Employees working for in the investment services companies and insurance industries stand to receive tax benefits on employment income received in Malta. Moreover, those individuals who qualify as eligible, are subject to favourable tax rates in Malta.
Eligibility
An investment services expatriate is an individual who is:
- An employee of, or provides services to, an investment services company, and
- The investment services company’s activities include the provision of management, administration, safekeeping or investment advice to collective investment schemes.
An insurance expatriate is an individual who is:
- An employee of, or provides services to an, a company (Insurance Business Act) or a company carrying on the business of (Insurance Intermediaries Act), and is either
- not ordinarily resident and not domiciled in Malta, or
- was not resident in Malta for a minimum period of three years immediately preceding the year in which he commenced such employment, during which period he maintained a similar position abroad.
Tax benefit
An Investment Services or Insurance Expatriate is entitled to a 10-year tax exemptions from the year in which he is first liable to tax under the ITA on income relating to the following expenditure when incurred for his benefit or that of his immediate family, when the expenditure is borne by the company.
The expenditure includes:
- removal costs for relocation to or from Malta;
- accommodation expenses incurred in Malta;
- travel costs in respect of visits;
- provision of a car for use in Malta;
- a subvention of not more than €600 per calendar month;
- medical expenses and medical insurance; and
- school fees in respect of his children
Exemption from income tax
An investment services or insurance expatriate is treated as not resident in Malta for the purposes of the exemption from tax on income derived by non-residents under Art 12 (1) (c) ITA.
Such tax-exempt income relates to:
- interests, discounts, premiums or royalties,
- income derived upon a transfer of:
- any units in a collective investment scheme,
- any units relating to linked long-term business of insurance, including the surrender or maturity of linked long-term policies of insurance,
- any shares in a company which is not a property company (that is, a company which owns immovable property situated in Malta or any real rights thereon, including through direct or indirect shareholding where at least 5% of the total value of the shares is attributable to such immovable property or rights thereon).
As of 2012, the exemption has become an option which an eligible individual may choose to take and is no longer applicable automatically. However, should the tax holiday be opted for, this would render them ineligible for the 15% tax scheme below.
Flat 15% Tax Scheme
Under the Highly Qualified Persons Rules (HQPR), an individual who derives employment income pursuant to an eligible office held with a company licensed with the Malta Financial Services Authority, may benefit from reduced tax rates in Malta, on such income derived from the employment contract.
Eligible Employment Contracts
An employment contract qualifies for the tax scheme where it is regulated by Maltese law and where the MFSA or LGA is satisfied that it is drawn up for the exercise of genuine and effective work in Malta. The individual must prove that he/she:
- is protected as an employee under Maltese law,
- derives employment income which is subject to income tax in Malta,
- discloses and declares all and any income from the employment contract, and
- has not benefitted from the deductions available to investment services expatriates (as above).
An Eligible Office
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 or the LGA respectively:
• Aviation Flight Operations Manager
• Aviation Ground Operations Manager
• Aviation Training Manager
• Chief Executive Officer
• Chief Financial Officer
• Chief Commercial Officer
• Chief Insurance Technical Officer
• Chief Investment Officer
• Chief Operations Officer (including Aviation Accountable Manager)
• Chief Risk Officer (including Fraud and Investigations Officer)
• Chief Technology Officer
• Chief Underwriting Officer
• Head of Investor Relations
• Head of Marketing (including Head of Distribution Channels)
• Head of Research and Development; (including Search Engine Optimisation and Systems Architecture)
• Portfolio Manager
• Senior Analyst (including Structuring Professional)
• Senior Trader/Trader
• Odds Compiler Specialist
Eligible Individuals
Furthermore, MFSA must be satisfied that the individual:
- performs the activities of an eligible office (or its equivalent),
- is in possession of professional qualifications and/or has at least five years of professional experience,
- is in receipt of stable and regular resources which are sufficient to maintain himself and his family,
- resides in a property regarded as normal accommodation for a comparable family in Malta,
- is in possession of a valid travel document, and
- is in possession of sickness insurance for himself and the members of his family.
Tax Rates in Malta: 15% Tax Rate
An individual employed under a qualifying employment contract may opt to subject the respective employment income to tax at a flat rate of 15%. In practice, 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.
The minimum amount to which the scheme may apply is €78,203, to be adjusted annually on the basis of the Retail Price Index (€84,991 for basis year 2019). Where the employment income exceeds €5,000,000, the excess income is exempt from tax.
Tax Rates in Malta: Duration of the Scheme
The scheme applies for a consecutive period of five years for all EU member state nationals, including nationals from Norway, Iceland, Liechtenstein and Switzerland. In relation to third-country nationals, the scheme only applies for a consecutive period of four years. The consecutive period begins from the year preceding the first year of assessment in which that person is first liable to income tax in Malta. Where an individual satisfied the scheme’s requirements upon its introduction, that individual may benefit from the 15% flat rate for the remaining years up to the five or four year cap, as applicable.
1.6 Tax Rates in Malta: Ineligibility for the Scheme
On the other hand the scheme does not apply where:
- an individual is domiciled in Malta,
- an individual has been employed in Malta for more than two years preceding the 1st January 2010,
- the employment income is paid by an employer who receives any business incentive benefit,
- a claim is made for any relief of any kind except for any income tax deducted at source,
- before the introduction of the scheme, the individual:
- was already in eligible employment with a company which is not licensed and/or recognised by the MFSA or the LGA respectively, or
- did not hold an eligible office with a company licensed and/or recognised by the MFSA or the LGA respectively.
Where a third country national:
- physically stays in Malta for more than four years in aggregate, or
- acquires real rights or holds a beneficial interest over immovable property situated in Malta,
the rights under this scheme are withdrawn with retrospective effect.
Malta already is a leading jurisdiction in the financial services and internet gambling industries and these rules further sustain the growth that it has managed to achieve so far thanks to its finely tuned balance of business friendliness and regulatory rigor.
Expatriate Services
At Chetcuti Cauchi Advocates we specialise in providing sound immigration law advice and cross-border relocation assistance to private clients worldwide. Over the years, we have been providing professional assistance to private clients and high net worth individuals seeking to obtain permanent residence permits in Malta for retirement, offshore living, international business travel or tax reasons. With Malta's growing reputation as a quality living destination and a tax-efficient residence solution in the European Union, we have increasingly advised on tax optimisation opportunities of moving to Malta under the appropriate residence scheme.
We co-operate with a number of overseas law firms, immigration lawyers and tax practitioners to provide professional assistance and advice on relocation and tax residence in Malta.
For more information, refer to our Malta law firm website.
