A new set of provisions targeted towards attracting foreign high net worth individuals who wish to relocate to Malta, was recently announced by the Minister of Finance.

Commonly referred to as the High Net Worth Individuals (HNWI) Rules, the new provisions improve upon the Residents Scheme Regulations, 2004, and seek to ensure that Malta’s tax residency stance remains compliant with its international commitments and in line with current global tax norms, while still providing tempting tax planning opportunities to individuals who qualify under such a scheme by granting them special tax status.

So what are the conditions?

The conditions required to qualify for special tax status, as well as the minimum tax payable under the HNWI Rules, vary depending on whether the applicant falls within or outside the EU, EEA or Swiss national category.

Individuals from both categories must prove to the Commissioner of Inland Revenue that they own an immovable property in Malta worth at least €400,000 or rent an immovable property in Malta for not less than € 20,000 annually.

Furthermore, all applicants must prove that they are in receipt of stable and regular resources and in possession of sickness insurance, in relation to both themselves and their dependents, and that they are not and do not intend to be Maltese domiciled within five years from the date of application.

Proof must also be furnished to the Commissioner of Inland Revenue that the applicants are fit and proper persons and that they do not benefit from the Residents Scheme Regulations, 2004, the Highly Qualified Persons Rules (a tax incentive scheme aimed at attracting foreign executives in the financial services sector) or long-term resident status.

In the case of individuals who are not EU, EEA or Swiss nationals, applicants are also required to be fluent in English or Maltese and to decide whether to apply for special rights to enter and reside freely in Malta. Should applicants decide to apply for such rights, they would be required to enter into a financial bond of €500,000 and €150,000 for every dependent in favour of the Government of Malta, which bond will be restored to the applicants upon renunciation of special tax status within four years from the date of such bond. Should applicants decide not to apply for special rights, they would be required to regularly renew their visa to be able to prolong their stay in Malta.

Special Tax Status

Persons qualifying under the HNWI Rules shall be subject to Maltese tax on foreign income (which excludes foreign capital gains) that is remitted to Malta at a reduced rate of 15%, with the possibility to claim double tax relief. Malta source income will be generally taxed at 35%.

In the case of EU, EEA or Swiss nationals, the minimum annual tax is €20,000 plus an additional annual tax of €2,500 for every dependent living with the individual. In the case of other nationals, the respective minimum amounts are €25,000 and €5,000.

Such special tax status will cease to apply in the event, among others, that the successful applicant does not reside in Malta for a minimum of 90 days or resides in any one other jurisdiction for more than 183 days in a calendar year.

Enhancing Malta’s Quality and Value

It is anticipated that the new HNWI Rules will continue to contribute to Malta’s reputation as an attractive location for nationals wishing to relocate while, at the same time, enhancing Malta’s quality and value through the generation of wealth and economic activity on our shores.

Anjelica Camilleri de Marco

This article first appeared on the December 2011 issue of Xmaslife, the in-flight magazine of Air Malta.