Malta Personal Tax Scheme

Dr. Jean-Philippe Chetcuti | 11 May 2016

Ccmalta Default

The Highly Qualified Persons Rules 2011 (“the Rules”) were enacted by means of Legal Notice 106 published in March 2011, with retrospective effect as of tax basis year starting 1 January 2010. The scheme prescribes a preferential income tax rate to highly qualified professionals who enter into employment contracts to occupy eligible offices in Malta.

This measure was introduced in response to the growth which the Maltese financial services sector, which has seen rapid growth in the context of hedge funds, FOREX businesses, captives and other areas, has registered over the last few years.

Highly Qualified Financial Services Executives

The objective of these new personal tax rules is the creation of a scheme to attract highly qualified persons to Malta. Such individuals must occupy eligible offices with companies licensed and/or recognised by the Malta Financial Services Authority (MFSA).

Malta Taxation of Financial Services Executives

New Personal Tax Band at 15%

The 15% tax rate will now therefore apply also to individuals deriving income from employment with companies that are licensed with the Malta Financial Services Authority and having a minimum income of Euro75,000, as adjusted annually in line with the Retail Price Index. (as at basis year 2016 this stands at €82,353)

The 15% rate will apply to the annual salary received under the qualifying employment contract for a period of five years from the beginning of the contract for EEA and Swiss nationals. In relation to non-EU nationals, the scheme is applicable for four years.

In July 2015, a one-time extension five year period was afforded to EEA and Swiss nationals who may benefit from these rules for a maximum of ten years.   This extension is available for persons who were resident in Malta after 1st January 2008.  Applications to benefit from the scheme will be determined by 31st December 2020 for employment commencing not later than 31st December, 2021. 

Employment Income over €5 million

Income in excess of €5 million is exempt from tax in Malta under the Rules.

Malta Financial Services Tax Scheme Eligibility Rules

Eligible Top Management Positions at Financial Services Companies

The law lists the following eligible offices, however the individual’s roles would be deemed eligible even if the contract does not mention the exact eligible job titles as long as they are equivalent to the duties envisaged by and at the discretion of the MFSA:

  • Chief Executive Officer
  • Chief Risk Officer
  • Chief Financial Officer
  • Chief Operations Officer
  • Chief Technology Officer
  • Portfolio Manager
  • Chief Investment Officer
  • Senior Trader/Trader
  • Senior Analyst
  • Actuarial Professional
  • Chief Underwriting Officer
  • Chief Insurance Technical officer
  • Head of Marketing
  • Head of Investor Relations

Non-Malta Domiciled Status

For eligibility under these rules, applicants must not be domiciled in Malta.

Qualifying Contracts of Employment

The preferential tax rate applies to an individual who satisfies all of the following conditions of employment:

  1. derives employment income subject to Malta income tax;
  2. employment contract is subject to the laws of Malta and proves to the satisfaction of the MFSA that the contract is drawn up for exercising genuine and effective work in Malta;
  3. proves to the satisfaction of MFSA that he is in possession of professional qualifications and has at least five years professional experience;
  4. has not benefitted from deductions available to investment services expatriates with respect to relocation costs and other deductions (Article 6, Income Tax Act);
  5. fully discloses for tax purposes and declares emoluments received in respect of income from a qualifying contract of employment and all income received from a person related to his employer paying out income from a qualifying contract as chargeable to tax in Malta;
  6. proves to the satisfaction of the MFSA that he performs activities of an eligible office; and
  7. proves that:
    • he is in receipt of stable and regular resources which are sufficient to maintain himself and the members of his family without recourse to the social assistance system in Malta;
    • he resides in accommodation regarded as normal for a comparable family in Malta and which meets the general health and safety standards in force in Malta;
    • he is in possession of a valid travel document;
    • he is in possession of sickness insurance in respect of all risks normally covered for Maltese nationals for himself and the members of his family.

Exclusions

Important exclusions apply and candidates are encouraged to seek professional advice to avoid punitive rules applicable in case an ineligible applicant obtains benefits under this personal tax scheme.

 

Our first applications for eligibility under the new rules are under way. To inquire about your eligibility under these rules, contact Dr Jean-Philippe Chetcuti at your convenience.

 


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