Malta Residency

It is vital to note that the taking up of residency is Malta does not, of itself, shed any previous residency. Frequently it is much harder to dispose of a previous residency than to acquire a new one. Since there is motivation on behalf of an inbound country to make registration as simple as possible and on behalf of an outbound country to keep tax residents as far as possible it is vital to seek advice in the outbound country as well.

Dual Residency
Where residency has not been shedded in the outbound country the result may be dual residency. In cases of dual residency taxes may be apportioned between countries either on a split-year basis or there may be treaties between the countries dealing with the attribution of income or credit in one country given for tax paid in the other. The aim of these treaties is to prevent dual taxation of the same income which is achieved by giving credit for tax paid but this has the effect of negating tax advantage in a lower tax country until previous residency has been shed.

Distinguishing Residence and Domicile
Malta (like the United Kingdom) distinguishes between ‘residency’ and ‘domicile’. The difference is crucial as some taxes are applied to residents only, some to domiciles only and other are applied only to people who are both resident and domicile. Throughout this article unless the contrary is clearly stated we will deal with the needs of non-Maltese nationals who wish to become resident in Malta and who do not wish to become Maltese nationals. The difference between residency and domicile is explained below.

Residence
Residency is determined by where a person was located between any two dates. The tests vary from country to country but are usually straightforward. For example, a person may be resident in country A if they spend more than 90 days in a calendar year in that country. Residency is a matter of fact and can usually be established fairly easily. Residence in Malta is not dependant on day counting and can be considered to be elective however day counting may still be relevant when advice is sought to ensure that the previous residency has been effectively removed.

Domicile
Domicile has been described as the country which is the centre of one’s interest or being. Excepting dual nationality this is likely to be the country which issued the person’s passport. How (and in some cases whether) one can renounce domicile is a matter of debate and varies from country to country. Domicile is generally tied in to taxes over worldwide income and death. In general applications to become Maltese residents will not take up Maltese domicile (indeed in most cases it will not be possible) and most (if not all) of the tax benefits of Maltese residency would be defeated by the taking up of Maltese domicile.

Reasons for a Maltese Residency
The reasons for a change of residency (both tax related and non-tax related) are explored in detail on our main article on residency in the products section. The scope of this article is limited to Maltese residency. The many advantages of Maltese residency are discussed below but include an excellent tax environment and may include freedom of movement in the Schengen area (relevant for non-EU applicants).

Considerations Relating to Maltese Property
If the client holds any Maltese investments or companies or intends to establish and operate local companies their relocation to Malta could have adverse taxation consequences without proper planning. Accordingly where the client has any assets or income in Malta prior to considering relocation it is advisable to seek advice first.

EU Citizens

Workers
Maltese employees are subject to tax on their income if they are resident in Malta and (excepting Maltese nationals) are taxed on income arising in or remitted to Malta, if the income does not arise in Malta and is not remitted to Malta it is outside the scope of Maltese tax. Income tax is charged on a sliding scale up to 35% but since little or no income may be chargeable the effective rate can be much lower or nil. Malta also has one of the lowest social security rates in Europe which is capped at around 3,500 EUR annually (total of employer and employee contributions). An EU citizen can pay their Social Security in any member state and many foreign nationals prefer to pay in Malta. Maltese residency is straightforward for European Union citizens who have a Treaty of Rome right to live and work in Malta without the the need for work permits or residency permits. Malta imposes no restrictions on the movement in or out of capital and if part of the EU no restriction can be imposed by the outbound country either. Generally the only case where local income tax will apply is where a Maltese resident individual is employed in Malta. In these cases the individual may pay either the rates set by the Maltese government or may be able to qualify for a reduced rate of tax under a scheme outlined below.

Highly Qualified Person Scheme
The following scheme may be desirable to persons wishing to be employed in Malta. The Highly Qualified Person Scheme (HQPS) offers a fixed rate of 15% tax to workers fulfilling the following criteria:
1) Employment in an eligible role. Those roles are of the highest executive roles and included the C-suite (CEO, CFO, CIO, COO etc) and similar positions.
2) Subject to a minimum income of 80,000 EUR p.a for calendar year 2013 and revised upwards annually.
3) Subject to approval of the employment contract by a relevant industry regulator.
4) Subject to the approval of the employer as eligible.
Local providers are able to to assist with applications to this scheme including the draft of supporting operational documents and interfacing with local tax agencies.

Non-workers
EU citizens enjoy a Treaty of Rome right to move their residence to any EU member state including  Malta. The only requirement is an address in Malta. In this case tax will be payable on income arising in or remitted to Malta (if any) and the movement of capital is, as always, exempt from taxation in Malta and there is no minimum annual remittance.

Global Residency Programme (GRP), also open to non-EU applicants
The following information reflects very recent changes to residency programmes (last update 1 June 2013) and is based on information currently available in anticipation of a Government Notice to be issued shortly to clarify the operation of the GRP scheme. Between now and then this information should be treated as capable of change and is largely based on the assumption that the GPR will tend to operate along the same lines as the HNWI which it replaces. Distinct from the Treaty of Rome right to settle in Malta entry can also be made under the Global Residence Programme. This scheme replaced the very unpopular High Net Worth Individual (HNWI) Scheme which itself replaced the Permanent Residence (PR), a popular scheme which it is felt was frequently abused. It encourages high net worth individuals to move to Malta and benefit from a flat tax rate of 15% on their remitted income subject to a minimum annual tax payment. Local income under this scheme is charged the same as for Maltese nationals (on a tiered scale to 35%). Persons still on the PR scheme may continue to renew their membership but no new applications are accepted.  Persons on the HNWI scheme should seek advice about their status since they will have already met the minimum qualifications for the GRP scheme and may be able to transfer.

