Malta is an ideal place to take up residence. Besides its pleasant climate, safe environment and hospitable English-speaking population, it offers a range of benefits to individuals seeking to acquire Malta residence, given its advantageous tax regime and competitive cost of living.
Any EU/EEA or third country national who resides in Malta for more than three months requires a permit from the immigration authorities which is granted on specific grounds, some of which are listed below.
Ordinary Malta residence requires individuals to physically live on the island for a period of six months or more. The transfer of one’s residence from a high-tax jurisdiction to a lower tax overseas country is available to both EU/EEA and non-EU/EEA nationals. There is no minimum value property requirement for non-residents seeking to obtain ordinary Malta residence, unless there is the need for an Acquisition of Immovable Property (AIP) permit, which applies in specific circumstances.
The qualifying criteria, which vary according to whether the individual seeking to obtain ordinary residence in Malta is an EU/EEA national or a third country national, can be easily complied with, thus making the attainment of Maltese ordinary residence even more attractive.
There are different grounds on which EU/EEA nationals may become ordinarily Malta resident, including economic self-sufficiency, employment, education and opening a business, the most popular of which are being set out hereunder.
Economic Self-Sufficiency: This criterion requires that such individuals show that they are able to provide for themselves and for their accompanying dependants by being financially stable and not being in need of any financial support from the Maltese government. The current thresholds for EU/EEA nationals are set at a minimum capital of € 14,000 or a weekly income of € 84.95 for single persons, and at a capital of at least € 23,300 or a weekly income of € 93.10 for married couples.
Employment: A second ground on which EU/EEA nationals may obtain ordinary residence in Malta is employment. Hence, an individual must accept offers of employment or seek employment in Malta, work in Malta as an employee or be self-employed. Alternatively, an individual may opt to set up a business in Malta and work for his / her own business.
Third Country Nationals
Employment: The qualifying criteria for Maltese ordinary residence in respect of third country nationals vary from those applicable to EU/EEA nationals. We are setting out below a few of these possibilities. An employment licence is required in order for non-EU/EEA nationals to work in Malta. This is granted upon satisfying certain criteria. Candidates qualified in the financial services and information technology fields are sought after and therefore it may be easier for such individuals to get an employment licence.
Self-Employment: In order to qualify to apply for self-employed status and work for one’s business, a third country national must meet one or more of the following criteria:
- An investment of at least € 100,000 without an EU/EEA partner, or an investment equivalent to € 40,000 with a Maltese partner. The investment must consist of fixed assets and/or capital used for business purposes. Rental contracts are not eligible;
- Status of a highly skilled innovator with a sound business plan, committed to recruiting at least three EU/EEA nationals within eighteen months of establishment of business;
- Status of sole representative of an overseas company (with a sound reputation and established for at least three years abroad) wishing to open a branch in Malta; or
- The holding of a directorship in a company forming part of a project that has been formally approved by Malta Enterprise, and which has been formally notified by the latter to the Employment and Training Corporation.
Individuals staying in Malta for some temporary purpose with no intention of establishing their residence here and who have not resided in Malta for a period longer than six months in a calendar year shall not be taxed in Malta on their foreign income and gains, whether these are remitted to Malta or otherwise. They are liable to tax in Malta solely on Maltese sourced income and capital gains.
LONG TERM RESIDENCE
Long-term Malta residence status may be granted to individuals who have been legally residing in Malta for five continuous years. The term “continuous” means that such individuals must not have absented themselves from Malta for more than six consecutive months in any given year of the said five-year period and further must not have been absent from Malta for more than a total of ten months throughout this five year period.
Furthermore, a third country national who has been granted long-term residence status by another Member State other than Malta may reside in Malta, for a period exceeding three months, for the exercise of an economic activity in an employed or self-employed capacity, provided that such person is in possession of an employment licence, is pursuing studies or vocational training, or is engaged in other such activities.
Education: Temporary Malta residence is granted for the entire period of education to students in any Private School, College, or at the University of Malta. If the student is underage, his or her legal guardian can apply for Malta residence to accompany him or her. Such person has to confirm that he or she is in receipt of stable and regular income and has a suitable place to live.
Income Tax: Individuals who are ordinarily resident, but not domiciled in Malta, are subject to income tax on income arising in Malta, on income arising outside Malta but received in Malta and on capital gains arising in Malta. No tax is chargeable on capital gains which arise overseas but which are remitted to Malta. Personal income tax is charged at progressive rates from 0% up to a maximum of 35 %.
THE HIGH NET WORTH INDIVIDUALS RESIDENCY SCHEME (HNWI)
: HNWI applicants are required to own property in Malta at the time of application. Such “qualifying property holding” must have been purchased after the 14th of September 2011 for a value of not less than €400,000, and must serve as the applicant’s habitual residence, and that of any accompanying family members. Alternatively, the applicant may opt to rent property in Malta for not less than €20,000 per annum. The old threshold of €116,000 continues to apply to properties purchased before this date in pursuit of a Permanent Residence permit.
