SA3 - The Permanent Residence Scheme in Malta

The global financial recession is placing strain on taxpayers’ resources. As a result, Governments have been forced to consider increasing tax rates in the attempt to reduce national deficits. Individuals are therefore considering attractive, cost effective jurisdictions from which to conduct their business affairs. Residents of South Africa also have issues such as their own personal security to take into account.

Malta offers an attractive proposition as a location. This is due to its political stability, temperate Mediterranean climate, generous fiscal policy and membership of the European Union (EU). A 2010 survey by International Living has placed Malta 15th out of 194 countries in terms of quality of life. The survey was based on numerous weighted factors including the economy, environment, climate, safety and health.

The Schengen Agreement

Malta is part of the EU, and party to the Schengen Agreement. Its residents therefore have freedom of movement within the Schengen area, which covers 25 countries in Europe. Residents of Malta can travel through the Schengen area with ease.

This ease of movement is particularly relevant for permanent residents who are non EU passport holders. Ordinarily they would require an additional visa for travel through the Schengen zone.

Additional Advantages Offered by the Jurisdiction of Malta

Malta also has the benefit of having the Euro as its currency, and, as it is situated in the middle of the Mediterranean, it has excellent transport links with the rest of Europe and North Africa.

Relocating to Malta can also provide other benefits, such as sun all of the year round, relatively low cost housing in comparison to other European countries, an excellent health care programme, high standards of education and general fluency in English.

Taxation Advantages of the Permanent Residence Scheme

An option available to individuals considering emigration, is to take up residence in Malta under the Permanent Residence Scheme. Under this scheme:

• The resident is taxed at a flat rate of 15% on all income remitted to Malta, subject to a minimum of €4192.
• Foreign source income which is not remitted back to Malta is not taxable in Malta.

In addition to holding a residence permit, the individual will need to register with the Maltese Inland Revenue Department, who will provide a certificate entitling the holder to the benefits of the scheme.

Conditions of the Permanent Residence Scheme

There are a number of conditions which need to be met for an individual to participate in the Permanent Residence Scheme:

• The individual must buy property in Malta during the first year of residence, at a minimum price of €116,000 (€69,000 in the case of an apartment) or rent property for not less than €4,150 per year (€345 per month).
• The individual cannot obtain employment locally or ply his trade on the local market. Malta must instead be used as a base for international business.
• The individual has to remit income of at least €13,950 annually for himself and €2,300 per dependant (including spouse).
• The individual has to have capital of at least €349,000 outside Malta, or earn a minimum of €23,000 annually from business activities outside Malta.
• The Permanent Residence Permit is renewed habitually on an annual basis. There is no minimum stay requirement.
• The resident does not gain the right to vote in elections held in Malta.

Summary

Malta is an attractive jurisdiction for residency. The climate and EU status are appealing, and a number of tax benefits are available through the Permanent Residence Scheme. In particular for individuals from South Africa, the freedom of movement offered within the Schengen area (25 European countries) can provide an attractive additional benefit.

Additional Information

If you have any questions or require any additional information regarding the permanent residence scheme in Malta, please contact Sean Dowden: sean.dowden@dixcart.co.za or Laurence Binge: laurence.binge@dixcart.co.za.