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Introduction

The Highly Qualified Persons Rules (Subsidiary Legislation 123.126) is intended to attract highly qualified persons to occupy “eligible office” with companies licensed and/or recognized by the Malta Financial Services Authority, companies licensed by the Lotteries and Gaming Authority and companies holding an Air Operators’ Certificate issued by the Authority for Transport in Malta. 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.

Eligible Office

“Eligible office” comprises employment in one of the following positions:

Tax treatment

Individual income from a qualifying contract of employment in an “eligible office” with a company licensed and/or recognised by the Malta Financial Services Authority is subject to tax at a flat rate of 15%

Individual income from a qualifying contract of employment in an “eligible office” with a company licensed and/or recognised by the Malta Financial Services 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:

Duration

The 15% tax rate applies for a consecutive period of five years for EEA and Swiss nationals and for a consecutive period of four years for third country nationals

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.

In July 2015, Malta’s Highly Qualified Persons Scheme was extended by a further 5 years

In July 2015, Malta’s Highly Qualified Persons Scheme was extended by a further 5 years. Applications to benefit from this 5-year extension, which is valid for EEA or Swiss nationals residing in Malta, must be formalised before 2020.

Conditions

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 Malta Financial Services Authority (in the case of Financial Services), the Lotteries and Gaming Authority (in the case of Gaming Services) and to the Authority for Transport in Malta (in the case of Aviation Services) 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 Malta Financial Services Authority (in the case of Financial Services); or the Lotteries and Gaming Authority (in the case of Gaming Services) or the Authority for Transport in Malta (in the case of Aviation Services) 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 Malta Financial Services Authority (in the case of Financial Services) or the Lotteries and Gaming Authority (in the case of Gaming Services) or the Authority for Transport in Malta (in the case of Aviation Services) that he performs activities of an eligible office; and
7. proves that:
   1. 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;
   2. 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;
   3. he is in possession of a valid travel document;
   4. 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.

Disqualification from the Scheme

The individual income derived from employment in an “eligible office” will not qualify for the 15% reduced rate if it is paid by an employer who receives any benefits under business incentive laws or is paid by a person who is related to the employer who received any benefits under any business incentive laws or if the individual holds more than 25% (directly or indirectly) of the company licensed and/or recognised by the Malta Financial Services Authority or the Lotteries and Gaming Authority or of a company holding an Air Operators’ Certificate issued by the Authority for Transport in Malta or if the individual is already in employment in Malta before the coming into force of the scheme either with a company not licensed and/or recognised by the Malta Financial Services Authority or the Lotteries and Gaming Authority or not holding an Air Operators’ Certificate issued by the Authority for Transport in Malta (in the case of aviation services) or not holding “eligible office” with a company licensed and/or recognised by the Malta Financial Services Authority or the Lotteries and Gaming Authority or not holding an Air Operators’ Certificate issued by the Authority for Transport in Malta (in the case of aviation services).

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.

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 a third country national and he either:

• Physically stays in Malta, in the aggregate, for more than four years; or
• 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.

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