The Minister of Finance, the Economy and Investment has introduced regulations providing for a 15% flat rate of income tax in respect of employment income derived by Highly Qualified Persons not domiciled in Malta and working with licensed or recognised financial companies for income up to € 5 million, and an outright tax exemption for any income in excess of €5 million per annum. These regulations represent a significant incentive for qualified persons working within Malta’s burgeoning financial service industry, reducing the Malta personal income tax burden on such persons from the maximum applicable rate of 35%.
The Highly Qualified Persons Rules, 2011 (the ‘Rules’), which were introduced by Legal Notice 106 of 2011 and published on the Government Gazette on the 25th March 2011, provide that individuals having their domicile outside of Malta and who are employed in senior positions with a company that is licensed or recognised by the Malta Financial Services Authority (‘MFSA’) to conduct financial business in or from Malta may avail themselves of a flat personal income tax rate of 15% on the employment income up to €5 million derived in respect of such work or duties carried out in Malta or outside Malta. Any income in excess of €5,000,000 per annum is not subject to any further Malta tax in terms of the rules.
The senior positions qualifying from this favourable tax treatment are the following:
- Chief Executive Officer;
- Chief Risk Officer;
- Chief Financial Officer;
- Chief Operations Officer;
- Chief Technology Officer;
- Portfolio Manager;
- Chief Investment Officer;
- Senior Trader/Trader;
- Senior Analyst (including Structuring Professional);
- Actuarial Professional;
- Chief Underwriting Officer;
- Chief Insurance Technical Officer;
- Head of Marketing;
- Head of Investor Relations.
In order to qualify, the employee must satisfy the following conditions:
- Employment in a senior position (or to perform equivalent activities);
- Possession of professional qualifications or acceptable professional experience;
- Remuneration of at least €75,000 (exclusive of any fringe benefits);
- Possesses resources which are sufficient to maintain him/herself and his/her family members without recourse to domestic social assistance;
- Resides in high-standard accommodation in Malta;
- Not domiciled in Malta;
- Possess a valid travel document;
- Possess adequate health insurance;
- Protected as an employee under applicable Maltese laws; and
- Has not availed of other benefits under alternative incentives made available in Malta to investment services and insurance expatriate employees.
Third-country nationals (i.e. non-EU nationals) are disqualified from eligibility of they stay in Malta for more than 1,460 days in aggregate or acquires any real estate rights in Malta.
Any individuals opting to pay tax on employment income at the reduced rate in terms of the Rules is required to apply to the MFSA for a formal determination of eligibility. Eligible individuals are then required to submit a prescribed form to the local tax authorities together with his/her tax return.
In terms of the Rules, any individual who was employed under a contract of employment requiring the performance of duties in Malta for a period exceeding 2 years preceding the 1st January, 2011 is not eligible for the reduced tax rate.
The tax benefit is available to EEA and Swiss nationals for a maximum period of 5 consecutive years and to third-country nationals for a maximum period of 4 consecutive years (commencing in the year in which the taxpayer is first liable to tax in Malta). The 5 and 4 year maximum periods would be further reduced in respect of EEA and Swiss nationals and citizens of non-EU Member States who were employed under a contract of employment requiring the performance of duties in Malta up to 2 consecutive years prior to the 1st January, 2011.
For further information on the Rules or your eligibility to benefit from the reduced personal income tax rate please contact GVZH Advocates on firstname.lastname@example.org.