Tax Guidelines on Highly Qualified Persons Rules
Introduction
Since joining the EU in 2004, Malta has been
modernising its economy. It is becoming recognized as a highly functional, low
cost, well regulated jurisdiction with the underlying theme being availability
of trained staff through investment in education and training. However, the
expansion of the financial services and the gaming services since joining the
EU and the aviation services and assisted reproductive technology in recent
years, is showing a significant need for additional highly qualified workers.
Therefore, the need is being felt for the importation of knowledge particularly
in those areas of the financial services sector, the gaming sector, the
aviation sector and the assisted reproduction sector where local expertise is
lacking.
The
objective of the Highly Qualified Persons Rules (SL 123.126), is the creation
of a scheme to attract highly qualified persons to occupy “eligible office”
with companies licensed and/or recognized by the Competent Authority regulating
the specific sector.
"Eligible
office" in the financial services and gaming sectors (and undertakings holding
an air operators certificate) comprises employment in one of the following
positions:
•
Actuarial Professional
•
Aviation Continuing Airworthiness Manager
•
Aviation Flight Operations Manager
•
Aviation Ground Operations Manager
•
Aviation Training Manager
• Chief
Executive Officer
• Chief
Financial Officer
• Chief
Commercial Officer
• Chief
Insurance Technical Officer
• Chief
Investment Officer
• Chief
Operations Officer (including Aviation Accountable Manager)
• Chief
Risk Officer (including Fraud and Investigations Officer)
• Chief
Technology Officer
• Chief
Underwriting Officer
• Head of
Investor Relations
• Head of
Marketing (including Head of Distribution Channels)
• Head of
Research and Development; (including Search Engine Optimisation and Systems
Architecture)
•
Portfolio Manager
• Senior
Analyst (including Structuring Professional)
• Senior
Trader/Trader
• Odds
Compiler Specialist
"Eligible
office" in an aerodrome licensed undertaking refers to employment in the
following position:
• Chief
Executive Officer
"Eligible
office" in the assisted reproductive technology sector comprises
employment in one of the following positions:
•
Embryologist
•
Responsible Person
• Lead
Quality Manager
The rules
for the scheme came into force with effect from 1 January 2010 and apply to
income which is brought to charge in year of assessment 2011 (basis year 2010)
and apply to individuals not domiciled in Malta, with the exception to the
positions associated with the aviation sector where the rules are effective
from 1st January 2012 i.e. year of assessment 2013.
The
scheme’s termination date is 31/12/2030. No determinations shall be issued by
the respective Competent Authorities after 31/12/2025.
Scheme
Rules
a)
Employment Income
Individual
income from a qualifying contract of employment in an “eligible office” with a
company licensed by the Competent Authority is subject to tax at a flat rate of
15% provided that the income amounts to at least €75,000 (seventy five thousand
euro) adjusted annually in line with the Retail Price Index. The 15% flat rate
is imposed up to a maximum income of €5,000,000 (five million euro), the excess
is exempt from tax.
In
practice this means that the minimum income (based on the Retail Price Index
published by the National Statistics Office) must exceed the following
thresholds:
• €75,000
for basis year 2010
• €76,136 for basis year 2011
• €78,207 for basis year 2012
• €80,100 for basis year 2013
• €81,205 for basis year 2014
• €81,457 for basis year 2015
• €82,353 for basis year 2016
• €82,881 for basis year 2017
•
€84,016 for basis year 2018
• €84,991 for basis year 2019
• €86,385 for basis year 2020
• €86,938 for basis year 2021
• €88,242 for basis year 2022
• €93,669 for basis year 2023
• €98,436 for basis year 2024
The 15%
tax rate applies for a consecutive period of five years for European Economic
Area (ie EU countries plus Norway, Iceland and Liechtenstein) and Swiss
nationals and for a consecutive period of four years for third country
nationals. Individuals who already have a qualifying contract of employment in
an "eligible office" two years before the entry into force of the
scheme may benefit from the 15% tax rate for the remaining years of the scheme.
This means that a national of the EEA and Switzerland who has a qualifying contract
of employment in an "eligible office" starting in 2008 (basis year)
will benefit for three years from the scheme, ie basis years 2010, 2011 and
2012, while a third country national will benefit from one less. This
"grandfathering" only applies for eligible offices in the financial
services and gaming sectors.
