Transfer of Residence: Immigrating into Malta
By: Hans J. Hoegen Dijkhof

General information about Malta

Malta is situated below Sicily and consisting of the islands of Malta and Gozo in so far as relevant here. The surface is ± 316 square km. and the number of inhabitants is ± 390.000. The gross product in EURO is ± 4,6 billion and is 53% per caput as a percentage of the EU average. The employment ratio is 4,5%. Malta might become a member of the European Union. According to polls half of the population is supporting this, while one quarter is rejecting this. Malta is a former British Crown Colony which became independent in 1964. In 1974 the Mintoff Government declared the Independent Republic of Malta. The last 10 years, the island experienced a spectacular growth. On this basis, the present conservative government of Prime-Minister Fenech Adami, would like to become member of the EU. According to the EU, there are shortcomings in the field of hunting, births and fowl and in the field of the environment. There are also too many exemptions in the VAT system and imbalances in the income tax system. Social security has not yet reached the EU level. Furthermore, there should be some reforms in administration and judiciary. The European Commission also urges the Maltese Government to liberalize the economy and stop supporting ship building. Malta itself is desirous to limit second residences for foreigners.

Applicable regime: the 1988 Permanent Residence Scheme

The 1988 Permanent Residence Scheme was designed to attract non-resident individuals wishing to settle down or retire to Malta. Over the years, however, this Scheme has also generated much interest amongst business people and high net worth individuals who travel frequently and accordingly spend virtually little time in their home jurisdiction, specifically from an international tax planning point of view.

It is only possible for a person of a foreign nationality to reside in Malta beyond three months if an employment license has been issued in his favor or, alternatively, if he is the holder of a Residence Permit issued in his favor under section 7 of the Immigration Act (Cap. 217) in terms of this Scheme.

The Maltese Permanent Residence Scheme 1988 offers a number of incentives to holders of a Residence Permit issued in terms of the Scheme, namely:

A flat 15% Income Tax rate applies to any foreign-source taxable income that the Permit holder receives or remits to Malta – a minimum of Lm 1,000, net of double tax relief, must be paid on annual basis by way of Income Tax. There is no obligation on the Permit holder to remit all his foreign-source income to Malta – such obligation applies limitedly to the equivalent of Lm 6,000 of his income plus an additional Lm 1,000 per dependant on an annual basis

Capital gains arising outside Malta and remitted to Malta will not be chargeable to tax in Malta provided the Permit holder does not become domiciled in Malta

Any capital brought into Malta that is not spent by the Permit holder and any income earned from it may be repatriated to his home jurisdiction. In addition, the Permit holder may repatriate any proceeds arising from the sale of his Maltese residence, if any

Household, personal effects, furniture and other domestic items may be imported free of duty and VAT if imported within six months from the date of taking up of residence by the Permit holder

A Permit holder is only required to visit Malta once, namely for his/her passport to be stamped. He/she is not required to spend any amount of time a year actually resident in Malta; he/she may freely travel to and from Malta.

Conditions for Application for a Permanent Residence Permit

Any foreigner, of whatever nationality, may submit an application for a Permanent Residence Permit provided the following specific conditions are satisfied:

Applicant is in receipt of an annual income equivalent to Lm 10,000 or is otherwise in possession of capital equivalent to Lm 150,000

Applicant is to annually remit to Malta income equivalent to Lm 6,000 in his respect, and Lm 1,000 in respect of each of his dependants

Applicant must either purchase property valued at not less than Lm 50,000 (Lm 30,000 in the case of an apartment), or lease/rent property for not less than Lm 1,800 per annum. Twelve months after taking up residence in Malta, the Permit holder will be required to produce evidence that he/she has complied with this condition. While he/she may invest capital in Malta, investments in real estate are limited to one owner-occupied house or apartment, with the exception of acquisitions of immovables situated in designated areas

Applicant must not exercise any occupation or profession, hold any appointment, seek employment or engage in any form of business in Malta unless an employment licence is applied for and obtained

Procedure and documents needed and steps to be taken.

For info contact: Hans J. Hoegen Dijkhof

Senior Partner Hoegen Dijkhof Advocaten B.V.
Advocates & Procurators with the District Court and Court of Appeals at Amsterdam
Members of the Amsterdam Bar and the Dutch Bar
Members of the International Bar Association
Member of NVBA (Nederlandse Vereniging van Advocaten - Belastingkundigen (Dutch Association of Advocates-Tax Experts)
Member of The Offshore Institute
Members of IAG International, a Worldwide Association of Independent Professional Firms
Members of the International Business Law Consortium

Hoegen Dijkhof Advocaten B.V.
Amsterdam. The Netherlands
HD@HD-DUTCHLAWYERS.NL