On the 8th August, 2014, the Minister for Finance issued, The Residence Programme Rules, 2014, which are to replace The High Net Worth Individuals Rules.  These rules are deemed to have come into force with effect from 1st July 2013.

The rules are very similar to the previous programme, however a few changes have been made, which are being highlighted below.

Conditions Applicable

In order to benefit from special tax status under these Rules, the beneficiary must be an individual who is not a permanent resident or national of Malta, but is an EU, EEA or Swiss National.

The afore-mentioned individuals must prove to the satisfaction of the Commissioner of Inland Revenue that:

(a)    They are not an individual which benefits under the Residents Scheme Regulations, the High Net Worth Individuals – EU/EEA/Swiss Nationals Rules, The High Net Worth Individuals – Non-EU/EEA/Swiss Nationals Rules, the Global Residence Programme Rules, the Qualifying Employment in Innovation and Creativity (Personal Tax) Rules or the Highly Qualified Persons Rules;

(b)   They hold a qualifying property holding which was purchased at a consideration of not less than €275,000 for a property purchased or €9,600 for a property rented in Malta; OR €220,000 for a property purchased or €8,750 for a property rented in Gozo or the South of Malta.  The persons residing in such a qualifying property must be the beneficiary or persons which qualify as his dependents, or household staff which have been notified to the Commissioner.

(c)    They are in receipt of stable and regular resources;

(d)   They are in possession of a valid travel document;

(e)   They are in possession of sickness insurance, in relation to both themselves and their dependents;

(f)     They can adequately communicate in one of the official languages of Malta;

(g)    They are fit and proper persons.

Special Tax Status

Persons qualifying under the Residence Programme Rules are subject to tax at a reduced rate of 15% on any income arising outside Malta in the year immediately preceding the year of assessment which is received in Malta by the beneficiary, their spouses and children, with the possibility of claiming double taxation relief.

The minimum amount of tax payable in terms of these rules in respect of income arising outside Malta is €15,000 for any year of assessment.

However, important to note is that once the individual acquires permanent residence of Malta, they would lose their special tax status and will be taxed at the normal rates as per Article 56 of the Income Tax Act.

Application process

An application for the special tax status must be made through the services of a person who qualifies as an authorised mandatory registered as such with the Inland Revenue Department.

A non-refundable one-off registration fee of €6,000 or €5,500 if the property is situated in the south of Malta, must be paid to the Commissioner of Inland Revenue.

Cessation of Status

If at any point the individual ceases to meet any of the above mentioned necessary conditions, then special tax status is lost.

Cessation will also occur if the individual’s stay is not in the public interest, or if the individual stays in another jurisdiction for a period which is longer than 183 days in any calendar year.

Upon failing to qualify the required conditions the individual must notify the Commission by not later than 4 weeks from the date of when he becomes aware of such event.