Financial Resources and Insurance:
The HNWI applicant must also be in receipt of stable and regular resources which are sufficient to support himself/herself as well as any accompanying dependants. HNWI applicants must therefore be economically self-sufficient and both the applicant and any dependants must hold adequate health insurance covering the EU territory. A new requirement is that the individual must satisfy a “fit and proper test” in order to be granted a permit under this scheme.
: The permit holder is given special tax status carrying the right to pay tax at a beneficial rate of 15% on foreign source income received in Malta together with the possibility of claiming double taxation relief. This is subject to a minimum yearly tax of €20,000 and €2,500 per accompanying dependant after claiming any applicable double tax relief. Other chargeable income of the beneficiary (and that of his or her spouse) that is not taxed at the special rate of 15% will be taxed at 35%. A beneficiary of this scheme and his or her spouse cannot opt for a separate tax computation.
A one-time registration fee of €6,000 is levied by the Government. Permit holders are also allowed to carry on an economic activity in Malta.
Non-EU/EEA /Swiss Nationals
Property : HNWI applicants being non-EU/EEA/Swiss nationals are required to own property in Malta at the time of application. Such “qualifying property holding” must have been purchased after the 14th of September 2011 for a value of not less than €400,000, and must serve as the applicant’s habitual residence, and that of any accompanying family members. Alternatively, the applicant may opt to rent property in Malta for not less than €20,000 per annum. The old threshold of €116,000 continues to apply to properties purchased before this date in pursuit of a Permanent Residence permit.
Financial Resources and Insurance: The HNWI applicant must not already benefit from the Residence Scheme Regulations or from the Highly Qualified Individual Rules. As in the case of EU/EEA/Swiss nationals, the applicant must also be in receipt of stable and regular resources that are sufficient to support himself/herself as well as any accompanying dependants and be in possession of adequate health insurance cover for himself/herself and any accompanying dependants covering the EU Territory. A new requirement is that the individual must satisfy a “fit and proper test” in order to be granted a permit under this scheme.
Tax Treatment : A 15% rate of tax is charged in respect of foreign income remitted to Malta with the possibility of claiming double tax relief. The minimum annual tax stands at €25,000 with an added €5,000 per dependant, after claiming any double tax relief. Other chargeable income of the beneficiary (and that of his or her spouse) that is not taxed at the special rate of 15% will be taxed at 35%. A beneficiary of this scheme and his or her spouse cannot opt for a separate tax computation. A one-time registration fee of €6,000 is levied by the Government.
Maximum period of stay in another jurisdiction: The HNWI applicant cannot stay in any other jurisdiction for more than 183 days in a calendar year.
Entry and stay in Malta: Non-EU/EEA/Swiss nationals applying under the High Net Worth Individuals Residency Scheme have two options in relation to their entry and stay in Malta.:
(a) In the case of a person who declares that he does not intend to become a long-term resident of Malta, in Part 6 of the Application form, such person may not spend more than 9 months in a calendar year in Malta. Such individual would be expected to leave Malta for a minimum period of 3 months in a calendar year. In this respect such individual will not become eligible for long-term residency status in accordance with the Status of Long-Term Residents (Third Country Nationals) Regulations, 2008. In such cases, the applicant need not enter into a qualifying contract to benefit from the High Net Worth Individuals Rules and consequently not pay ‘The Bond’. Basically, applicants will be able to reside in Malta under the Uniform Residence Permit but has to leave for three months every year. This way, he/she will not qualify for Long-Term Residence and take advantage of such status after 5 years.
(b) In the case of a person who declares that he intends to become a long-term resident of Malta, in Part 6 of the Application Form, such individual needs to become a party to a qualifying contract. Applicants are required to contact the Ministry of Finance, Economy and Investment so as to become a party to a Qualifying Contract, and the Ministry of Foreign Affairs. A very important change is that the qualifying contract does not stipulate a specific amount to be paid but simply states that the applicant contributes an amount to the Government of Malta. Our understanding is that this amount will be decided on the merit of each application.
Visas: Although it is not yet official as to which type of permit such applicants will be granted to reside in Malta, we understand from reliable sources that these will be treated as follows:
(1) Non EU nationals who choose not to become ‘Long Term Residents’ and who today do not require any visas to visit Malta, will be given a ‘Uniform Resident Permit’ (URL) of twelve months which is renewable every year.
(2) Non-EU nationals who choose not to become Long Term Residents and who today require a visa to visit Malta will be issued with a category ‘D’ visa (issued from Malta) for a period in excess of ninety days.
On expiry of the category ‘D’ visa, they can apply for a ‘Uniform Resident Permit’ which will eventually be renewed every year.