Under the GRP scheme high net worth individuals (both EU and non-EU) can apply for a special tax status in Malta subject to the following conditions:

1) Qualifying property requirement. The applicant must either:
a. Buy a qualifying property for 275k EUR in Malta’s most popular areas or 220k EUR in the South of Malta or the neighbouring island of Gozo; or,
b. Rent a qualifying property for 9,600 EUR annually (or 8,500 EUR in less popular areas or the  neighbouring island of Gozo).

2) Minimum declared income. The applicant must remit an income such that he pays at least 15,000 EUR of income tax in Malta. Remitted income is taxed at 15%. Income arising locally is taxed on the same basis as for residents (above) - a tiered system up to 35%.

3) Valid travel document requirement. The client must have a valid travel document (not applicable to EU applicants).

4) Health insurance. The client must have EU-wide health insurance.

5) Fit and proper. The client must undergo background checks specifically regarding bankruptcy and criminal records.

6) Fluency of Language. The client must be fluent in English (or Maltese). This is based on a declaration and is applicable to non-EU applicants only.  

7) Physical presence. There is no minimum presence requirement however the client will need to visit Malta at least once annually. This scheme may also lead to a residency permit which in turn can give some freedom of movement within the Schengen area making it particularly attractive to non-EU applicants but is irrelevant to EU applicants since they already have this freedom of movement.

HNWI Scheme
The High Net Worth Individuals (HNWI) scheme replaced the defunct PR scheme  (see below) but it is now itself defunct and has been replaced by the Global Residency Program (GRP) see above for more details. The HNWI scheme was extremely unpopular and its replacement removed or lowered its more onerous conditions.

PR Scheme
The Permanent Residency (PR) scheme is a now defunct residency scheme though persons still  on this scheme may continue to renew their membership. Various local advisors can assist people still on this scheme to renew their membership or to transfer to a different type of residency. It was replaced by the unpopular HNWI scheme (see above) which was itself replaced by the GRP scheme. The PR scheme was very popular but its usage was suspended amidst concerns about the low entry requirements and potential for abuse of the healthcare system.

Non-EU Citizens

Non-EU citizens do not have a right to settle or work in Malta and residency therefore depends on the provision of a work permit or special residency status.

Workers

Work permit application
Non-EU migrant workers may be eligible for work permits. Various local providers can offer assistance with the application process and the relocation of workers to Malta which will involve some attempt to find a suitably skilled EU candidate locally before approval will be given. In such cases the interviews etc can usually be handled by local providers without the need for the client to visit Malta.

GRP Scheme
Non-EU workers can apply under the GRP scheme (see above in the EU section for full details) where tax is payable over foreign income only if it is remitted to Malta subject to a high minimum payment and their local income will be subject to tax at a tiered rate up to 35%).  Application under this scheme may lead to the Uniform Residency Permit allowing some freedom of movement in the Schengen area which is explained above.

Non-Workers

GRP Scheme
Non-EU non-workers can apply under the GRP scheme (see above in the EU applicants section for a full description of the process and what additional steps are required by non-EU applicants).  Application under this scheme may lead to the Uniform Residency Permit allowing some freedom of movement in the Schengen area which is explained below. This residency permit is of no interest to EU applicants to the GRP because they already enjoy complete free movement within the EU.

Uniform Residence Permit
The Maltese Uniform Residence Permit (“URP”) affords the holder free movement around the Schengen area (without the need for a visa) for three months in six. URPs are issued subject to Article 4A of the Immigration Act and are, subject to EC regulation 1030/ 2002, in the specified format to be included on the holder's passport in place of a visa. They need to be affixed to the passport of the holder on presentation in person in Malta once every year. They are a European instrument and are available from all member states. The freedom of movement is subject to a restriction that the holder of the URP must not be within the Schengen area (Malta is not counted for the purposes of this calculation since the holder has indefinite leave to remain) for more than three months in any six month period. This means that it will be necessary for the holder of a URP to return to Malta once every year if they wish to move within the Schengen area (not including Malta) on an ongoing basis. Provided, therefore, that the holder of URP does not spend more than three months in a six month period they can travel freely in and out of the Schengen area. In theory each entry into the Schengen area should begin from Malta. However, in practice Schengen states do not concern themselves with point of entry so long as the URP is held and the three months in six months have not been exceeded. This three months in six months rule is enforced and must be observed. The dates of entry and exit to a country are always stamped on the passport so as to identify how long in any six month period the holder has spent in Schengen countries (except Malta). It is important to note that Maltese residency permits afford the holder the right to permanent residency in Malta and so Malta is considered the same as the permit-holders home country (for the purposes of calculating the three months in six rule) and therefore the term 'other Schengen area country' means any country in the Schengen area with the exception of Malta (in which the holder has indefinite leave to remain). It is also possible to obtain residency for family members (spouse and children for example). Costing for the process will depend largely on the specifics of the case in question.

Real Estate
Maltese law restricts the purchase of property to Maltese residents (whether EU or having obtained residency by another route). Non-Maltese residents wishing to acquire property in Malta can do so in designated areas or freely by the registration of a local company or by the obtaining of a permit. Most local law firms can handle property purchase by rates vary greatly and are usually paid as a percentage of the property cost. Local stamp duty, notarial fees and estate agents commission need to be considered and it is beneficial to seek advice before committing to a property purchase to ensure a thorough understanding of all the costs involved.