The Malta Retirement Programme (MRP) is a programme designed to attract both European Union (EU), and non-EU citizens who are not employed and are in receipt of a pension as their regular source of income. The MRP is considered to be a residence tax scheme as successful applicants are subject to tax at a flat rate of 15% on foreign-sourced income with the possibility of claiming double tax relief. As is the case with all residence cards granted by the Government of Malta, successful applicants of the MRP are able to travel across all Member States of the EU without the requirement of obtaining a visa.
The professional team at RC International offers advice and consultation on all legal and tax implications arising in connection with the MRP.
For an individual to be able to apply for this beneficial tax scheme he or she must already have a fixed address in Malta. In this respect, the MRP requires an applicant and his or her dependants to occupy such property as their principal place of residence worldwide. The property investment can be made in either Malta or Gozo in the form of a purchase or lease.
Applicants may either purchase:
• A property with a minimum purchase price of €275,000 in Malta; or
• A property with a minimum purchase price of €250,000 in Gozo
Alternatively, applicants of the MRP may either:
• lease a property in Malta for a minimum yearly lease of €9,600; or
• lease a property in Gozo for a minimum yearly lease of €8,750
Applicants must be in receipt of a pension which must be supported by original documentary evidence. An individual is deemed to be receiving a pension if he is in receipt of:
i. periodic payments paid in respect of past employments; or
ii. remunerations paid as lifetime or temporary annuities; or
iii. regular income from an occupational retirement scheme, personal overseas retirement plan or insurance policies.
An individual will not be deemed to be receiving a pension if he is in receipt of a lump sum payment or any capital sum received by way of commutation of pension, retirement or death gratuity. The MRP Rules also stipulate that the pension must be received in Malta. Furthermore, this pension needs to constitute at least 75% of the applicant’sMalta chargeable income for any given fiscal year. Therefore, for the purposes of clarity, the applicant’s chargeable income is required to be made of at least 75% pension and 25% of ‘other’ income.
The MRP rules requires the applicant to be in possession of health insurance covering himself or herself and his or her dependants in respect of all possible risk and hazard across the EU. The cover is expected to be similar to the standard cover of a Maltese National. The health insurance policy must be procured from a company licensed in Malta by the Malta Financial Services Authority or by an international health insurance company of a reputable standing.
Fit and Proper Test
The MRP Rules further impose an obligation on the Commissioner of Inland Revenue to conduct a due diligence exercise on the applicant and his or her dependants. The fit and proper test is required to establish the applicant’s reputation. In particular, verifications are made as to whether the applicant has been subject to any criminal investigation related to terrorism, money laundering, crimes against humanity and child abuse.
The MRP Rules are also limited to applicants that are not domiciled in Malta and, furthermore, do not intend to establish their domicile in Malta within 5 years from the date of the application. This condition is generally satisfied by means of a written declaration signed by the applicant..
Foreign Source Income
An individual, who has been granted special tax status pursuant to the MRP, will be subject to a tax charge of 15% on any income that is received in Malta from foreign sources by the applicant and his or her dependants.
Dependants may be any of the below:
• the applicant’s spouse;
• a person with whom the applicant is in a stable and durable relationship.
Individuals will be considered to be in a stable and durable 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;
• the beneficiary’s unmarried minor children;
• adopted minor children of the applicant;
• children who are in the custody of the beneficiary or the spouse and such children are financially dependent on the beneficiary;
Financial dependency implies that the person requires financial support from the applicant or the spouse in order to meet his or her essential needs. It does not cover persons that require support from the applicant or spouse to obtain a certain level of income. Additionally, 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 spouse who are not minors but who, owing to circumstances related to illness or disability of a serious nature are unable to maintain themselves.
Income Arising in Malta
Other chargeable income of the applicant and his or her dependants that is not charged to tax as separate income at the rate mentioned above will be charged at a tax rate of 35%. This may include bank interest received from a local source or dividends received from a company registered in Malta. As indicated above, this type of income may not exceed 25% of the beneficiary’s chargeable income. Individuals benefiting from the MRP may hold a non-executive post on the board of a company that is resident in Malta. They may also partake in activities related to any institution, trust or foundation of a public character and any other similar organisation or body of persons, which are also of a public character, that is engaged in philanthropic, educational or research and development work in Malta.
Individuals holding a special tax status pursuant to the MRP will need to pay a minimum tax of €7,500 annually and an additional €500 in respect of every dependent and every special carer. The minimum tax for the first year will be payable not later than the tax return date. The applicant further retains the right to request a claim for double taxation relief in terms of the Income Tax Act, provided that the minimum amount of tax payable by the individual is as delineated above.
An application for special tax status under the MRP rules may only be submitted to the Commissioner of Inland Revenue through the services of a person that qualifies as an Authorised Registered Mandatory. A non-refundable fee of €2,500 applies for every application submitted.