On the 22nd of January the Malta Tax and Customs Administration issued updated tax guidelines in relation to Article 6 of the Income Tax Act applicable to investment services and insurance expatriates.
The aim of Article 6 of the Income Tax Act is to attract to Malta highly qualified individuals to work for investment services and insurance companies licensed and/or recognised by the Malta Financial Services Authority. Provided that certain conditions are satisfied, an investment services or insurance expatriate is eligible for an exemption from tax on a number of personal expenditures paid by the employer on his or his immediate family’s behalf for a period of ten years starting from the first year in which the expatriate became liable to tax in Malta.
These expenditures include:
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Removal costs in respect of relocation to or from Malta,
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Accommodation expenses incurred in Malta,
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Travel costs in respect of visits to or from Malta by the expatriate and his immediate family,
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Provision of a car in Malta,
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A subvention of not more than €600 per calendar month,
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Medical expenses and medical insurance,
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School fees of children.
The election to claim the exemption on the above listed expenditures is at the sole discretion of the employee, however, irrespective of whether the expatriate elects to claim the exemption or not, said expenditures need to be declared in the FS3 as Fringe Benefits.
Article 6 of the Income Tax Act defines an investment services expatriate as any individual who is an employee of, or provides services to an investment services company or to a company whose activities comprise of management, administration, safekeeping, or investment advice to collective investment schemes. On the other hand, an insurance expatriate refers to any individual who is employed, or provides services to an insurance company authorised under the Insurance Business Act, or to an insurance manager as per the Insurance Distribution Act, or to an insurance broking company authorized under the Insurance Distribution Act.
To benefit from the exemption the expatriate has to satisfy the abovementioned conditions, and either:
- not be ordinary resident and not domiciled in Malta; or
- was not resident in Malta for a minimum period of three years immediately preceding the year in which the employment commenced (or the provision of services) and during the said three years the individual was engaged on a full-time basis in a similar position outside Malta.
An additional advantage provided by Article 6 is that the expatriate would be treated as non- resident in Malta for the purpose of Article 12 (1)(c) of the Income Tax Act thereby exempting from tax in Malta any interest, discount, premium or royalties income, as well as gains or profits from the transfer of units in a collective investment scheme, units relating to linked long term business of insurance, interest of a partnership or shares or securities in a company (neither of which is holding immovable property in Malta or rights thereof).
To opt for the exemption from tax under Article 6 of the Income Tax Act the expatriate is required to submit RA32 Form (endorsed by the employer) along with his personal tax return. Benefiting from provisions for Expatriates under Article 6 of the Income Tax Act excludes the possibility for the expatriate to benefit from the the 15% flat tax rate applicable under the Highly Qualified Persons Rules.