Malta Retirement Programme

The Malta Retirement programme (MRP) is a programme intended for nationals of the EU, EEA and Switzerland who are not in an employment relationship and are receiving a pension as their steady source of income. Individuals who are to benefit from this programme may acquire a non-executive position on the board of a company residing within Malta. This signifies that the beneficiary may not be employed by the company in any circumstance.

However, individuals may participate in projects associated to any foundation, trust or institution of a public character, including similar organisations or body of persons that are of a public character, involving philanthropic, research and development or educational work in Malta.

I. Who May Apply?
II. Procedure for Application
III. Tax Treatment
IV. Special Carer
V. Changes in circumstances that have an effect on the minimum tax payable
VI. Annual Tax Return
VII. Cessation of Special Tax Status
VIII. Power to request information
IX. Abuse of Rights

I. Who May Apply?

Those who are eligible for the application must meet all of the requirements of the Malta Retirement Programme listed below:

1) Owns or rents a secure property in which the individual resides within as his primary place of accommodation worldwide. The standards of the property needed are as follows:

a) Owned:

i. Malta: €275,000

ii. Gozo: €250,000

The property needs to have been purchased after 1st January 2011. Although, if the proper documentation is submitted with the application, property that has been bought before 1st January 2011 for a smaller amount than the above-mentioned may suffice, if the individual states in the application that the property was purchased for a total smaller than the amount shown above and is confirmed by the documentation listed:

• A valuation of the property, carried out by an unrelated and impartial architect; and
• Architect’s plan of the property.

The Commissioner for Revenue may permit a surveyor, office or architect to complete and open access to the fixed property until the worth of the property is validated.

Along with the application, a verified copy of the final deed of purchase must be submitted.

b) Rented:i. Malta: €9,600 annually;ii. Gozo: €8,750 annually

A lease no less than a twelve month period must be obtained and confirmed by a certified rental contract to then be submitted in conjunction with the application.

If the property is being rented fully furnished or otherwise, this needs to be indicated in the lease agreement. As well as any independent agreement in regards to furnishing etc and their respective amounts are to be attached in the application form.

Depending on the individuals situation, the final deed or the lease agreement, must provide complete information of the buyer or tenant, relating to the circumstances. In the instance of an individual: the full name and surname, identity card number or passport and residential address must be provided. In the occurrence of buyers / tenants that are not individuals, the details required include name, income tax registration number, company registration number as well as registered address.

2) Is not a recipient of the following tax Regulations:

a) Residents Scheme Regulations;

b) High Net Worth Individuals Rules; or

c) Highly Qualified Persons Rules .

Although, under the terms of Malta Retirement Programme, an individual is able to resign to the advantages provided under any of the aforementioned Rules before the application submittance.

3) Is either:

a) an EU National (excluding a Maltese National); or

b) a national of Iceland, Liechtenstein or Norway; or

c) a national of Switzerland

4) Is in possession of a pension which the original documentary evidence supports. This is determined by:

a) consecutive payments paid in regards to past employment. This also includes services to a State or political subdivision or local authority of the State; or

b) rewards paid as temporary or lifetime annuities; or

c) constant income from job-related insurance policy, personal overseas retirement plan or retirement scheme

If the individual collects a lump sum of payment or any capital sum in compensation of pension, retiring or death gratuity the individual will not be classed as receiving a pension.

This pensions needs to comprise of at least 75% of the individual’s Malta declarable income for any tax year, if the pension is not stated in it’s entirety in the application according to the documentary evidence and is not received completely in Malta, the beneficiary may not apply. This means that for any tax year, an individuals declarable income must consist of at least 75% pension and 25% of ‘other’ income. All of the declarable income may comprise of the pension income.

5) Certified proof in the form of a valid travel document must be submitted along with the application.

6) All applicants including their dependents must submit together with their application, an EU health insurance that Malta is signatory to. In the case that the applicant is unable to receive EU health rights or rights under a Reciprocal Agreement that Malta is entitled to, the health insurance must be obtained by an organisation licensed in Malta or by an international reliable health insurance company and a legitimate copy of the policy must be submitted along with the application documentation.

7) Is not residing within Malta during this time or within five years from the moment of application.

8) Is a respectable and healthy person. The applicant must present a police conduct certificate (along with the Apostille Certificate shown below) as well as a confirmed statement before a Commissioner for Oaths in Malta determining whether the individual was not found guilty of any criminal convictions. If by chance, the individual was found guilty, details of such proceedings must be signed and submitted on a separate statement. The Commissioner is allowed the right to ask further questions.

9) Has attached a copy of a Residence Card/Document or acknowledgment of an application for a Registration Certificate in Malta in terms of the Free Movement of European Union Nationals and their Family Members Order (S.L.460.17).

II. Procedure for Application

An application may only be submitted for an MRP to the Commissioner of Revenue once it has been passed through an Authorised Registered Mandatory (ARM), this can only be authorised once Part 1 of the application has been completed.

