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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.

EU/EEA MEMBER STATE NATIONALS

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:

are covered by health insurance in respect of all risks in Malta;
have sufficient resources, to avoid their becoming a burden on the social assistance system in Malta during the period of their residence; and
provide evidence to that effect, along with a valid identification document and, in the case of dependants who are third country nationals, a valid visa, when the application for the residence permit is submitted.

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):

2 recent passport size photos;
a copy of the passport/ID + the original;
a copy of marriage (for married persons) or birth certificate in English (certified translation) + the original;
for pensioners: a copy of health insurance + original (coverage of sickness in respect of all risk in Malta;
for pensioners: proof of pension;
for persons employed in Malta: employment licence; and
proof of funds (bank statement) + original

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

1. Introduction

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:

owns an immovable property in Malta purchased after 1st January, 2011 for a value of not less than €400,000; or
rents as lessee an immovable property in Malta for not less than €20,000 annually.

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:

ascendants (the father or mother);
descendants (children or descendants of such children);
brothers and sisters;
spouse/s or persons with whom the beneficiary is in a stable and durable relationship. (Persons claiming to be in a stable and durable relationship with the applicant must have come to Malta at the same time as the applicant or just before or very recently thereafter.)

In addition to the above conditions, the Rules stipulate that:

no person other than the beneficiary and his/her family members must reside in the Qualifying Property Holding;
the beneficiary must already reside in such Property at the time of the application; and
the Qualifying Property Holding may not be leased or sub-leased.

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.

2.2 Citizenship

An applicant must be:

a European Union citizen (not being a Maltese citizen); or
a citizen of Iceland, Norway, Liechtenstein or Switzerland.

2.3 Documentation required

The applicant needs to be in possession of:

a valid travel document and must provide a copy of his/her passport or national official identity card with the application;
sickness insurance which covers himself/herself and his/her dependants in respect of all risks across the EU. The applicant must provide a copy of such insurance policy with the application, which policy has to be procured by a company licensed in Malta or by an international reputable health insurance company.

2.4 Domicile

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:

whether the individual is of good conduct and good morals;
the individual’s reputation, character, criminal record, convictions for fraud or other dishonesty;
disqualification or censorship by professional or regulatory bodies;
being adjudged bankrupt by a competent Court or authority;
being the subject of any current criminal or civil investigations, proceedings or litigation;
offences related to terrorism, money laundering, crimes against humanity and child abuse whether in the past, the individual has been truthful in all his dealings with the Maltese public administration.

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:

the special tax status was obtained on the basis of fraud or omission on part of the applicant; or
the beneficiary commits a serious crime in or outside Malta following the grant of the special tax status.

Dependants are:

the beneficiary’s spouse;
the beneficiary’s unmarried minor children including adopted minor children of the beneficiary or of the spouse;
minor children who are in the custody of the beneficiary or the spouse and who are financially dependant on the beneficiary;
children who are not minors but, because of circumstances of illness or disability of a serious gravity are unable to maintain themselves.

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:

Retain qualifying property holding;
Retain insurance and stable resources;
Not become a Maltese domiciliary;
Not stay in any other jurisdiction for more than 183 days in a calendar year (becoming tax resident therein);
Satisfy special reporting obligations and notifications.

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:

in the case of EU/EEA/Swiss nationals the minimum amount of yearly tax payable by a beneficiary is €20,000 and an additional €2,500 for every dependant;
in the case of non-EU/non-EEA/non-Swiss nationals the minimum amount of yearly tax payable by a beneficiary is €25,000 and an additional €5,000 for every dependant.

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:

does not hold a Qualifying Property Holding; or
is not in receipt of stable and regular resources sufficient to maintain himself and his dependants; or
is not in possession of sickness insurance for himself and his dependants; or
establishes his domicile in Malta; or
resides in any other jurisdiction for more than 183 days in a calendar year; or
the beneficiary’s stay is deemed not to be in the public interest.
becomes a Maltese national or a third country national .

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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