Highly Qualified Persons Rules

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Highly Qualified Persons Rules

22 Jan , 2015  

Malta’s success in securing an increasing number and quality of hedge funds, managers, insurers and similarly regulated entities depends largely on the ability of such entities to attract and recruit highly qualified, experienced and senior professionals available globally.

Tax Planning for High Income Earners

The domestic Malta Highly Qualified Persons Rules (the-Rules) relate to the tax benefits available thereunder to individuals employed to fill senior positions with companies licensed by the MFSA (Malta Financial Services Authority) and the LGA (Lotteries and Gaming Authority). In addition, the tax benefits will also be available to individuals holding an Air Operators’ Certificate issued by Transport Malta within the positions listed hereunder.

Such senior employees may opt to pay tax at the Flat Rate of 15% on employment income derived in respect of work or duties carried out in Malta (or in respect of any period spent outside Malta in connection with such work or duties).

The Malta Highly Qualified Persons Rules by virtue of Legal Notice 306 of 2012 has also been extended to employees in the Aviation Sector. The Eligible employment and offices shall now cover employment with undertakings also holding an Air Operators’ Certificate or an aerodrome licence issued in terms of article 71 of the Air Navigation Order’ issued by Transport Malta.

The Senior Positions specified in the Malta Highly Qualified Persons Rules

  • Chief Executive Officer;
  • Chief Risk Officer (including Fraud and Investigations Officer);
  • Chief Financial Officer;
  • Chief Operations Officer;
  • Chief Technology Officer;
  • Chief Commercial Officer;
  • Portfolio Manager;
  • Chief Investment Officer;
  • Senior Trader/Trader;
  • Senior Analyst (including Structuring Professional);
  • Actuarial Professional;
  • Chief Underwriting Officer;
  • Chief Insurance Technical Officer;
  • Odds Compiler Specialist;
  • Head of Research and Development (including Search Engine Optimisation and Systems Architecture);
  • Head of Marketing (including Head of Distribution Channels);
  • Head of Investor Relations
  • Aviation Accountable Managers
  • Aviation Continuing
  • Airworthiness Inspectors
  • Aviation Flight Operations
  • Inspectors
  • Aviation Training Managers.

Paying Tax on Malta Source Employment Income

In fact, a senior employee would be entitled to opt to pay tax on Malta source employment income at the flat rate of 15% if the senior employee:

(i) is employed to fill a senior position (or to perform equivalent activities) and is in possession of professional qualifications or acceptable professional experience;

(ii) is entitled to remuneration of at least €75,000 (exclusive of the annual value of any fringe benefits) in terms of a contract of employment;

(iii) is in receipt of stable and regular resources which are sufficient to maintain him/herself and his/her family members without recourse to domestic social assistance;

(iv) resides in accommodation regarded as normal for a comparable family in Malta;

(v) is not domiciled in Malta;

(vi) is in possession of a valid travel document;

(vii) is in possession of adequate health insurance;

(viii) does not benefit under alternative incentives available domestically in favour of investment services and insurance expatriate employees;

(ix) is protected as an employee under applicable Maltese laws.

The Terms of the Highly Qualified Persons Rules

In addition, in terms of the Rules, no further Malta Tax would be chargeable in respect of qualifying employment income exceeding €5,000,000.

An individual eligible to opt to pay tax on employment income at the reduced rate of 15% (in terms of the Rules) would be required to apply to the LGA/MFSA for a formal determination confirming eligibility. The eligible individual would then be required to submit a prescribed form (endorsed by the LGA/MFSA) to the local tax authorities together with his/her tax return. The Rules do not apply in respect of individuals who were employed under a contract of employment requiring the performance of duties in Malta for a period exceeding 2 years preceeding 1 January, 2010.

Furthermore, certain additional restrictions apply in respect of EEA and Swiss nationals and citizens of non-EU Member States. Accordingly, the tax benefits under the Rules are available to EEA and Swiss nationals for a maximum consecutive period of 5 years and to non-EU citizens for a maximum consecutive period of 4 years (commencing in the year in which the taxpayer is first liable to tax in Malta). The 5 and 4 year maximum periods would be further reduced in respect of EEA and Swiss nationals and citizens of non-EU Member States who were employed under a contract of employment requiring the performance of duties in Malta up to 2 years prior to the 1st January, 2010. (2 years prior to the 1st January, 2012 for holders of an Air Operators? Certificate issued by Transport Malta.)

No maximum period or additional restrictions are prescribed for the application of the Rules in favour of nationals of EU Member States.

If you are a senior employee filling positions with companies licensed by the MFSA (Malta Financial Services Authority) and the LGA (Lotteries and Gaming Authority), read more to find out about the Tax Benefits pertaining to the recently amended Highly Qualified Persons Rules that have now been extended to persons in certain positions holding an Air Operators’ Certificate issued by Transport Malta.

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