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Taking up residence in Malta
ME PoV Spring 2016 issue
In view of its strategic geographic location in the heart of the Mediterranean and its highly regulated business and banking infrastructure, Malta has, over the last two decades, become an international financial services center of high repute.
In 2004 and 2008 Malta became a full member of both the European Union and the Eurozone respectively, events which have both contributed to the island’s growth from a local and international perspective. This growth has been noted on various occasions when Malta has ranked highly on both standard of living and business jurisdiction indexes.
Malta has the advantage of having two official languages–Maltese and English–together with other non finance-related benefits such as a warm climate, excellent cuisine, a rich history and a general jovial and welcoming culture. The island is easily accessible through its modernized airport with a variety of international flight connections.
During Malta’s period of growth as an international business center it became evident that various programs for attracting foreign individuals wishing to take up residence in Malta should be introduced to sustain and increase this growth. This led to the introduction of the Global Residence Programme (GRP) and the recently introduced Malta Residence and Visa Programme (MRVP) that are targeted at non-EU/non-EEA/non-Swiss nationals while other similar residence programs are targeted at EU/EEA/Swiss nationals. This article will concentrate on the GRP and MRVP.
Basis of taxation in Malta
The basis of taxation in Malta is determined in relation to whether the individual is resident in Malta and domiciled in Malta. An individual who transfers his residence to Malta without the intention of residing indefinitely there is typically considered, for Malta income tax purposes, to be resident in Malta but not domiciled in Malta. It is important to note at the outset that Malta adopts a “remittance basis” of taxation in respect to the taxation of foreign-source income of individuals who are resident in Malta but not domiciled in Malta. This means that such individuals are subject to tax in Malta on income and capital gains arising in Malta and any foreign-source income received in, or remitted to, Malta. Foreign-source income not remitted to Malta is not subject to tax in Malta whilst foreign-source capital gains are not subject to tax in Malta irrespective of whether or not remitted to Malta.
Both programs discussed below cater for resident non-domiciled individuals and the aforementioned remittance basis of taxation would apply to such persons. Furthermore, it is important to note that for both programs, separate Malta residence application procedures have to be carried out.
The main advantages available to a beneficiary of the GRP and qualifying dependents is that such an individual would be subject to tax in Malta at a flat rate of 15 percent on foreign-source income remitted to Malta, with no tax arising on remittances of foreign capital to Malta. The beneficiary and qualifying dependents would also be granted a Malta Residence Permit that provides access to the Schengen Area, with certain restrictions.
In order to qualify for the GRP, as per application conditions, an applicant should be a non-EU, non-EEA, non-Swiss national. The applicant should also be a “fit and proper person,” fluent in English, who is in receipt of stable, regular resources, is in possession of medical insurance and who owns a qualifying property in Malta (i.e.: purchased for a consideration of not less than €275,0001 or rented for not less than €9,600 per annum.) An application fee of €6,0002 applies upon submission of the application and an annual minimum tax of €15,000 per annum is payable.
The MRVP, unlike the GRP, is not a tax program but an immigration program that grants the beneficiary and qualifying dependents a Malta Residence Permit, and which provides access to the Schengen Area, with certain restrictions. The beneficiary may also take advantage of Malta’s source and remittance basis of taxation, however any income remitted to Malta would be taxable at progressive rates of up to 35 percent and not a flat rate of tax of 15 percent, as is available in terms of the GRP.
In order to apply for the MRVP, the main conditions state that an applicant should be a non-EU, non-EEA, and non-Swiss national. The applicant should also be a “fit and proper person” who is in receipt of stable, regular resources, is in possession of medical insurance and who owns and holds a qualifying property in Malta for at least five years (i.e.: purchased for a consideration of not less than €320,000 or rented for not less than €12,000 per annum.) The individual must also make a qualifying investment in Malta (i.e.: investment will remain to be an asset of the individual) of €250,000 (held for a minimum of five years) and should have annual income of not less than €100,000 outside of Malta or be in possession of capital of not less than €500,000. A non-refundable contribution of €30,000 also has to be made to the Competent Authority.
Comparison of the programs
The following is a comparative summary of the GRP and MRVP:
The above are two programs through which an individual and his/her qualifying dependents may take up residence in Malta. In terms of both programs a minimum presence in Malta is not required, however in terms of the GRP the individual cannot spend more than 183 days in any other jurisdiction. That being said a number of applicants do spend quite some time in Malta; in fact, the island was selected as the third best place to live for expatriates according to a survey published by The Wall Street Journal in 2015.