The Malta Global Residence Programme

The Malta Global Residence Programme (the “MGRP”) is a programme regulated by subsidiary legislation 123.148 (the “Subsidiary Legislation”) designed to attract individuals who are not nationals of the EU, EEA or Switzerland and who are not long- term residents. The aim of the MGRP is to formally recognise as tax resident for Maltese tax purposes foreign nationals satisfying the eligibility criteria of the MGRP.

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Eligibility

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In order to be eligible to apply under the MGRP, an applicant (the “Applicant”) must fulfil all of the following criteria:

(i) be a non-EU national – applicants who are EU nationals, nationals of Iceland, Norway or Liechtenstein or Swiss nationals are not entitled to apply [1] ;

(ii) not benefit in terms of any of the following tax programmes:

(a) Residents Scheme Regulations;
(b) High Net Worth Individuals Rules;
(c) Malta Retirement Programme Rules;
(d) Qualifying Employment in Innovation and Creativity Rules; or
(e) Highly Qualified Persons Rule;

(iii) Owns or rents a qualified owned property or qualifying rented property which the individual
occupies as his/her principal place of residence worldwide.

The values of the property need to be as follows:
(a) In the case the property is owned:
– Immovable property situated in Malta other than in the South of Malta amounting to two hundred and seventy five thousand euro EUR 275,000;
– Immovable property situated in the South of Malta amounting to two hundred and twenty thousand euro (EUR 220,000);
– Immovable property situated in Gozo amounting to two hundred and fifty thousand euro (EUR 250,000).

(b) In the case the property is rented:
– Immovable property situated in Malta other than in the South of Malta amounting to nine thousand six hundred euro (EUR 9,600) per annum;
– Immovable property situated in the South of Malta amounting to eight thousand seven hundred and fifty euro (EUR 8,750) per annum;
– Immovable property situated in Gozo amounting to eight thousand seven hundred and fifty euro (EUR 8,750) per annum.

The lease needs to be taken out for not less than a twelve (12) month period and is evidenced by a certified lease agreement.

In both cases whether the immovable property is owned or rented, the Applicant would need to declare that s/he occupies such property as his/her principal place of residence worldwide.

(iv) Is in receipt of stable and regular resources that are sufficient to maintain himself/herself and his/her dependants without recourse to the social assistance system in Malta;

(v) Is in possession of a valid travel document, certified proof of which is submitted together with the application;

(vi) Is in possession of sickness insurance which covers himself/herself and his/her dependants in respect of all risks across the whole of the EU normally covered for Maltese nationals. The health insurance cover must be procured by a company licensed in Malta or by an international reputable health insurance company;

(vii) Needs to be able to adequately communicate in Maltese or English [2]  and

(viii) Is a fit and proper person.

Application Process

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An Applicant who wishes to apply under the MGRP must be represented by an Authorised Registered Mandatary (the “ARM”).Furthermore, an application for special tax status under the MGRP will only be valid if signed and submitted by the ARM.  lecocqassociate Ltd. provides the services of an ARM and thus our firm is able to assist Applicants who wish to apply for special tax status under the MGRP.

An administrative fee of six thousand euro (EUR 6,000), except where the qualifying owned property is situated in the South of Malta, in which case the administrative fee is that of five thousand five hundred euro (EUR 5,500) shall apply. In the latter case, the qualifying owned property needs to have been purchased at the time of submission of application.

Step-by-Step procedure of the Application Process

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Step 1

Once an application together with all the required documentation, including the bank draft in relation to the administrative fee is submitted to the Commissioner for Revenue, it is checked for completeness and vetted accordingly.

Step 2

An acknowledgment letter is sent to the ARM indicating the progress of the application. In the case of missing information or documents, these are indicated as this would prevent the application from being processed any further until such omission is rectified.

An Applicant need not be the owner or lessee of a qualifying property at time of application and may submit the certified final deed or lease agreement, as the case may be, at a later stage. However, in order for an Applicant to benefit from the reduced administrative fee, in the case of an owned immovable property situated in the South of Malta, the certified final deed of purchase needs to be submitted at application stage. Special tax status will not be confirmed unless and until the certified final deed or lease agreement, as the case may be, is submitted.
A valid complete application will then be forwarded for the due diligence process.

Step 3

Once the due diligence process is completed, the ARM will be notified of the outcome. If the outcome is positive, a face-to-face meeting with the Applicant and the ARM will be scheduled, following which, a letter of intent is issued and sent to the ARM once the application may continue to be processed. This will be accompanied by a notice of primary residence which would need to be finalised, signed by the Applicant and submitted in original.