If public documents are to be produced in Malta but are performed in a country other than Malta in regards to the Malta Retirement Programme Rules, they need to be submitted with an Apostille Certificate in terms of the Hague Convention of 5th October 1961 Abolishing the requirement of Legalisation for Foreign Public Documents. Public documents are as follows:

a)  notarial acts;

b) administrative documents

c) any documents from an authority or an official linked to the courts or tribunals of the State;

d) official certificates that have been signed, dated and authorised by persons in their private capacity as well as notarial authentications of signatures

In the instance that the  aforementioned Convention has not been signed by an authorised person, the document must be officiated by a Notary or Lawyer (who must also declare the professional institute or association to which s/he belongs).

The individual must take into account that an application for an MRD will only be validated if signed and presented by the Authorised Registered Mandatory.

An Authorised Registered Mandatory is a person that:

• holds a warrant to practice as an advocate or legal procurator under the Code of Organisation and Civil Procedure; or
•  has been selected notary public in regards to the necessities of the National Profession and Notarial Archives Act; or
• holds a warrant to practice as an accountant under the Accountancy Profession Act; or
• is a member of the Malta Institute of Taxation; or
• is a member of the Financial Services Practitioners;
• is a member of the Malta Institute of Management; or
• is a member of the Malta Institute of Accountants;

or who is registered with the Commissioner for Revenue under the MRP of having owned at least 75% (directly or indirectly) by persons in possession of the aforementioned criteria.

A. Where to apply:

Applicates must submit their applications and supporting documentation to the International Tax Unit at the following address:

Commissioner for Revenue

International Tax Unit

MFSA Building

Notabile Road

Attard

BKR 3000

The envelope should state “Application: Malta Retirement”

B. Administrative Fee:

An administrative fee of €2,500 must be paid upon application by way of a bank draft payable to the ‘Director General (Inland Revenue Department)’, this fee is non-refundable.

C. Step-by-step procedure of the application process:

A Director General (Inland Revenue Department) will then check the submitted application to confirm its entirety along with a notice of primary residence that is completed and signed by the applicant. A letter is then sent to the relevant ARM determining whether any documents are missing, and a letter of intent is issued that will be valid for twelve months. Once all documents have been confirmed by the Commissioner of Revenue and a certified true copy of the registration certificate is issued by the Department of Citizenship and Expatriate Affairs, the special tax status will be established.

Any incorrect or misleading information can delay the process and may be deemed as untrustworthy and is considered very serious. Full and accurate information is required and if in doubt as to how much detail to provide, always opt for more.

III. Tax Treatment

Once granted special tax status the beneficiary is liable to a rate of fifteen cents (0.15) on every euro that is classed as income received in Malta from foreign sources by the beneficiary or his dependents (see below) and begins from the date of confirmation up until the day of termination of status. Previously established tax rates are to continue until the date of confirmation or succeeding to the day of termination of status.

Dependents are classified as any of the below:

• the beneficiary’s spouse;
• person with whom the beneficiary is in a steady and long-lasting relationship –

This is seen to be a relationship where the person has lived permanently with the individual in a long-term, committed relationship and must have entered Malta at the same time, just before or very recently after the applicant.

• adopted minor children of the beneficiary;
• the beneficiary’s unmarried minor children;
• children who are in the custody and financial dependency of the beneficiary or the spouse;

This means that the person needs financial support from the beneficiary or spouse, not in regards to obtain a certain level of income and must have begun immediately before or very recently before the application.

• children who are not minors but who unable to maintain themselves due to illness or disability.

None of the above individuals may be beneficiaries under the Residents Scheme Regulations (S.L. 123.79), High Net Worth Individuals – EU / EEA / Swiss Nationals Rules (S.L. 123.129), the High Net Worth Individuals Rules – Non-EU / EEA / Swiss Nationals Rules (S.L. 123.130) or Highly Qualified Persons Rules (S.L. 123.126).

Any other chargeable income such as, dividends received from a company registered in Malta or a bank interest received from a local source by the beneficiary or his spouse that are not accounted to tax as separate income at the rate above can be charged to the tax rate of thirty five cents (0.35) on every euro. As mentioned earlier, this income can not exceed 25% of the applicants chargeable income.

A. Minimum Tax

The minimum tax payable by the beneficiary  is seven thousand five hundred euro (€7,500) annually and an additional five hundred euro (€500) for every dependent and every special carer and cannot be paid any later than the tax return date. However, Provisional Tax (see below) will not be included in the first year.

If the minimum amount of tax payable is provided, the beneficiary is able to request relief of double taxation under Article 74 9a) and (b), Income Tax Act.

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. As the minimum tax payable according to the Rules indicate a minimum remittance of €50,000 [€7,500 / 15% = €50,000]. In view of the requirement that the pension needs to constitute at least 75% of the individual’s chargeable income, as a corollary to this, the pension received and remitted needs to be at least €37,500 [€50,000 * 75%]. 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.

B. Provisional Tax

Payment of Provisional Tax (P.T.) Rules are to be adhered to by the beneficiary in regards to payment of provisional tax payments.