Schengen Visas: On the basis of a Uniform Resident Permit, applicants will be granted a Schengen Visa. Under the Category ‘D’ visas, applicant can only transit through other Schengen states for a maximum period of five days.
Annual Tax Returns: An individual who benefits from this HNWI Scheme special tax status must submit an Annual Tax Return which should include any material changes that affect the beneficiary’s special tax status.
Submission of application: An application for special tax status under the High Net Worth Individuals Rules may only be submitted to the Commissioner of Inland Revenue through the services of a person that qualifies as an Authorised Registered Mandatory, registered as such with the Commissioner of Inland Revenue under the High Net Worth Individuals Rules. Our partners in Malta are an Authorised Registered Mandatory and may assist you with your application for residency under this scheme as well as with any tax and legal requirements.
Double Taxation Relief: Malta residents are afforded protection by double taxation agreements, which ensure that tax is never paid twice on the same income in different countries. Malta has an extensive network of double taxation treaties. Most treaties are based on the OECD Model Convention, and relief is granted under the credit method whereby a credit for the foreign tax paid is given. Where there is no double taxation treaty, another form of relief from double taxation available under domestic law, namely unilateral relief, largely achieves the same outcome.
Inheritance and Transfer Tax: No death tax or duty is payable in Malta. However, duty on documents and transfers is payable by the heirs of the deceased or the purchaser on real estate situated in Malta, and upon the purchase of shares in Malta companies. However, no such duty is payable on share transfers effected by shareholders in or by trading companies which have business interests to the extent of more than ninety per cent outside Malta. Likewise, an exemption from duty on share transfers in holding companies exists where more than half of the ordinary share capital, voting rights and rights to profits are held by persons who are not resident in Malta. Subject to certain exceptions, duty is due at the rate of five per cent in the case of real estate, and two per cent in the case of shares.
CURRENT HOLDERS OF A PERMANENT RESIDENCY SCHEME CERTIFICATE
Holders of a Permanent Malta Residence Certificate may continue enjoying their current status and conditions unless they opt for this new scheme. However if they sell the property that they have acquired in pursuance of their Permanent Residence application, they will need to purchase another property complying with a minimum value of € 400,000. It should be noted however that the following conditions for eligibility have been added through amendments to the Permanent Residence Scheme Regulations:
- The holder of the certificate must be in receipt of stable and regular resources sufficient to maintain himself/herself and his/her dependants without recourse to the social assistance system in Malta;
- The holder of the certificate must be in possession of sickness insurance in respect of all risks normally covered for Maltese nationals, for himself/herself as well as for any accompanying dependants;
- The property being declared as the holder’s place of residence cannot be occupied by any person other than the holder of the certificate and his/her family members.
Conversely, in the case of pending applications, the €6,000 Government registration fee has been waived, and where the property has already been purchased, the value threshold of €116,000 should be applicable.
BUYING A PROPERTY IN MALTA BY FOREIGN NATIONALS
Non-residents may freely purchase one property in Malta, subject to obtaining an AIP permit. This restriction does not apply to properties in Special Designated Areas and, in the case of EU citizens who have not been resident in Malta for at least five continuous years, to property which is to serve as their primary residence. On the other hand, EU citizens who have been resident in Malta for at least five continuous years may purchase any number of properties they wish.
Where one of the spouses is an EU citizen and the other spouse is a non-EU citizen, both can likewise benefit from the exemption outlined above and acquire property without the necessity of obtaining an AIP permit, provided the acquisition is being made to establish therein their primary residence.
Also excepted is the acquisition of immovable property by an EU national for the conduct of one’s business activity or for the supply of services by such person. In such a case, a declaration reflecting the purchaser’s intention for the acquisition should be inserted in the relative contract of purchase.
The relative permit will be issued usually within 6 weeks, subject to the value of the property being over €98,000 in the case of anapartment or €164,000 if it is a house or villa (values as at 2011). The property has to be used solely as a residnce by the applicant and his family. Should one wish to rent out the property, this is possible subject to obtaining the relative permits.
One may only own one property in Malta and Gozo, with the exception of Special Designation Areas. Malta and Gozo boast of a good selection of luxury property developments that have been
earmarked by the local authorities as Special Designated Areas (SDA), where there are absolutely
no restrictions to acquisition for foreigners. Spread across the two islands, these areas represent
recently constructed developments intended to provide top-end residential properties, often
consisting of a cluster of apartments, maisonettes and penthouses built with a common theme on
an extensive piece of land, often enhanced by their location, amenities and finishes. These include,
amongst others, Portomaso and Pendergardens in St Julians, Tigne Point and Fort Cambridge in
Sliema, Fort Chambray and Kempinsky residences in Gozo, Tas-Sellum Village in Mellieha, St Angelo Mansions at the Vittoriosa Marina, Ta’ Monita and Madliena Village.
TO VIEW MORE ABOUT INVESTING IN MALTA PROPERTY CLICK HERE