Malta: A Package Deal Catering For Everyone
It is well known that for decades Malta has been a jurisdiction of choice for the shipping community. However, the ongoing changes to the domestic and international legislation have made Malta all the more prominent, even outside the shipping industry.
The truth of the matter is that Malta has worked for some time now at placing itself in a position where it is considered to be a financial hub, with a range of financial services that goes beyond shipping. Today Malta’s financial services industry includes many sectors such as aviation, corporate structures, i-gaming, funds, tax advisory, residency and citizenship together with all the ancillary services. Whilst mention of the financial services industry does not necessarily bring to mind services such as residency, the truth of the matter is that each and every one of these sectors has an innate and intricate financial aspect which has become the main driver for opting for Malta.
Yet Malta has gone further. It is all well and good to promote Malta as a safe country with a mild climate all the year round and a relatively low cost of living but we all know it takes a lot more to attract the brightest and finest to relocate. It is with this constantly in mind that legislative incentives are being implemented in Malta. Reference to a ‘holistic approach’ has been used to often in various industries that it has lost its importance. However the fact of the matter is that Malta has become such an attractive jurisdiction due to a holistic approach being taken in all industries. It is the sum of many Governmental policies and legislative enactments being developed over two decades, with one clear goal in mind that has led to this point.
From a personal income tax perspective, Citizenship and Residency programmes have been setup to compliment corporate tax incentives already in place and in effect for years. Ultimately the goal is to entice companies and their people to relocate to Malta lock, stock and barrel. Granted some people may only relocate for a few years but the fact of the matter is that for that period of time those persons are subject to tax in Malta and the effective place of management of the company they work for is Malta.
The Citizenship programme (known as Individual Investor Programme or ‘IIP’) was inaugurated in 2013 by Identity Malta, the authority set up by the Government to oversee the programme, and has seen since a significant influx of applications. The acquisition of Maltese citizenship, which is possible only via an Accredited Agent, is an attractive option for third country nationals as, upon naturalization, they are granted with the right to live, work and study in any of the 28 EU countries and Switzerland and gain visa-free access to 166 countries, including the EU and Canada. These advantages are further enhanced by the substantial tax benefits, both on corporate as well as individual level, envisaged under the Maltese regulatory status quo.
There are also various residency programmes to speak of but just to mention two; I will make reference to the Highly Qualified Persons (HQP) Rules and the Global Residence Rules. Given the expansion and modernisation of Malta’s economy, the conscious decision was taken by the Government to attract knowledgeable and experienced personnel in industries such as the financial services sector where expertise was either in short supply or lacking. This gave rise to the Highly Qualified Persons Rules aimed at attracting highly qualified persons to occupy ‘eligible office’ with certain types of companies. ‘Eligible office’ comprises employment in positions such as, Actuarial Professional; Chief Executive Officer; Chief Financial Officer; Chief Commercial Officer; Chief Investment Officer; Head of Investor Relations; amongst others. In essence, individual income from a qualifying contract of employment in an ‘eligible office’ is subject to tax at a flat rate of 15% as long as the requirements are satisfied.
On the other hand, the Global Residence Rules were implemented to allow an individual who has been granted special tax status in accordance with the these Rules, to be subject to a rate of tax of 15% on any income that is received in Malta from foreign sources.
When the effective rate of tax of a company can be brought down to 5% and the company’s personnel have the potential of being subjected to a rate of tax of 15%, all within the bounds of EU legislation, the whole package becomes very attractive. It offers the much needed stability to those stakeholders that face uncertain economic times. It also becomes an attractive jurisdiction for those stakeholders attempting to tap not only the EU but also the Commonwealth market (with the combined gross domestic product of the latter’s member countries being predicted to reach US$14 trillion by 2020). It becomes a cost effective, less bureaucratic yet well-regulated entry point into the EU. Therefore, the question that bids an answer is not ‘why Malta’ but rather ‘why anywhere else other than Malta?’
Disclaimer: The content of this article is intended to provide a general guide to the subject matter and should in no way be construed as advice. Specialist advice should be sought about your specific circumstances.