Update in Tax Scheme: The Malta Retirement Programme’s scope extended to Third Country Nationals (TCNs)

Kristine Attard and Dr John Caruana  -  24/March/2020

Malta’s popular Retirement Programme Scheme has become even more alluring as under the recently enacted Legal Notice 69 of 2020, TCNs can now qualify as beneficiaries. The main benefit which arises from this tax incentive is the 15% flat tax rate on any income arising outside Malta that is received in Malta by the beneficiary, and the beneficiary’s spouse, and children, who classify as dependants. As implied from the name of the Scheme itself, in order be categorised as a beneficiary, an individual must be in receipt of a pension constituting at least 75% of his/her chargeable income.

An intriguing aspect of this tax incentive is that a beneficiary is allowed to keep household staff who are employed with him. By virtue of the newly enacted Legal Notice, the criteria which must be met in order for this to apply has become even less stringent as the two-year condition of employment and the requisite that the service is to be provided within the qualifying property has been removed. This is however subject to such conditions that the Commissioner for Revenue may determine in the future.

A significant addition to this Scheme is the introduction of a continuity clause, clarifying what is to happen following the death of a beneficiary. The clause holds that the benefits shall then be granted to the deceased beneficiary’s dependent who has inherited the property that was the primary residence of such beneficiary, or who rents a qualifying rented property, subject that the dependant satisfies the Scheme’s all other requirements.

Notably, an individual who acquires long term residence status or permanent resident status shall no longer be able to benefit from this Scheme and shall be taxable on any income accruing in or derived from Malta or elsewhere (thus, he/she shall be taxable on his worldwide income). In order to make sure that this rule is abided by, the Commissioner for Revenue and the other respective Authorities shall be in constant communication with each other, exchanging information with each other 

Significantly, a beneficiary of this Scheme shall in all cases be subject to a minimum yearly tax of €7,500 in respect of the beneficiary and to a €500 per year of assessment for every dependent and every household staff. Moreover, by virtue of the newly enacted Legal Notice, there has been an increase in the number of schemes from which a beneficiary cannot benefit from in order to apply for his scheme, these being:  

  • the Global Residence Programme Rules;
  • the High Net Worth Individuals – EU/EEA/Swiss  Nationals  Rules; 
  • the High Net Worth Individuals Rules – Non-EU/EEA/Swiss Nationals Rules;
  • the Highly Qualified Persons Rules; 
  • the Qualifying Employment in Aviation (Personal Tax) Rules; 
  • the Qualifying Employment in Innovation and Creativity (Personal  Tax)  Rules; 
  • the Qualifying Employment in Maritime Activities and the Servicing of Offshore Oil and Gas Industry Activities (Personal Tax) Rules; 
  • the Residence Programme Rules; 
  • the Residents Scheme Regulations or 
  • the United Nations (“UN”)  Pensions Programme Rules
Should you have any questions with regards to this scheme, please do not hesitate to contact us accordingly. At KSi Malta, we pride ourselves of having a number of tax and legal experts who can help you with applying for such scheme and with giving you advice as to whether this Scheme is the right one for you.
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