By virtue of Legal Notice 184 of 2015, the Government of Malta issued new regulations under the Income Tax Act, which, inter alia, provide for an exemption from income tax to beneficiaries who are in receipt of a pension or a widow’s / widower’s benefit from the United Nations.
Furthermore, tax shall be charged at the reduced rate of 15% on any income (except for income and gains arising in Malta) arising outside Malta and received in Malta by the beneficiary, the beneficiary’s spouse and children, following the granting of the special tax status, with the possibility to claim relief of double taxation under the relevant provisions of the Income Tax Act. These rules will apply to both EU and third country nationals, but not to Maltese nationals.
Applying for Special Tax Status
An individual, who is duly represented by an Authorised Registered Mandatary (ARM), may apply to the Commissioner for Revenue for a special tax status in the required form and by making payment of a non-refundable administrative fee of €4,000 upon application.
However, applications in respect of which the property is qualifying owned property situated in the south of Malta or Gozo, the fee shall be that of €3,500, to be paid upon application.
As per Rule 4, the programme defines a beneficiary as an individual who is not a permanent resident nor a long-term resident of Malta and who proves to the satisfaction of the Commissioner for Revenue that:
- the individual is in receipt of a UN pension or a Widow’s / Widower’s Benefit, of which at least 40% is received in Malta;
- he is not a person who benefits under the Residents Scheme Regulations, the Global Residence Programme Rules, the High Net Worth Individuals – EU / EEA / Swiss Nationals Rules, the High Net Worth Individuals – Non-EU / EEA / Swiss Nationals Rules, the Malta Retirement Programme Rules, the Qualifying Employment in Innovation and Creativity (Personal Tax) Rules or the Highly Qualified Persons Rules;
- he is not a Maltese national;
- he holds a qualifying property;
- he is in receipt of stable and regular resources which are sufficient to maintain himself and his dependants without recourse to the social assistance system in Malta;
- he is in possession of a valid travel document;
- he is in possession of sickness insurance in respect of all risks across the whole of the European Union normally covered for Maltese nationals for himself and his dependants;
- he can adequately communicate in one of the official languages of Malta; and
- he is a fit and proper person.
The UN Pensions Programme Rules provide that a “dependent” shall refer to:
- The beneficiary’s spouse or person with whom the beneficiary is in a stable and durable relationship;
- Minor children, including adopted minor children and children who are in the care and custody of the beneficiary or the person mentioned in (1) above;
- Children who are under the age of twenty-five, including adopted children and children who are in the care and custody of the beneficiary or the person mentioned in (1) above. Such children shall not be economically active;
- Children, including adopted children and children who are in the care and custody of the beneficiary or the person mentioned in (1) above, who are not minors but who are unable to maintain themselves because of circumstances of illness or disability of a serious gravity;
- Dependent brothers, sisters and direct relatives in the ascending line of the beneficiary or the person mentioned in (1) above and who are not beneficiaries under the Residents Scheme Regulations, the High Net Worth Individuals – EU / EEA / Swiss Nationals Rules, the High Net Worth Individuals – Non-EU / EEA / Swiss Nationals Rules, the Malta Retirement Programme Rules, the Global Residence Programme Rules, the Qualifying Employment in Innovation and Creativity (Personal Tax) Rules or the Highly Qualified Persons Rules.
Furthermore, the dependent brothers, sisters and direct relatives in the ascending line must reside with the beneficiary in the qualifying property.
Cessation of Special Tax Status
If any of the circumstances referred to below occurs, possession of special tax status for an individual shall cease:
- If such individual becomes a permanent resident or a long-term resident of Malta;
- If he/she becomes a Maltese national;
- If such individual does not hold a qualifying property, including in the case where the said individual lets or sublets the qualifying property holding;
- If the individual fails to receive in Malta at least 40% of the UN pension or Widow’s / Widower’s Benefit as indicated in the documentary evidence submitted to the Commissioner for Revenue;
- If the individual is not in possession of sickness insurance in respect of all risks normally covered for Maltese nationals for himself and his dependants;
- If the individual’s stay is not in the public interest, or
- If the individual stays in any other jurisdiction for more than 183 days in a calendar year.
If the beneficiary opts to acquire immovable property, the value must be of at least €275,000 for a property situated in Malta. However, if the property is situated in the south of Malta or in Gozo, the minimum value is reduced to €220,000.
A beneficiary under the programme has the option of renting instead of buying immovable property. This minimum annual rental payment has to be of at least €9,600 if the immovable property is situated in Malta or €8,750 if in Gozo or in the south of Malta.
The localities considered to be in the South of Malta are listed in the Schedule to the Rules.
Under the programme, beneficiaries shall be exempt from tax in Malta on any UN pension income and widow’s / widower’s benefit which is received in Malta.
Beneficiaries will be subject to a flat rate of tax of 15% on any income excluding the UN pension income and Widow’s / Widower’s Benefit, which arises outside Malta in the year immediately preceding the assessment year and received in Malta by the beneficiary, the beneficiary’s spouse, children and other dependents, with the possibility of granting relief from double taxation under the Income Tax Act.
The minimum annual tax liability payable on any income excluding UN pension income and widow’s / widower’s benefit, which arises outside Malta and received in Malta is of €10,000 in the case of the beneficiary which is increased by an additional €5,000 in the event that both spouses are in receipt of a UN pension.
The minimum tax payable is due in advance every year, and shall be payable before the 30th of April. In the year in which the special tax status is granted, where it is evident that the special tax status will not be granted before the 30th April, the minimum tax is to be paid before the special tax status is granted.
Income of the beneficiary, such beneficiary’s spouse and children arising in Malta will be charged as separate income at the rate of 35%.
The private clients practice at WDM International assists individuals with all their requirements linked to Malta residence, Malta Citizenship and relocation, as well as estate and wealth planning.
WDM Lex Advisory is an ARM and can advise clients in relation to the preparation and submission of the application and the pertinent documentation. Furthermore the firm also assists clients with all their residence and tax planning requirements.
Through WDM Trustees, we may also assist clients in setting up trusts and foundations, which may be professionally managed through our trust practice.
Via our international networks we ensure that there will be no negative tax implications in the client’s original country of residence and / or departing country.