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Malta’s residence is a reasonable solution for tax planning: peculiarities of the program

19 November 2018

EU residence is a prestigious and profitable long-term option for prosperous businessmen who aim to protect themselves and their businesses and search for the opportunity to quickly change their tax residence in case of unforeseen circumstances in the sphere of tax legislation. Malta noticeably distinguishes itself from the numerous countries providing this opportunity.

Malta’s temporary residence, permanent residence and citizenship: peculiarities

Since the year 2013, Malta’s Government has worked actively on attracting high net worth individuals to the country. At the moment, Malta has several official programs that allow one to receive Malta’s temporary residence, permanent residence or citizenship by investment.

  1. Individual Investor Program (IIP) is a fast way to obtain EU citizenship in exchange for one-time investment in Malta’s economy.
  2. Malta Global Residence Program (GRP) allows applicants to receive temporary resident status by purchasing or renting immovable property and paying a minimum annual tax corresponding €15,000.
  3. Malta Residence and Visa Program (MRVP) allows applicants to receive permanent resident status by purchasing or renting immovable property and additionally investing in the government stocks of the country.

The term of document processing both for temporary and permanent residence is quite short — 2-3 months for MRVP, and 3-4 months for GRP. But it will take one from 12 to 14 months to receive Malta’s citizenship. It is clear that the cost of Malta’s passport is noticeably higher than that one of temporary or permanent residence document. The applicant must make a non-refundable contribution of at least €650,000 in the state fund. However, this status provides numerous advantages: the opportunity to live and work in the countries of the European Union, the opportunity to travel without visa to 167 countries around the globe and the right to register a business in Malta under reduced tax rates.
One should take into consideration that passport issuance under IIP (by one-time investment) is carried out according to quota limitations (1,800 permits). Meanwhile, the demand for this program increases every year.
According to the data of The Third Annual Report of the Government of Malta regarding the IIP, 723 citizenship application forms were filed within the period from the program launch to June 2016. Sixty (60) applicants were rejected. From July 2015 to June 2016, the number of those who submitted applications reached 450. The majority of program participants came from Europe.

Malta’s citizenship is in high demand especially among the British people: only within the first half of the year 2017, 492 people filed applications. This number exceeds the number of applications submitted in 2016. The Prime Minister of Malta Joseph Muscat alleges it might be due to Brexit voting results.

5 major benefits of Malta’s temporary residence and special tax status

  1. Minimum €15,000 annual tax for total world income. Malta’s tax legislation makes the country attractive to large business owners. The country has signed over 60 agreements with other states in order to avoid double taxation. Annual income tax rate is only 15% of the income received outside Malta. The minimum amount is €15,000 per year. There is no capital, property, inheritance or gift tax, as well as dividend, interest and royalty tax.
  2. Quick change of tax residence.
  3. Visa-free travel across the Schengen Area.
  4. No requirements to reside in the country permanently. However, one should avoid living in other jurisdiction for more than 183 days per year.
  5. Malta’s residence is received within just 3 months. The application process for a temporary residence status takes from 3 to 4 months and doesn’t require long-term preparations.

How much does it cost to obtain the resident status?

How much financial resources does it take to receive residence? The major part of the expenses will go to purchasing or renting immovable property. If you decide to purchase a real estate object, the minimum investment should be at least €275,000 for the property located in the north or in the center of Malta and €220,000 for the property located in the south of the country or in Gozo. Another option, least expensive, is to rent property. To meet the program’s rules, one needs to rent a real estate object in the north or in the center of Malta for at least €9,600 per year, while in the south or in Gozo for at least €8,750.
Apart from purchasing or renting real estate, one must fulfill several other conditions:

  1. Acquire medical insurance covering treatment expenses in all the EU countries.
  2. Pay a one-time registration fee – €6,000 (when renting or buying property in the south of the country, the amount is €5,500).
  3. Pay annual income tax on earnings from work performed outside Malta. The minimum amount, however, is €15,000.

There are also some limitations. A real estate object can be used only by the applicant and the applicant’s family members. That is why one shouldn’t count on renting out the purchased property. In order to keep the special tax status, one must own or rent property.

