Tax Treatment and Minimum Tax Requirements
Beneficiaries under the programme are entitled to pay tax at an advantageous rate of 15% on all that income which is foreign sourced (arises outside of Malta) and which is in turn remitted or received in Malta. This is subject to a minimum amount of tax amounting to €15,000 payable by the beneficiary after taking into consideration any double taxation relief which the beneficiary may be entitled to in terms of any pertinent double tax treaty and Malta’s domestic tax legislation. The minimum tax requirement is payable in respect of income arising outside Malta. Furthermore, contrary to the previous rules, no additional tax will be payable by the beneficiary’s dependants. Other Maltese sourced income attributable to a beneficiary, the beneficiary’s spouse and pertinent dependants as outlined hereunder, shall be taxed at a flat rate of 35%.
The rules provide for a definition of dependents which has been widened from the previous HNWI rules and which no longer solely comprises the wife and children under the age of 21. To this end the age limit attributable to children (natural, adopted or in care) is now age 25. The definition also encompasses dependent brothers, sisters and direct relatives in an ascending line provided that the Director of Inland Revenue is satisfied that these are indeed dependents of the beneficiary of the GRP. Employees of the beneficiary are also provided for, in that the regulations include carers/butlers and other persons that may have been employees of the applicant for the preceding two years, as eligible dependants. Such an employment relationship must be evidenced by a contract of service.
Consequently the definition of dependants comprises the following parties:
a. The beneficiary’s spouse or a person with whom the beneficiary is in a stable or durable relationship;
b. Minor children, including minor adopted children, who are in the care or custody of the beneficiary or persons mentioned above;
c. Persons under the age of 25, including adopted persons, who are children of, and are in the care and custody of, the beneficiary or the person mentioned in (a) above, provided that such persons are not involved in any economic activity;
d. Persons, including adopted persons who are children of, and in the care and custody of, the beneficiary or the person mentioned in (a) above, and who, because of illness or disability, are unable to maintain themselves;
Dependent brothers, sisters and direct relatives in the ascending line of the beneficiary or the person mentioned in (a) above.
Immovable Property Requirements
In order to be granted the special tax status provided for by the programme, an applicant is obliged to satisfy minimum property purchase or minimum property rental requirements. To this end the applicant ought to purchase or rent immovable property in Malta or in Gozo. Furthermore the pertinent legislation provides that the property must be solely occupied by the applicant, his/her family members and any special carers accompanying them.
In the event of a property being purchased in Malta, the purchase value must amount to a minimum value of €275,000. Sensitive to the property market values in Gozo and the South of Malta the pertinent implementing legislation provides for lower property purchase thresholds in both Gozo and the Southern part of Malta, with the minimum value in this case being of €220,000.
The rules also provide for a situation where the applicant is given the option of renting a property. Likewise the legislation provides for minimum rental values being €9,600 in the case of a property being rented in any part of Malta except for the Southern part of Malta. In the case where the applicant wishes to rent property in the Southern part of Malta or in Gozo, the minimum rental value decreases to €8,750.
Where the applicant has purchased a property prior to the introduction of the GRP at a cost which is inferior to the aforementioned values, such property will nevertheless still qualify to be considered as a qualifying property within the remit of the rules - if the value of the property, as at the date of application, is duly certified by an architect to be equivalent or superior to the minimum values indicated above.
Fundamentally the qualifying property, whether purchased or rented, ought to be the applicant’s primary residence and principal place of abode worldwide. The rules also provide for a clear prohibition with regard to the leasing or subleasing of the qualifying property.
Minimum Stay Requirements in Malta
The Programme does not impose a minimum stay requirement in Malta. Consequently permit holders need not spend a minimum amount of days in Malta. Nevertheless beneficiaries under this scheme are required to spend no more than 183 days in every calendar year in any other single jurisdiction.
Applicants under the scheme ought to submit the application for beneficiary status, through an Authorised Registered Mandatory (ARM). Dr Jonathan De Giovanni, Head of International Tax at WDM International is a licensed ARM and may assist clients through pre-application tax planning as well as with the entire application process together with the pertinent annual compliance requirements imposed by the Scheme.
A non-refundable Government fee of €6,000 must be paid and submitted together with the application. The fee is reduced to €5,500 where the beneficiary acquires or rents immovable property situated in Gozo or in the South of Malta. The fee is payable as follows:
• At application stage - €4,000;
• From the date that the person actually takes up residence in Malta - A further amount of €2,000 shall be payable. (Persons who take up residence in Gozo or in the South of Malta can benefit from a reduction of €500 from the latter €2,000).
It is fundamental to note that applicants and their accompanying dependants are obliged to be covered by a health insurance policy covering all risks across the EU. Furthermore, applicants must be in receipt of stable and regular financial resources which are sufficient to maintain themselves and their dependants. Applicants are also required to satisfy a fit and proper test as provided by the Maltese Authorities and must be in possession of a valid travel document as required by Maltese immigration law.