or EEA Member State benefit from rules that must ensure (and regulate) their freedom of movement within the European Union, whilst other persons, so-called Third Country Nationals, are subject to a more restrictive regime in line with the Schengen acquis.
Since Malta joined the European Union in May 2004, EU/EEA nationals have the option to choose between applying for a residence permit or document in terms of the Immigration Regulations or a permanent residence permit/special tax status issued under the High Net Worth Individuals Rules.
a) Residence permits for EU/EEA citizens – Long-term residence
Since 1 May 2004, the date of Malta’s accession to the European Union, EU/EEA citizens are allowed to reside in Malta. However, in cases where such residence is to exceed three months (six months in the case of a person who provides evidence that s/he is genuinely seeking employment and has a genuine prospect of securing employment by the end of the said period of six months), an application must be made for a permit; the Principal Immigration Officer will automatically issue the citizen and, where applicable, his dependants, with a residence permit or a residence document in accordance with the Immigration Regulations. A residence permit will specify whether the residence has been taken up for the purpose of long-term or permanent stay in Malta, for work, study or other purpose. It should be noted that, depending on the purpose of the stay in Malta, other formalities than those related to residence permits or documents may have to be fulfilled. For example, persons wishing to take up employment in Malta are required to obtain an employment licence.
Residence permits are valid for a period of five years from the date of issue and will, in normal circumstances, be automatically renewable. Breaks in residence do not affect the validity of the residence permit, as long as they do not exceed six consecutive months and do not exceed the total of ten months within the afore-mentioned five year period.
Residence permits, for persons who do not reside in Malta for employment, professional or education purposes, are issued provided that the EU/EEA citizen and his/her dependants actually accompanying him:
A person’s resources are deemed “sufficient” if they are higher than the level of resources indicated by the Ministry responsible for social policy as being the minimum means which determine the grant of social assistance to Maltese nationals, and taking into account the personal circumstances of the applicant and, where appropriate, the personal circumstances of accompanying dependants. If this criterion cannot be applied, such resources are deemed sufficient if they are higher than the level of the national minimum social security pension payable by the Government of Malta at the time of application.
The following documents must be produced to the Immigrations Office (Police Headquarters) together with the completed application form (and for each dependant):
Athough residence (and employment) permits must, as a rule, be issued automatically and unconditionally, the processing of the applications may take a few months. The Immigration Regulations provide that the Principal Immigration Officer has to take a decision as to whether to grant or refuse a first residence permit, or whether to renew same, as soon as possible and in any event not later than six months from the date of application for the permit. The person concerned is allowed to remain in Malta temporarily pending a decision to grant or refuse such application.
b) Special Tax Status under the High Net Worth Individuals Rules
Instead of applying for a residence permit, EU/EEA citizens may opt to apply for Special Tax Status under the High Net Worth Individual Rules.
Indeed, any foreigner, of whatever nationality, including a third country national, may submit an application for a permanent residence permit provided the capital or annual income conditions are satisfied. This permit is issued on an indefinite basis provided that the individual continues to satisfy certain obligation for the duration of his stay. The conditions for the issuing of special tax status depend on whether the applicant is an EU/EEA/Swiss national or not.
2. Eligibility Criteria - EU/EEA/Swiss nationals
2.1 Capital or Income Qualifications
In order for an individual to qualify for special tax status, s/he must prove to the satisfaction of the Commissioner of Inland Revenue that on the date of application, the applicant holds a Qualifying Property Holding, meaning that s/he:
Such property is regarded as a Qualifying Property Holding if the applicant and his family members habitually reside in such property as their principal place of residence.
The term “Family members” refers to the beneficiary’s:
In addition to the above conditions, the Rules stipulate that:
An authenticated copy of the contract providing evidence of such ownership or lease needs to be attached to the application.
Furthermore, the applicant must have stable and regular resources, which are sufficient to maintain himself/herself as well as his/her dependants without recourse to any social assistance in Malta.
An applicant must be:
2.3 Documentation required
The applicant needs to be in possession of:
In order to obtain special tax status, the applicant must not be domiciled in Malta and does not intend to establish his domicile in Malta within 5 years from the date of the application.
2.5 Fit and Proper Test
The Commissioner of Inland Revenue must be satisfied that the applicant is a fit and proper person. In determining such, he shall consider, amongst other things, the following:
2.6 Special Considerations
In order for an individual to benefit from this special tax status, s/he must not already be benefiting from the Residence Scheme Regulations (Subsidiary Legislation 123.79 of the Laws of Malta) or the Highly Qualified Persons Rules (Subsidiary Legislation 123.126 of the Laws of Malta).
3. Eligibility Criteria - Non-EU/Non-EEA/Non-Swiss nationals
In the case of non-EU/non-EEA/non-Swiss nationals, the same conditions binding EU/EEA/Swiss nationals must be satisfied, in addition to the following considerations:
i)The applicant must be fluent in Maltese or English.
ii)(a) Special tax status without long-term residence
The applicant may still benefit under the High Net Worth Individuals Rules without acquiring any special rights of long-term residence in Malta by applying for a renewable visa to enter and stay in Malta. However, in order to benefit from the High Net Worth Individuals Rules, a person who declares that he does not intend to become a long-term resident cannot spend more than 9 months in Malta in any calendar year.