It is profitable to invest in real estate in Malta

Even if your major goal is to obtain a travel document to move across Europe or to create a “safe haven” in a EU country, it’s still good to know if it’s worth investing in Malta’s real estate. Will one be able to sell the purchased property after a while and multiply the income at the same time? Let’s see the advantages of purchasing a villa or another residential property in Malta:

  1. Constant grown of the real estate market — in 2014-2016, Malta was among the leading European countries in terms of the market growth speed. In the last quarter of 2016, the prices on real estate rose by 4.9% in comparison to the same period of the previous year. Rent rates are also skyrocketing.
  2. Experts forecast a housing boom due to high living standards in the country, GDP growth and low unemployment level.
  3. The demand for property is rising, however, land for construction in the center of the island is almost used to maximum. It would also lead to gradual price increase.
  4. In big cities, such as Valletta or Mdina, the existence of numerous sightseeing places limits the opportunity to build new objects. This is why the existing real estate items will be getting more expensive, and the investment will eventually pay off.

Malta offers houses within various price categories. In the majority of cases, luxurious resort real estate like villas, bungalows, townhouses are being purchased to meet the requirements for a residency. A two- and four-bedroom house in a small quiet town would cost €400,000-600,000. Small villas in popular resort towns, such as Sliema, St Julian’s, Valletta, High Ridge, Victoria Gardens, Mellieha, Madliena, located at a certain distance from the beach, cost approximately €500,000-900,000, while a price tag for bigger houses would be around €1,000,000. Beach-front real estate objects would cost on average €2,000,000. For two- and three-story houses of the luxury segment with a sea view, swimming pool and yacht berths one will need to pay at least €7,000,000.

Main conditions of Malta’s residency program

The process of obtaining residence usually takes not more than 3 months. For the successful outcome, the applicant must have all the means required for investment and must also be and act in compliance with the following criteria:

  1. Not banned or restricted from entering the USA, Canada, Great Britain and the EU countries.
  2. Not under any investigation and don’t have any criminal record.
  3. Has proof of the licit origin of his or her income.
  4. Has good credit history and untarnished reputation both in personal life and in business.
  5. Is not a politically exposed person (PEP) — a person holding a senior position in political office and therefore subjected to constant attention of the media.
  6. Has a medical insurance.

Apart from the main applicant, his/her relatives can also apply for the resident status: husband or wife, children under the age of 25 (provided that they are not married and are financially dependent on the applicant) and parents over 55 years of age. So Malta’s program is a reasonable solution for those who seek a comfortable place for the whole family.

4 simple steps for obtaining Malta’s residence

The process of receiving resident status is clear and simple:

  1. Signing an agreement with a licensed immigration agent.  Experts will provide all the required advisory services, will help one to choose the program and will conduct free-of-charge test to estimate the applicant’s chances to receive a ‘yes’ for a submitted application. In order to sign the agreement, the applicant will need to provide scanned copies of the foreign-travel passports of all the program participants.
  2. Submission of documents. To file an application, one should collect all the required documents first: passports and birth certificates of all the applicants, non-conviction certificates (for the persons aged 16 and above), marriage certificates or divorce certificates, military records and documents proving financial dependence on the applicant. It is also required to prepare the documents regarding the financial state of the main applicant and health condition of all the applicants involved. The documents should be filled in using the English language or must be submitted together with a certified translation.
  3. Due diligence.
  4. Receiving a residence permit. After the application has been approved, the applicant needs to fulfill the program conditions and make the required investments in real estate or stocks. Having provided the purchase and sale agreement and other documents, you will receive Malta’s residence and a special tax status.

Malta’s residence is a unique opportunity at a reasonable price

Malta’s residence opens doors to great opportunities: to live in the European country with a pleasant climate, travel without visa across Europe and have special tax status. One should also keep in mind high standards of medical and educational services in Malta. Tax optimization is another reason to consider this country for residence. All this makes it desirable and prestigious for one to obtain the official status in the country, be it either temporary or permanent residence, or citizenship.

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