The four
or five year period, as the case may be, commences from the year when the
individual concerned first becomes taxable in Malta. In cases where the
individual was taxable in Malta but not benefiting under this Scheme and
subsequently comes to Malta and becomes eligible under the Scheme, he can
benefit only if the four or five year period has not elapsed; the benefit is
for the years remaining from the date of eligibility under the Scheme until the
said four or five year period from the date of first being subject to tax in
Malta elapses.
Nationals of the EEA and Switzerland who have availed themselves of the benefit under this scheme may apply for two extensions of five years each to the qualifying period. Third country nationals of who availed themselves of the benefit under this scheme may apply for two extensions of four years each to the qualifying period.
b) Qualifying Contract of Employment
An
individual may benefit from the 15% tax rate if he satisfies all of the
following employment conditions:
1.
derives employment income subject to income tax in Malta
2. has an
employment contract subject to the laws of Malta and proves to the satisfaction
of the Competent Authority that the contract is drawn up for exercising genuine
and effective work in Malta
(Note:
where an individual receives salaries from different companies in the same
group and the group relationship of such companies is of 100% ownership, he
will still be eligible if the aggregate salaries (excluding fringe benefits)
are higher than the minimum thresholds as specified above).
3. proves
to the satisfaction of the Competent Authority that he is in possession of
professional qualifications and has at least five years professional
experience;
4. has
not benefitted from deductions available to investment services expatriates
with respect to relocation costs and other deductions (under article 6 of the
Income Tax Act);
5. fully
discloses for tax purposes and declares emoluments received in respect of
income from a qualifying contract of employment and all income received from a
person related to his employer paying out income from a qualifying contract as
chargeable to tax in Malta;
6. proves
to the satisfaction of the Competent Authority that he performs activities of
an eligible office; and
7. proves
that:
i.
he is
in receipt of stable and regular resources which are sufficient to maintain
himself and the members of his family without recourse to the social assistance
system in Malta;
ii. he
resides in accommodation regarded as normal for a comparable family in Malta
and which meets the general health and safety standards in force in Malta;
iii. he is in possession of a valid travel document;
iv. he is in possession of sickness insurance in respect of all risks normally
covered for Maltese nationals for himself and the members of his family.
Exclusions from the Scheme
The
individual income derived from employment in an “eligible office” will not
qualify for the 15% reduced rate if
the individual holds more than 25% (directly or indirectly) of the company
licensed and/or recognised by the Competent Authority or if the individual is
already in employment in Malta before the coming into force of the scheme
with a company not licensed and/or recognised by the Competent Authority.
The
individual income derived from employment in an “eligible office” will not
qualify for the scheme if a claim is made for any relief, deduction, reduction,
credit or set-off of any kind except for any income tax deducted at source.
Anti-abuse
provisions in respect of split contracts have been introduced. An arrangement
in terms of which a beneficiary receives a payment from a person related to his
employer and such payment is not declared for tax purposes in Malta is
considered to be an artificial arrangement.
Any rights are withdrawn with retrospective effect if a beneficiary is not an EEA or Swiss national and he
directly or indirectly acquires real rights over immovable property situated in Malta or holds a beneficial interest directly or indirectly consisting in, inter alia, of real rights over immovable property situated in Malta.
Any
individual who claims a benefit under the scheme when he is not entitled to do
so is liable to a penalty equal to the amount of benefit claimed and if the
benefit is paid the individual is liable to repay the benefit received plus
additional tax of 7% per month or part thereof.
Application
to Benefit from the Scheme
An
application for a formal determination relating to eligibility under the Highly
Qualified Persons Rules must be made to:
• The
Chairman, Malta Financial Services Authority using this form (in the case of Financial
Services). Persons who already submitted a personal questionnaire to the Malta
Financial Services Authority can apply using this form instead.
• The
Chairman, Lotteries and Gaming Authority using this form.
• The
Chairman, Authority for Transport in Malta using this form (in the case of Aviation
Services).
• The Chief
Medical Officer to Government using this form (in
the case of assisted reproductive technology).
The benefit is exercised for each year of assessment by means of a
declaration made on the form RA 17 signed by the beneficiary and endorsed by
the Malta Financial Services Authority or the Lotteries and Gaming Authority or
the Authority for Transport in Malta or the Office of the Chief Medical Officer
to the Government, as the case may be. This form is to be attached to the
income tax return and filed with the Office of the Commissioner for Revenue by the tax
return date.