IV. Special Carer

A. Who may be a special carer?

A special carer is an individual who has been providing substantial and regular, curative care and has been in service for a minimum period of three years, has been established on regular basis for an extended period of time or a new carer has been required recently. This must be regulated by a contract of service.

B. Tax Treatment

In any case, the carer must register with the appropriate tax authorities in Malta and is subject to the rates set out in Article 56(1) and is unable to benefit from the 15% tax rate.

C. Working in Malta

If by chance, the special carer is in need of a work permit due to being a third country national they may be issued one by the Employment and Training Corporation (ETC) in Malta. The guidelines set out by the ETC are accessed by the link below:

http://etc.gov.mt/etc-portal/page/3/ELU-Guidelines.aspx

In this case, the application for special tax status must include a letter addressed to the Department Manager (Employers Services), sent no later than fifteen days from the date of the application, with details of the individual/s requesting a work permit to be issued. This letter will then be supported by the International Tax Unit and submitted to the ETC by the ARM,

V. Changes in circumstances that have an effect on the minimum tax payable

If there are any changes to the amount of dependents or carers of the beneficiary he must notify the ARM who in turn will inform the Commissioner within four weeks of the change.

VI. Annual Tax Return

An Annual Tax Return must be submitted by the individual in question as well as an annual declaration and any material changes that may affect the special tax status.

The Commissioner may request any information including  certifications and declarations from the individual to ensure that they may correctly  benefit from this tax treatment.

If a person creates a false declaration or statement in any documentation submitted to the Commissioner he is liable to all penal provisions in the Income Tax Management Act as well as the Criminal Code.

VII. Cessation of Special Tax Status

A. By choice of the beneficiary:

It is possible for the beneficiary to terminate the special tax status by informing the Commissioner for Revenue and such termination will take place either from the date indicated by the individual which may not be any later than three months from the date of issue or if no date is specified, termination will take effect immediately.

B. By default of the Income Tax Acts:

In the unfortunate event that the beneficiary has breached any of the conditions of the Income Tax Acts, they will forfeit special tax status with instant effect. These breaches include:

• regular adherence to agreements are not followed, such as tax evasion and misrepresentation;
• failure to produce information requested by the Commissioner for Revenue in time.

If the beneficiary, for any reason, is no longer represented by an Authorised Registered Mandatory, he needs to appoint another Mandatory and must advise the Commissioner for Revenue as soon as possible, otherwise the agreements under the Income Tax Acts cannot be fulfilled.

C. Where there is a failure in connection with the conditions that need to be satisfied throughout the special tax status:

If the Commissioner for Revenue  deems the conditions below are no longer being met, the individual surrenders all special tax status effective from the date determined by the Commissioner in writing. The special tax status will be discontinued if the beneficiary:

a) does not own an eligible property at any time after the arranged day; or

b) becomes a Maltese national; or

c) does not remain a citizen of an EU Member of State, Iceland, Liechtenstein, Switzerland or Norway; or

d) fails to obtain in Malta all the pension stated in the documents submitted to the Commissioner; or

e) if himself or his dependents are not in ownership of sickness insurance in regards to the risks usually covered by Maltese nationals; or

f) if he establishes his residence in Malta

g) possesses a permanent residence certificate in terms of Article 7 of the ‘Free Movement of European Union Nationals and their Family Members Order’; or

h) if the Minister of Justice believes the beneficiary’s stay is seen as not to be in the public interest. This includes such situations as:

• interests of public safety;
• national security;
• the protection of public order;
• public health or morals;
• territorial integrity

i) if the individual resides within Malta for less than the stated amount of time which is ninety days a year averaged over five years or 450 days out of any 1,825 day period. This must be shown by adequate evidence via day to day living expenses such as bank statements, transaction documents, bills, receipts for electricity as well as travel records of trips into and out of Malta amongst others; or

j) stays in another territory for more than 183 days in a calendar year, if so the beneficiary needs to declare this in the Annual Tax Return.

If the beneficiary fails to notify the Commissioner through his/her ARM within four weeks of knowing of this event, the individual must pay an administrative penalty of €5,000.

The Minister responsible for Finance has the ability to declare a failure in regards to any of the conditions above, however, if the Minister is made aware of the failure within the four weeks, they are able to pardon the failure if the individual provides the following:

• an adequate explanation that it was due to unforeseen circumstances; and
• adequate proof that all efforts were used to prevent the failure.

More importantly, if the beneficiary or the ARM decides to place responsibility of the failure on another person to remedy, this is as seen as insufficient proof that all efforts were made to prevent the failure and may not be the reason for a failure due to unforeseen circumstances.

VIII. Power to request information

The Commissioner for Revenue has the right to request any information or documents, including certifications and declarations for the purpose of determining whether an individual qualifies for the right to pay tax at the reduced rate indicated in 3 above, these documents must be presented within a time frame stated by the Commissioner in the request.

IX. Abuse of Rights

If an individual claims the reduced tax benefits that they are not entitled to, the Commissioner for Revenue may issue an assessment in terms of Article 31 of the Income Tax Management Act.