Malta: Malta amends tax rules on qualifying employment in aviation
Mark Galea Salomone
The Maltese legislator has continuously sought to attract high-net worth individuals and highly qualified individuals to Malta's shores, especially in the financial services, gaming and aviation industries.
In 2016, the Qualifying Employment in Aviation (Personal Tax) Rules (the rules) were introduced, establishing the income tax treatment of individuals undertaking employment under a qualifying contract within the aviation industry.
Under the rules, individuals who receive remunerations that are payable under a qualifying contract of employment for work or duties carried out in Malta may be charged income tax at a reduced rate of 15%. The rules complement similar provisions in respect of employment with MFSA licenced companies and gaming companies.
A qualifying contract is one where the beneficiary derives taxable income that amounts to no less than €45,000 ($48,000) per annum (exclusive of any fringe benefits), which must be derived from an eligible office. An eligible office is one that is key for the functions of a company that operates within the aviation industry, subject to confirmation after an administrative assessment by the Malta Transport Authority. The rules exhaustively list the eligible offices including, but not limited to, the chief executive officer, chief financial officer, flight operations manager, quality systems manager and ground operations personnel.
In order to qualify as a beneficiary, an individual must satisfy a number of conditions, namely being protected as an employee under Maltese law and sufficiently proving to the Malta Transport Authority:
Possession of professional qualifications or experience;
Performance of activities of an eligible office;
Receipt of stable and regular resources that are sufficient for his/her own maintenance and that of his/her family;
Residence in accommodation considered as sufficient for a family in Malta;
Possession of a valid travel document;
Possession of health insurance; and
Non-domiciliation in Malta.
Under the rules, European Economic Area (EEA) and Swiss nationals may benefit from the reduced rate of income tax via a declaration signed by the beneficiary and endorsed by the Malta Transport Authority, for a consecutive period of five years commencing from the first year of assessment when that person is first liable to income tax in Malta, so long as this remains in the public interest. Third country nationals can benefit from the rules for a period of no longer than four years.
A new provision has recently been added to the rules whereby any individual claiming the reduced rate is now eligible to apply for an extension of four to five years (depending on whether the person is an EEA/Swiss national or a third country national) to the qualifying period, provided that the individual's period of eligibility does not exceed 10 years. This clause essentially provides such highly qualified persons with the opportunity to extend their attractive tax treatment in Malta, thereby guaranteeing an advantageous situation for both Malta and the relevant individuals.
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