Qualifying Expatriates operating in Digital Products enjoya Malta Reduced Tax Rate
As part of a consecutive number of steps attaining
Malta’s digital economy, and as part of Malta’s Digital Gaming Strategy, as
from 1st January 2012 and through Legal Notice 106 of 2013, Malta has issued
another incentive for expatriates working on the island. This new incentive
covers employees working in development of innovative and creative digital
products who may choose to have their employment income in respect of work
exercised in Malta to be chargeable at a flat rate of 15% tax in lieu of
progressive rates of tax which can be as high as 35%.
There are a number of qualifying criteria that much be
adhered to under this new scheme where such employee must:
- hold a qualifying contract of employment
- hold an eligible office
- submit an application to Malta Enterprise (ME) for its approval
- hold a qualifying contract of employment under which contract one’s employment income is of a minimum of Eur45,000 per annum exclusive of any fringe benefits.
Very important to note that prior approval in writing is
required by ME, which must be satisfied that the employer or a person related
to the employer has not benefitted from any business incentive laws and/or any
arrangement in terms of the business incentive laws.
With reference to what constitutes “an eligible office”
one would need to roles which are directly engaged in the development of
innovative and creative digital products. These include: Chief Executive
Officer, Chief Technical Officer, Chief Creative Officer, Head of Writing, Game
Developer, and Game Director.
There are a number of conditions under the scheme that
must be met. Basically a beneficiary must:
- derive employment income in respect of work or duties carried out in Malta, or in respect of any period spent outside Malta in connection with such work or duties, or on leave during the carrying out of such work or duties;
- be in possession of the requisite qualifications and experience to be able to hold the eligible office;
- be protected as an employee under Maltese law for the purpose of exercising genuine and effective work for or under the direction of someone else and has the requisite adequate and specific competence as approved by ME;
- prove to the satisfaction of ME that he performs the activities of an eligible office;
- declare for Maltese income tax purposes all his income received under the qualifying contract of employment and all income received from a person related to his employer;
- prove to the satisfaction of ME that he is in receipt of stable and regular resources which are sufficient to maintain himself and his family.
- have a sickness insurance policy in place which covers him and his family in respects of all risks while in Malta;
- reside in a suitable accommodation;
- not be domiciled in Malta;
- be in possession of a valid travel document.
If all the above conditions are met, income derived from
a qualifying contract of employment will be deemed to be the individual’s first
part of his income and will be subject to a flat rate of tax of 15% without the
possibility to claim any deductions, relief, set-offs or credits, whether under
a relevant double tax treaty or otherwise. Any income from a qualifying
contract of employment which exceeds Eur5,000,000 will not be subject to tax in
Malta.
Malta has identified growth potential in the digital
gaming arena particularly in view of the strong ICT industry on the island and
the possibility of transferring skills and technology not only from other
existing sectors such as software development or iGaming, but also from other
industries such as film and audiovisual.
These new incentives add on to the attractiveness
of the island in this area. Please contact us for more detais on this incentive.
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