All other conditions mentioned in this document remain applicable.
(b) Special tax status combined with long-term residence
Alternatively, if the applicant declares that he intends to acquire long-term residence, when s/he applies to benefit under the High Net Worth Individuals Rules, s/he must enter into a qualifying contract. This contract between the applicant and the Government of Malta contemplates a financial bond of €500,000 and €150,000 for every dependant to cover potential social costs.
The Bond will be restored to the applicant if such applicant proves that s/he has renounced to the special tax status granted under High Net Worth Individuals Rules, prior to the expiration of four years from the date of the qualifying contract. However, if the applicant intends to become or effectively becomes a long-term resident prior to the expiration of four years from the date on which s/he has applied for special tax status the bond will be forfeited.
Under a qualifying contract, the Bond is also forfeited if:
4. Continuing Obligations
All persons benefiting from the High Net Worth Individuals Rules must continue to satisfy the following criteria in order to retain the special tax status:
5. Tax Treatment
The special tax status granted by the High Net Worth Individuals Rules entitles the beneficiary to be taxed at the rate of tax of 15% on foreign-sourced income that is remitted to Malta.
Such beneficiary retains the right to request a claim for relief of double taxation provided that:
If the tax payable is less than the minimum tax required, the amount to be paid will be the said minimum. Other chargeable income of the beneficiary and his/her spouse that is not charged to tax at the above-mentioned rate, such as income arising in Malta from any trade, business, profession or vocation, will be charged at the rate of 35%. Under these Rules, a beneficiary and his spouse cannot opt for a separate tax computation.
6. Cessation of Special Tax Status
6.1 EU/EEA/Swiss nationals
i)By choice of the beneficiary – by notification to the Commissioner of Inland Revenue; or
ii)By default of the Income Tax Acts - if the beneficiary is in breach of any provision of the Income Tax Acts; or
iii)With retrospective effect from the date of qualification for special tax status, such status shall no longer apply where the beneficiary:
6.2 Non-EU/Non-EEA/Non-Swiss nationals
In the case of non-EU/non-EEA/non-Swiss nationals, the above conditions of cessation of the special tax status [i, ii and iii (a-f)] apply, with the addition of the following. The beneficiary ceases to benefit from the special tax status if s/he:
a) is a long-term resident without being a party to a qualifying contract; or
b) becomes a Maltese national or a national of another EU Member State, Iceland, Norway, Liechtenstein or Switzerland.
7. Procedure of Application –
An application for special tax status is submitted to the Commissioner of Inland Revenue through an Authorised Registered Mandatory (a service provided by Mamo TCV Advocates) and has to be signed and submitted by such Mandatory.
A non-refundable Government fee of €6,000 applies for every application submitted.
8. Current Holders of a Permanent Residence Certificate –
An individual who had acquired rights under the Residence Scheme Regulations before 1st January 2011 shall continue to benefit from such rights as long as the conditions of the scheme are adhered to, in addition to the following conditions:
-the holder of the certificate must be in receipt of stable and regular resources sufficient to maintain himself and his dependants;
-the holder of the certificate must be in possession of sickness insurance for himself and the members of his family;
-the property being declared as the holder’s place of residence cannot be occupied by any person other than the holder of the certificate and his family members.
If such individual sells his residence, he must acquire a Qualifying Property Holding in order to maintain his eligibility for the Scheme.
In the case of individuals who applied for the Permanent Residence Scheme before 14th September 2011 but were not issued with a certificate, property purchased before 1st January 2011 for a consideration of not less than €116,000 shall still be considered as a “Qualifying Owned Property” for the purposes of the High Net Worth Individuals Rules.
9. Identity Card
Every person over the age of fourteen years who resides in Malta for a period of more than six months must apply for a Maltese identity card.
10. Exemption from Customs Duty/VAT
Used household and personal effects, furniture and other domestic articles (excluding firearms and weapons of all kinds) may be imported free of import duty if imported within six months of the applicant’s arrival in Malta to take up residence. In such cases import licences are not required. Special provisions may apply to motor vehicles.
11. Complete Freedom of Movement
A permanent resident may travel to and from Malta freely without the need of applying for a visa or extensions of stay.
12. Repatriation of capital and income
Proceeds from the sale of property, encashment of investments, local income and excess income brought into Malta may be freely repatriated by permanent residents, provided that any tax due has been settled.
13. Schengen visas
In view of the Schengen acquis, which applies to Maltese permanent residents, third-country nationals who are holders of a residence title of a Schengen state may freely enter into and stay in any other Schengen state for a period of up to 3 months (provided that the other conditions for entering and staying in another Schengen country are met). For a longer stay, a residence title of the target member states would be required. Therefore, foreign nationals who have been issued valid residence permits by Malta do not need a visa to enter another Schengen country. This is on the basis of the fact that in terms of the Schengen acquis, a valid residence permit form a Schengen state, together with a travel document, can substitute for a visa.
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