Malta: Amendment to the highly qualified persons rules
Mark Galea Salamone
The Maltese Parliament has recently passed Legal Notice 225 of 2015, amending the highly qualified persons (HQP) rules as promulgated in 2010. A qualifying EU, EEA or Swiss beneficiary who, before the recent amendment could benefit under the rules for a maximum qualifying period of five years, may now benefit for an additional period of five years. Beneficiaries, therefore, now have the possibility of benefitting from the rules for an extended period of up to 10 years. The rules aim to attract HQPs to occupy an eligible position with companies licensed and/or recognised by the Malta Financial Services Authority, companies licensed by the Malta Gaming Authority, and undertakings holding an Air Operators' Certificate or an Aerodrome Licence issued by the Authority for Transport in Malta. Examples of eligible roles include: chief executive; financial, commercial or investment officer; head of investor relations, marketing or research and development; and senior analyst or trader, among others.
Under these rules, income from a qualifying contract of employment received by a beneficiary is subject to tax at a flat rate of 15% provided that the income amounts to a minimum of €75,000 ($84,000). The Inland Revenue's tax guidelines on the rules provide that the minimum income for basis year 2015 must exceed €81,457. The 15% tax rate applies up to a maximum income of €5,000,000. One of the advantages of the rules is that any income over and above the latter threshold is exempt from tax. As mentioned above, this tax rate originally applied for a consecutive period of five years for EU/EEA/Swiss nationals, and a consecutive period of four years for third country nationals.
However, through LN 25/2015, EU/EEA or Swiss beneficiaries may now apply for a one-time extension of five years to his qualifying period, as long as the individual has not been residing in Malta prior to the January 1 2008.
There are a number of criteria that must be satisfied before a taxpayer can benefit under the rules. The applicant must:
be an individual in receipt of income subject to tax under a qualifying contract of employment received in respect of work carried out in Malta which is fully disclosed for tax purposes;
have an employment contract subject to the laws of Malta and prove – to the satisfaction of the relevant authority under which the company employing the said beneficiary is licensed – that the contract is drawn up for exercising genuine and effective work in Malta and that he has the required competence to do so;
prove to the satisfaction of the relevant authority that they are in possession of qualifications relevant to the profession attested by evidence of education qualifications or by at least five years' professional experience of a level comparable to educational qualifications;
not have benefitted under the investment services and insurance expatriates provisions as detailed in the Income Tax Act;
prove to the satisfaction of the relevant authority that they perform activities of an eligible office; and
prove to the satisfaction of the relevant authority that:
they are in receipt of stable and regular resources which are sufficient for his maintenance and that of his family without recourse to social security in Malta; they reside in accommodation regarded as normal for a comparable family in Malta and which meets the general health and safety standards in force in Malta; they are in possession of a valid travel document; they are in possession of sickness insurance for themselves and their family for all risks across the whole of the EU normally covered for Maltese nationals; and they are not domiciled in Malta.
An otherwise qualified individual will not benefit from the special tax rate under this scheme if the income is received from an employer who receives any benefits under business incentive laws or is paid by a person who is related (as defined in the rules) to the employer who received any benefits under any business incentive laws. A third country national who physically stays in Malta for more than 1,460 days in the aggregate, or acquires real rights over immovable property situated in Malta or holds a beneficial interest over such rights, will suffer from a claw-back of the benefits availed of under the rules.
The rules now provide that no determination under the rules will be issued after December 31 2020 and any determination issued must refer to employment commencing by December 31 2021 and terminated by December 31 2025. This is a welcome amendment, in line with Malta's firm commitment to continue attracting highly qualified persons to Malta.
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