European High Net Worth Individual Residence Application

Published 6 Feb 2015

Background

The Malta High Net Worth Individual (“HNWI”) Scheme is an attractive residence scheme available to individuals from the EU, EEA, Switzerland, Iceland, Norway and Liechtenstein seeking to transfer their tax residence to Malta. 

HNWI residence is suitable for persons seeking to take up fiscal residence in Malta and seeking to exit their home-country tax jurisdiction by satisfying Malta rules on tax residence as well as properly staying out of the fiscal jurisdiction of their home country. 

The following are the salient features of the HNWI Scheme:

 

Tax Treatment

HNWI taking up tax residence in Malta may benefit from a favourable tax status in Malta and the treatment is as follows:

  • No Malta tax would be chargeable on capital gains realised outside Malta even if these are remitted to Malta.
  • No Malta tax would be chargeable on income arising outside Malta which is not remitted to Malta; and
  • Income arising outside Malta which is remitted to Malta would be chargeable to tax in Malta at the flat rate of 15%.
  • Income arising in Malta and capital gains realised in Malta would be taxable in Malta at 35%.
  • Double tax relief is available against any tax liability in Malta subject to the minimum annual tax payments.

A European HNWI would be required to make an annual minimum Malta income tax payment of at least €20,000 plus an additional €2,500 per dependent. (1)

 

Other Tax Considerations

Malta does not levy any wealth taxes or estate taxes or such other duties. However, duty may be chargeable in Malta upon any ‘inter vivos’ or ‘causa mortis’ transfer of immovable property or marketable securities.  Duty payable upon a transfer of immovable property is generally chargeable at the rate of 5% whilst duty is typically chargeable at the rate of 2% upon a transfer of marketable securities.

A HNWI would be entitled to relief of double taxation suffered on income arising outside Malta which is received in Malta. Such relief would be available under a treaty in force between Malta and the country of source of the relevant income (2) or, alternatively, by way of unilateral relief – available in terms of domestic tax legislation.  Treaty or unilateral relief would generally be available in the form of an ordinary credit against the beneficiary’s Malta income tax liability.

 

(1) The minimum Malta income tax payment would be due in full in the year in which the special tax status is granted to a HNWI.

 

Eligibility

  • The applicant must hold a ‘Qualifying Property Holding’ in Malta (minimum value of €400,000 or €20,000 rental per annum).(3)
  • The applicant and his/her family must occupy the above- mentioned immovable residential property in Malta as their principal place of residence and no person other than the applicant and his/her family may reside in the said property.
  • The applicant must be in receipt of stable and regular resources which are sufficient to maintain himself and his dependents without recourse to the local social assistance system.
  • The applicant must be in possession of private health insurance which covers him and his dependents in respect of all risks across the EU.
  • The applicant must not be domiciled (4) in Malta or be a long-term resident.
  • The applicant must be a fit and proper person (a due diligence exercise is carried out by the Inland Revenue Department prior to granting the special tax status).
  • Special reporting obligations (the filing of an annual return together with the annual tax return) and notification must be complied with.

 

Residence Period

There is no requirement for a minimum period of residence in Malta.  The individual should ensure that he/she is not deemed tax resident in any other jurisdiction that could lead to dual tax residence and additional taxes outside of Malta.

 

Procedure For Application

  • An application seeking confirmation of the special tax status of a HNWI together with a ‘fit and proper person’ questionnaire may only be submitted to the local tax authorities by an Authorised Registered Mandatory such as JTC.
  • A non-refundable one-off registration fee of €6,000 must be paid.
  • An applicant need not be the owner or lessee of a Qualifying Property Holding in Malta at the time of application.

 

Cessation of Special Tax Status

A HNWI or beneficiary may opt to cease to possess the special tax status by notifying the local tax authorities of his/her/their intention not to remain in possession of the special tax status from a particular date in the future.

 

(2) Malta has a large and expanding double tax treaty network currently in force.  Malta currently boasts numerous double tax treaties, including treaties with all EU Member States.

(3) The property need not be acquired or leased at application stage.

(4) Domicile is a common law concept that takes into account the individuals’ long term connections with a country and their intentions.  It is possible to be resident in one country and retain domicile in another.

 

Emigration / Immigration Planning

We can help HNWIs who are planning to relocate.  Leaving one country/jurisdiction and taking up residence in another often offers the opportunity to structure their financial affairs in a way which reduces exposure to taxation in the new jurisdiction whilst at the same time establishing holding structures in order to maximize privacy.  A trust or a foundation structure often lies at the core of such structures and we work with a client’s tax advisors to develop a solution that is effective for their personal circumstances when they are planning to take up residence in Malta.

 

 

This publication is intended to provide an overview of the subject matter and is not comprehensive in nature or to be construed as legal or tax advice. We recommend that clients seek professional advice on any particular matter.

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