The Malta Retirement Programme (MRP) is a programme aimed at attracting nationals of the EU, EEA and Switzerland who are not in an employment relationship and are in receipt of a pension as their regular source of income. Individuals availing themselves from this Programme may hold a non-executive post on the board of a company resident in Malta. A beneficiary under the program would be prohibited from being employed by the company in any capacity. Beneficiaries may also partake in activities related to any institution, trust or foundation of a public character and any other similar organisation or body of persons, which are also of a public character, that is engaged in philanthropic, educational or research and development work in Malta.
The beneficiary ought to own or rent immovable property, which the individual must occupy as his/her principal place of residence worldwide. In the case of property purchase the following are the pertinent thresholds
- Malta: €275,000
- Gozo: €250,000
The property must be purchased after the 1st of January 2011. Nevertheless, in the event that a property was purchased prior to the 1st January 2011 for an amount which is less than the abovementioned amounts, such property may also satisfy this requirement if the individual declares in his application that the property was bought for less than the amounts indicated above and the said declaration is supported by the following documentation which should be submitted together with the application:
- separate and independent architect valuation of the property; and
- architect’s plan of the property.
Nevertheless, the property ought to have a value which amounts to at least the above values as at the date of application. A certified copy of the final deed of purchase needs to be submitted together with the application.
In the case of rented property, the applicant ought to satisfy the following yearly thresholds:
- Malta: €9,600
- Gozo: €8,750
Moreover, the lease ought to be taken out for not less than a twelve month period, which must be evidenced by a certified lease agreement submitted together with the application.
The applicant must either be:
a) an EU national (excluding a Maltese national); or
b) a national of Iceland, Norway or Liechtenstein; or
c) a national of Switzerland.
Income, Remittance and Minimum Tax Requirements
The applicant must be in receipt of a pension, supported by original documentary evidence. An individual is deemed to be receiving a pension if he is in receipt of:
a) periodic payments paid in respect of past employment. This includes where the services were rendered to a State or political subdivision or local authority of the State; or
b) remunerations paid as lifetime or temporary annuities; or
c) regular income from an occupational retirement scheme, personal overseas retirement plan or insurance policies.
It is fundamental to note that an individual will not be deemed to be receiving a pension if he is in receipt of a lump sum payment or any capital sum received by way of commutation of pension, retiring or death gratuity.
The entire pension declared in the application to be received by the individual in accordance with the documentary evidence must be received in Malta.
Where a pension is not wholly received in Malta the beneficiary cannot apply for the MRP. Furthermore this pension needs to constitute at least 75% of the individual’s Malta chargeable income for any particular tax year.
Therefore for any particular tax year, an individual’s chargeable income needs to be made up of at least 75% pension and 25% of ‘other’ income. All the chargeable income may be constituted of pension income.
An individual who has been granted special tax status in accordance with the MRP will be subject to a tax rate of 15% on any income that is received in Malta from foreign sources by the beneficiary or his dependents. This rate of tax will apply from the date of confirmation of the special tax status which is referred to as the “appointed day” up to “day of cessation of status”. Progressive tax rates are to apply in the days prior to the appointed day or subsequent to the day of cessation of status.
Dependents may be any of the below:
- the beneficiary’s spouse;
- the beneficiary’s unmarried minor children,
- adopted minor children of the beneficiary children who are in the custody of the beneficiary or the spouse and such children are financially dependent on the beneficiary. Financial dependency should be interpreted as meaning that the person needs financial support from the applicant or the spouse in order to meet his/her essential needs and should not be interpreted to mean that the person requires the support from the applicant or the spouse in order to have a certain level of income. Such dependency must have existed immediately before or very recently before the applicant applies for special tax status;
- children of the beneficiary or of his/her spouse who are not minors but who, because of circumstances of illness or disability of a serious gravity are unable to maintain themselves;
- a person with whom the beneficiary is in a stable and durable relationship. Individuals will be considered to be in a stable and durable relationship with the applicant, if, at the time of application, these persons are in a situation of permanent cohabitation, tied by bonds of mutual affection and mutual dependency. Such relationships need to be long-term, committed affiliations. Persons claiming to be in a stable and durable relationship with the applicant must have come to Malta at the same time as the applicant or just before or very recently thereafter.
Other chargeable income of the beneficiary and his/her spouse that is not charged to tax as separate income at the rate mentioned above will be charged to tax at the rate of 35%. This may include bank interest received from a local source or dividends received from a company registered in Malta. As indicated above, this type of income may not exceed 25% of the beneficiary’s chargeable income.
Beneficiaries of special tax status in terms of the MRP will need to pay a minimum tax of €7,500 annually and a further €500 in respect of every dependent and every special carer.
The minimum tax for the first year will be payable not later than the tax return date. In the first year the beneficiary will not be subject to provisional tax. Such beneficiary retains the right to request a claim for relief of double taxation provided that the minimum amount of tax payable by the beneficiary 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 required to be paid as aforesaid, 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 calculated on a pro-rata basis by applying a split-year treatment.
A beneficiary is subject to payment of provisional tax payments in accordance with the Payment of provisional tax rules
Fit and Proper Test
The individual is required to submit an updated police conduct certificate (accompanied with the Apostille Certificate as indicated below) together with by a sworn declaration before a Commissioner for Oaths in Malta confirming whether the individual was not found guilty of any civil or criminal convictions as well as providing a confirmation of any civil or criminal ongoing proceedings. If the individual was found guilty, details of such convictions need to be provided in a separate declaration signed in original by the respective individual.
The applicant must have applied for a Registration Certificate in Malta in terms of the Free Movement of European Union Nationals and their Family Members Order and a copy of the acknowledgement or Residence Card/Document is to be submitted with the application.
The applicant must be in possession of a valid travel document, certified proof of which is submitted together with the application.
The applicant must also be in possession of health insurance which covers himself/herself and his/her dependents in respect of all risks across the whole of the EU normally covered for Maltese nationals.
The individual must not be domiciled in Malta and must not not intend to establish his domicile in Malta within five years from the date of application.
A non-refundable administrative fee of €2,500 needs to be paid upon application by means of a bank draft payable to the ‘Director General (Inland Revenue Department)’.
Applicants under the scheme ought to submit the application for beneficiary status under the scheme, through an Authorised Registered Mandatory (ARM). WDM International is a licensed ARM and may assist clients through pre-application tax planning as well as with the entire application process together with the pertinent annual compliance requirements imposed by the Scheme.