The letter of intent is valid for twelve (12) months from the date of issue of the said letter, within which time the certified lease agreement or final deed of purchase, as the case may be, will need to be submitted in order for the confirmation letter to be issued.

The ARM would be notified of the main issues of concern should the due diligence outcome be negative, further to which the ARM together with the Applicant may provide an explanation. It is in the Commissioner for Revenue’s discretion whether to refuse or proceed with the application process.

Taxation

A tax rate of fifteen cents (0.15) on every euro thereof on any income that is received in Malta from foreign sources shall apply in the case of successful applications. This rate of tax will apply from the year of confirmation of the special tax status up to the year of cessation of status, both years included.

Dependants who will be able to benefit from the rate of fifteen cents (0.15) on every euro are:

• Spouse of the Applicant;
• Minor children including minor children and children who are in the care and custody of the Applicant or the Applicant’s spouse;
• Children including adopted children who are in the care and custody of the Applicant or the Applicant’s spouse, who are not minors but who because of circumstances of illness or disability of a serious gravity, are unable to maintain themselves.
  

Minimum Tax

Successful Applicants are required to pay a minimum tax of fifteen thousand euro (EUR 15,000) annually. This minimum tax covers income of the Applicant and his/her dependants as aforementioned (where applicable) that arises outside Malta and is received in Malta and does not include income that arises in Malta.

The Applicant retains the right to request a claim for double taxation relief under Article 74(a) and (b) of the Income Tax Act, provided that the minimum amount of tax payable by the Applicant is as provided above. If the tax payable according to the tax computation (including any credit for relief of double taxation) is such that it is less than the minimum tax of fifteen thousand euro (EUR 15,000) which is required to be paid, the amount to be paid will be the said minimum.

In the year when the special tax status is confirmed or cancelled, the minimum tax will be paid in full.

Annual Tax Return

An Applicant who benefits under the MGRP must submit an annual tax return which includes an annual declaration, by means of which any material changes that affect the Applicant’s special tax status need to be indicated. In order to ensure that an individual may properly benefit from this tax treatment, the Commissioner for Revenue may require the individual benefiting under the MGRP to produce information and documents including certifications and declarations within a time specified by the Commissioner for Revenue in the request itself.

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Cessation of the Special Tax Status under the MGRP

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The following are the methods by which a successful Applicant may cease to possess the special tax status under the MGRP:

• By choice of the Applicant: A successful Applicant may opt to cease to possess the special tax status by notifying the Commissioner for Revenue of his/her intention not to remain in possession of the special tax status from a particular date in the future. Cessation will be effective as from the date indicated in the notification, which date cannot be in excess of three (3) months from the date of receipt of such notification by the Commissioner for Revenue. If no date is indicated in the notification, cessation will have immediate effect.
• By death of the successful Applicant: Following the death of the successful Applicant, such status shall devolve onto the dependant of the deceased Applicant who has either: (a) inherited the qualifying property which was the primary residence of the deceased; or (b) rented a qualifying property immediately after the death of the deceased Applicant. In both cases such dependant needs to satisfy the eligibility requirements above in his/her own right and the special tax status will only devolve to the dependant once documentary proof of such is submitted to the satisfaction of the Commissioner for Revenue;
• By default of the Income Tax Act: An Applicant will cease to possess special tax status with immediate effect, if he/she is in breach of any provisions of the Income Tax Act.
• Where there is a failure in connection with the conditions that need to be satisfied throughout the special tax status: In such a scenario the Applicant will cease to possess the special tax status with retrospective effect as from the date on which the Commissioner for Revenue had determined in writing that such individual qualifies under the MGRP.
  

Power to Request Information

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The Commissioner for Revenue may require the Applicant to produce information and documents, including certifications and declaration in order to ascertain an individual’s entitlement to the right to pay tax at the reduced rate. The indicated documents must be produced within a time specified by the Commissioner for Revenue in the request itself.

Conclusion

The MGRP builds on the success of Malta’s reputation in attracting expatriates seeking an alternative residence base in a warm Mediterranean Island within the European Union. The main benefit for Applicants who intend to reside in Malta and benefit under the MGRP is that a special tax status of fifteen percent (15%) will be applicable.

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Footnote References:

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[1]  An Applicant who has dual citizenship i.e. having citizenship of one of the above jurisdictions and citizenship of another jurisdiction, is precluded from applying for special tax status in terms of the MGRP.
[2]  Where available, certified true copies of any certifications proving that this requirement is satisfied should be attached and submitted together with the application documents.