For the past decade, Malta has increasingly been chosen as the jurisdiction of choice for a number of international players to do their business in Malta. This growth is being driven through a combination of factors being Malta's sound regulatory framework, competent workforce and favourable corporate tax system. Today Malta is at the forefront in a number of industries including software development, digital gaming and other knowledge-based industries. These industries require the availability of human resources – however the local labour force is not currently sufficient to address this resource requirement. Therefore, the qualifying employment in innovation and creativity incentive underpins Malta's strategy in attracting such businesses through a special tax status intended to facilitate the employment of non-residents in the required roles.

Eligible Office

The 15% flat rate of tax may be availed of by individuals employed in an eligible office. An eligible office refers to an employment in a role directly engaged in any of the following three categories:

  1. Industrial Research and Experimental Development, where the employee is in possession of a post graduate degree in sciences or engineering applicable to the role.
  2. Product Development and Product or Process Innovation where the employee is either in possession of post graduate degrees in sciences, engineering, design, creativity, product development or art and that is applicable to the role or has demonstrated a minimum of three years' experience as part of a team engaged in a similar role;
  3. Senior management roles provided that the employee is not a director in the undertaking indicated as his employer and does not control more than 25% of the shares of the undertaking.

Qualifying Income

The 15% reduced rate of tax is applicable in respect of emoluments payable under a contract of employment if the employment activity contemplated therein is an eligible office. The minimum annual amount which may be taxable at 15% is EUR45,000. Furthermore any qualifying income above EUR5,000,000 is not subject to tax in Malta.

The 15% rate of tax is a final tax and cannot be reduced by means of any relief, deduction, reduction, credit or set-off of any kind.

Conditions

In order to be eligible for the reduced rate of 15%, an expatriate must satisfy a number of conditions, including inter alia the following:

  1. Minimum employment income of EUR45,000 (excluding the value of fringe benefits) in respect of the holding of an eligible office.
  2. The employment contract must be in terms of Maltese law and must relate to the exercise of genuine and effective work for the employer to the satisfaction of Malta Enterprise.
  3. Possession of professional qualifications or experience proven to the satisfaction of Malta Enterprise.

    • Furthermore, Malta Enterprise must be satisfied that the expatriate:Is in receipt of stable and regular resources which are sufficient to maintain themselves and their family without recourse to the social assistance system in Malta;
    • 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;
    • Is in possession of a valid travel document;
    • Is in possession of sickness insurance in respect of all risks normally covered for Maltese nationals for themselves and their family;
    • Is not domiciled in Malta.

Furthermore, in order to be eligible for the benefit, besides declaring all emoluments received in respect of a qualifying contract of employment, an applicant is required to declare as chargeable to tax in Malta, all income received from a party related to his employer even where such income is not subject to Maltese tax in accordance with the ITA.

Period of Application

The benefit is available to individuals employed in an eligible office upon the attainment of a formal determination of eligibility issued by Malta Enterprise. No benefit may be claimed in respect to any income received in any year preceding the determination issued by Malta Enterprise.

The 15% tax rate is applicable for a three year consecutive period commencing from the year in which the expatriate takes up residence in Malta and derives income which is subject to tax in Malta. This period may in certain circumstances.

Procedure

Any eligible employees are required to fill in an official application form to determine their eligibility for the scheme for evaluation by Malta Enterprise. On being satisfied that the applicant satisfies the conditions for eligibility, Malta Enterprise will provide the applicant with an Entitlement Certificate confirming the determination of eligibility to the scheme.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.