Through Legal Notice 106 of 2013, as from 1st January 2012 employees working in development of innovative and creative digital products can benefit from a new incentive whereby they may choose to have their employment income in respect of work exercised in Malta to be chargeable at a flat rate of 15% tax in lieu of progressive rates of tax which can be as high as 35%.
This move has further built on Malta's already successful Highly Qualified Persons Rules and High Net Worth Individual Rules and is clear evidence of Malta’s commitment towards the digital gaming industry.
The Qualifying Employment in Innovation and Creativity (Personal Tax) Rules, 2013
For such employee to benefit, he/she must:
- hold a qualifying contract of employment
- hold an eligible office
- submit an application to Malta Enterprise (ME) for its approval
- hold a qualifying contract of employment under which contract one’s employment income is of a minimum of Eur45,000 per annum exclusive of any fringe benefits.
Prior approval in writing by ME is required, and the latter must be satisfied that the employer or a person related to the employer has not benefitted from any business incentive laws and/or any arrangement in terms of the business incentive laws.
Eligibility
With reference to what constitutes “an eligible office” one would need to roles which are directly engaged in the development of innovative and creative digital products, such as CEOs, CTOs and game developers.
There are also a number of conditions under the scheme that must be met, including, the fact that the employee must derive employment income in respect of work or duties carried out in Malta, or in respect of any period spent outside Malta in connection with such work or duties, or on leave during the carrying out of such work or duties and must be in possession of the requisite qualifications and experience to be able to hold the eligible office.
Malta Taxation
If all the above conditions are met, income derived from a qualifying contract of employment will be deemed to be the individual’s first part of his income and will be subject to a flat rate of tax of 15% without the possibility to claim any deductions, relief, set-offs or credits, whether under a relevant double tax treaty or otherwise. Any income from a qualifying contract of employment which exceeds Eur5,000,000 will not be subject to tax in Malta.
For more detailed information on this scheme, kindly refer to the detailed publication entitled Malta Reduced Tax Rate for Qualifying Expatriates operating in Digital Products or contact us at info@ccmalta.com
