Highly Qualified Individuals Rules
Given the expansion and modernisation of Malta’s economy, the conscious decision was taken by the Government to attract knowledgeable and experienced personnel in the financial services sector, gaming sector and aviation. This gave rise to the Highly Qualified Persons Rules aimed at attracting highly qualified persons to occupy “eligible office” with certain types of companies. “Eligible office” comprises employment in positions such as Actuarial Professional, Chief Executive Officer, Chief Financial Officer, Chief Commercial Officer, Chief Investment Officer, and Head of Investor Relations, amongst others.
The individual income from a qualifying contract of employment in an “eligible office” is subject to tax at a flat rate of 15% provided that the income amounts to €75,000 (excluding the annual value of any fringe benefits) adjusted annually in line with the Retail Price Index. The 15% flat rate is imposed up to a maximum income of €5,000,000, the excess is exempt from tax.
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
The 15% tax rate applies for a consecutive period of 5 years for EEA (i.e. EU countries plus Norway, Iceland and Liechtenstein) and Swiss nationals and for a consecutive period of 4 years for third country nationals. However, EEA and Swiss nationals who have availed themselves of the benefit under this scheme may apply for a one-time extension of 5 years to the qualifying period.
For an individual to benefit from the 15% tax rate the below requirements shall be met:
- derives employment income subject to income tax in Malta
- 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
- proves to the satisfaction of the Competent Authority that he is in possession of professional qualifications and has at least five years professional experience
- 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)
- 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
- proves to the satisfaction of the Competent Authority that he performs activities of an eligible office
- proves that:
- 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
- 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;
- he is in possession of a valid travel document
- 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
All other requirements set in the law should also be met.
An application for a formal determination relating to eligibility under the Highly Qualified Persons Rules must be made to the Malta Financial Services Authority in the case of financial services, to the Lotteries and Gaming Authority and to the Authority for Transport in Malta using this form in case of Aviation Services.
The benefit is exercised for each year of assessment by means of a declaration signed by the beneficiary and endorsed by the competent authority as the case may be. This form is to be attached to the income tax return and filed with the Inland Revenue Department by the tax return date.
