Zammit, Michael J: Malta Introduces High Net Worth Individuals Rules (January 2012)

Malta has introduced a new set of rules (the ‘HNWI Rules’) which are intended to attract high net worth individuals to take up residence in Malta. As such, individuals eligible to benefit under the HNWI Rules would be taxable in Malta on foreign source income which is received in Malta at the favourable flat rate of 15% (such persons would not be chargeable to tax in Malta on foreign source capital gains). Local source income and gains would be taxable in Malta at the higher rate of 35%.

Eligible individuals would be required to acquire qualifying immovable property in Malta having a value of not less than €400,000 or to otherwise procure such qualifying immovable property under a lease agreement against aggregate rental consideration of not less than €20,000 per annum. The qualifying immovable property must represent the applicant and his/her family’s principal place of residence. Eligible individuals must also be in receipt of stable and regular resources and in possession of appropriate health insurance. Beneficiaries under the HNWI Rules would further be required to, inter alia, reside in Malta for a minimum of 90 days per annum and not stay in any other jurisdiction for more than 183 days.

In addition, a minimum amount of €25,000 (plus €5,000 per dependant) would be payable by way of tax in Malta per annum by a non-EU/EEA/Swiss beneficiary under the HNWI Rules. Such beneficiaries must also be fluent in English or Maltese and would be required to procure and then renew appropriate entry visas or, alternatively, to secure special rights of residence in terms and by virtue of an agreement concluded with the Malta Government (non-EU/EEA/Swiss nationals seeking to become or who are long-term residents in Malta would, however, be required to execute the said agreement). Significantly, a €500,000 Bond would be delivered to the Malta Government upon execution of the agreement. The bond is increased by an amount of €150,000 in respect of each dependant of the beneficiary.

The bond would only be returned to a beneficiary should s/he renounce to the benefits of the HNWI Rules within four years from the date of the agreement. The bond would, accordingly, be forfeited upon the lapse of four years from the date of the agreement should the beneficiary retain his/her status as such under the HNWI Rules. In addition, the bond would be forfeited immediately by an applicant who is a long-term resident (either in terms of domestic regulations or otherwise having resided in Malta legally and continuously for five years) or should the beneficiary intend to become or does actually become a long term-resident prior to the lapse of four years from the date on which s/he applied for the benefits of the HNWI Rules.1

The HNWI Rules have not, strictly speaking, replaced the Malta Permanent Residents Scheme (although no new permits shall be issued under the said scheme). Still, whilst individuals currently in possession of Permanent Residents Permits shall continue to benefit under the latter scheme, they shall additionally be required to:

be in receipt of stable and regular resources which are sufficient to maintain him/herself and his/her dependents without recourse to the social assistance system in Malta;
be in possession of sickness insurance in respect of all risks normally covered for Maltese nationals for him/herself and the members of his/her family.
In addition, the property declared as the Permanent Resident Permit (PRP) holder’s place of residence cannot be occupied by any person other than the holder of the certificate and his/her family members. Furthermore, should the permit holder transfer that property, s/he would be required to acquire a new property having a value at least equal to the minimum value prescribed under the new scheme in respect of qualifying immovable property.

Finally, any individual who applied for a Permanent Resident Permit prior to 14 September, 2011, but who was not issued with such a permit before 1 January, 2011, would be entitled to apply to benefit under the HNWI Rules – should s/he satisfy the eligibility criteria prescribed under the HNWI Rules. Property purchased prior to 14 September, 2011, by any such person for a consideration of not less than €116,000 shall still be treated as a qualifying immovable property for the purposes of the HNWI Rules.

1 The bond would also be forfeited should:

the beneficiary have secured the benefits of the HNWI Rules on the basis of fraud or omission – to the extent that had such fact been known at the time of his/her application, such application would have been refused; or
the beneficiary commit a serious crime in or outside Malta following the grant of benefits under the HNWI Rules – to the extent that had the crime been committed prior to the granting of such benefits, the application for the same would have been refused.