The Malta Retirement Program (MRP) is a program to attract nationals of the EU, EEA, and Switzerland. They are not in an employment relationship and receive a pension as their regular source of income. Individuals availing themselves of this Program may hold a non-executive post on the board of a company resident in Malta. A beneficiary under the program would be prohibited from being employed by the company in any capacity. Beneficiaries may also partake in activities related to any institution, trust, or foundation of a public character and any other similar organization or body of persons, which are also of a general nature engaged in philanthropic, educational, or research and development work in Malta.

PROPERTY REQUIREMENT

The beneficiary ought to own or rent immovable property, which the individual must occupy as his/her principal place of residence worldwide. In the case of property purchase, the following are the pertinent thresholds.

• Malta: €275,000
• Gozo: €250,000

The property must be purchased after 1st January 2011. Nevertheless, suppose a property was purchased before the 1st of January 2011 for an amount that is less than the abovementioned amounts. In that case, such property may also satisfy this requirement if the individual declares in his application that the property was bought for less than the amounts indicated above. The said declaration is supported by the following documentation, which should be submitted together with the application:

• separate and independent architect valuation of the property; and
• architect's plan of the property.

Nevertheless, the property should have a value that amounts to at least the above matters as the application date. A certified copy of the final deed of purchase needs to be submitted together with the application.

In the case of rented property, the applicant ought to satisfy the following yearly thresholds:

• Malta: €9,600
• Gozo: €8,750

Moreover, the lease ought to be taken out for not less than a twelve-month period, which must be evidenced by a certified lease agreement submitted together with the application.

NATIONALITY REQUIREMENTS

The applicant must either be:

• an EU national (excluding a Maltese national); or
• a national of Iceland, Norway or Liechtenstein; or
• a national of Switzerland.

INCOME, REMITTANCE, AND MINIMUM TAX REQUIREMENTS

The applicant must receive a pension supported by original documentary evidence. An individual is deemed to be receiving an assistance if he receives of:

• Periodic payments paid in respect of past employment. This includes where the services were rendered to a State or political subdivision or local authority of the State; or
• remunerations spent as lifetime or temporary annuities; or
• regular income from an occupational retirement scheme, personal overseas retirement plan, or insurance policies.

It is fundamental to note that an individual will not be deemed to be receiving a pension if he receives a lump-sum payment or any capital sum received by way of commutation of pension, retiring, or death gratuity.

The entire pension declared in the application to be received by the individual following the documentary evidence must be received in Malta.

Where a pension is not wholly received in Malta, the beneficiary cannot apply for the MRP. Furthermore, this pension needs to constitute at least 75% of the individual's Malta chargeable income for any particular tax year.

Therefore, for any particular tax year, an individual's chargeable income needs to be made up of at least 75% pension and 25% of 'other' income. All the chargeable income may be constituted of pension income.

TAX TREATMENT

An individual who the MRP has granted special tax status will be subject to a tax rate of 15% on any income received in Malta from foreign sources by the beneficiary or his dependents. This tax rate will apply from the date of confirmation of the special tax status, which is referred to as the "appointed day" up to "day of cessation of status". Progressive tax rates apply on the days before the appointed day or after the day of cessation of status.

Dependents may be any of the below:

• the beneficiary's spouse;
• the beneficiary's unmarried minor children,
• adopted little children of the beneficiary children who are in the custody of the beneficiary or the spouse, and such children are financially dependent on the beneficiary. Financial dependency should be interpreted as meaning that the person needs financial support from the applicant or the spouse to meet their essential needs and should not be construed to indicate that the person requires permission from the applicant or the spouse to have a certain level of income. Such dependency must have existed immediately before or very recently before the applicant applies for special tax status;
• children of the beneficiary or of his/her spouse who are not minors but who, because of circumstances of illness or disability of a severe gravity are unable to maintain themselves;
• a person with whom the beneficiary is in a stable and durable relationship. Individuals will be considered in a sturdy and long-lasting relationship with the applicant if, at the time of application, these persons are in a situation of permanent cohabitation, tied by bonds of mutual affection and mutual dependency. Such relationships need to be long-term, committed affiliations. Persons claiming to be in a stable and durable relationship with the applicant must have come to Malta simultaneously as the applicant or just before or very recently after that.

Other chargeable income of the beneficiary and their spouse that is not charged to tax as separate income at the rate mentioned above will be charged to tax at 35%. For example, this may include bank interest from a local source or dividends from a company registered in Malta. However, as indicated above, this type of income may not exceed 25% of the beneficiary's chargeable income.

Minimum Tax

In terms of the MRP, beneficiaries of special tax status will need to pay a minimum tax of €7,500 annually and a further €500 for every dependent and every particular carer.

The first year's minimum tax will be payable no later than the tax return date. The beneficiary will not be subject to provisional tax in the first year. Such beneficiary retains the right to request a claim for relief of double taxation provided that the minimum amount of tax payable by the beneficiary is as provided above.

If the tax payable according to the tax computation (including any credit for relief of double taxation) is such that it is less than the minimum tax required to be paid as aforesaid, the amount to be paid will be the said minimum.

In the year when the special tax status is confirmed or canceled, the minimum tax will be calculated on a pro-rata basis by applying a split-year treatment.

PROVISIONAL TAX

A beneficiary is subject to Payment of provisional tax payments following the Payment of temporary tax rules.

FIT AND PROPER TEST

The individual is required to submit an updated police conduct certificate (accompanied with the Apostille Certificate as indicated below) together with a sworn declaration before a Commissioner for Oaths in Malta confirming whether the individual was not found guilty of any civil or criminal convictions as well as ensuring any civil or criminal ongoing proceedings. If the individual was found guilty, details of such convictions need to be provided in a separate declaration signed in original by the respective individual.

IMMIGRATION REQUIREMENTS

The applicant must have applied for a Registration Certificate in Malta regarding the Free Movement of European Union Nationals and their Family Members Order. In addition, a copy of the acknowledgment or Residence Card/Document will be submitted with the application.

OTHER REQUIREMENTS

The applicant must have a valid travel document, certified proof of which is submitted together with the application.

The applicant must also have health insurance which covers themself and his/her dependents in respect of all risks across the whole of the EU typically covered for Maltese nationals.

The individual must not be domiciled in Malta and must not intend to establish his domicile in Malta within five years from the date of application.

ADMINISTRATIVE FEE

A non-refundable administrative fee of €2,500 must be paid upon application using a bank draft payable to the 'Director General (Inland Revenue Department)'.

Applicants under the Scheme should apply for beneficiary status through an Authorized Registered Mandatory (ARM). Promethean is a licensed ARM and may assist clients through pre-application tax planning, the entire application process, and the applicable annual compliance requirements imposed by the Scheme.