The Highly Qualified Persons Rules ("the Rules") include specific eligible offices of undertakings in the aviation industry in Malta licensed and/or recognized by the competent authority or with undertakings holding an air operators' certificate issued in terms of the Civil Aviation (Air Operators' Certificates) Act. The competent authority for the Aviation sector is Transport Malta (hereinafter referred to as "the Authority"). The aviation sector is included in the list of specific industries benefitting from these reduced rates of tax, which also include banking, insurance, financial services and i-gaming.
The relevant eligible offices specified in the Rules include the following:
- Chief Executive Officer, Chief Risk Officer (including Fraud and Investigations Officer), Chief Financial Officer, Chief Operations Officer (including Aviation Accountable Manager), Chief Technology Officer, Chief Commercial Officer;
- Portfolio Manager, Chief Investment Officer, Senior Trader/Trader, Senior Analyst (including Structuring Professional), Actuarial Profession, Chief Underwriting Officer, Chief Insurance Technical Officer, Odds Compiler Specialist, Head of Research and Development (including Search Engine Optimisation and Systems Architecture), Aviation Continuing Airworthiness Manager, Aviation Flight Operations Manager, Aviation Training Manager, and Aviation Ground Operations Manager; and
- Head of Marketing (including Head of Distribution Channels,) Head of Investor Relations. In terms of the Rules, expatriates satisfying the definition of a qualifying beneficiary and holding an employment under a qualifying contract of employment in an eligible office in Malta may opt to be subject to tax on such income at a flat rate of tax of 15% as from 1 January 2012, subject to a valid application having been filed with the Authority.
Qualifying contract of employment
A qualifying contract of employment consists of employment income falling under the definition of eligible office which is derived by a beneficiary and is of a minimum value of €75,000 per annum (excluding fringe benefits) and adjusted annually in line with the Retail Price Index (2012: €78,207; 2013: €80,107). Moreover, the Authority is to be satisfied that the employer or any related person to the employer has not benefitted from any business incentive laws or any arrangement in terms of the business incentive laws and is not paid by a person who is related to the employer and who has received a benefit or benefits under business incentive laws or arrangements.
A beneficiary in terms of this scheme is an individual who is not domiciled in Malta, is protected as an employee in terms of Maltese law and who meets these conditions:
- Derives emoluments payable under a qualifying contract of employment, and received in respect of work or duties carried out in Malta or outside of Malta in connection with such work or duties;
- Has proved to the satisfaction of the Authority that he performs activities of an eligible office and that he is in possession of professional qualifications as required by the scheme;
- Declares the emoluments received from the qualifying contract of employment and all income received from a person related to his employer, for income tax purposes in Malta; and
- Proves to the satisfaction of the Authority that the individual is in receipt of stable and regular resources sufficient to maintain himself and his family and is in possession of sickness insurance in respect of all risks covering himself and his family in Malta. Moreover, the individual is required to reside in suitable accommodation in Malta and is in possession of a valid travel document.
There are also specific rules to be satisfied for third country nationals (excluding EEA and Swiss nationals).
Malta tax treatment
Income derived from a qualifying contract of employment in terms of this scheme will be deemed to constitute the first part of the individual's total income and is subject to tax at a flat rate of 15%. The maximum taxable annual income amounts to €5,000,000. Any income exceeding €5,000,000 and received in respect of a qualifying contract of employment is not subject to tax in Malta.
In the case of EEA and Swiss nationals the scheme applies for a consecutive period of five years; whereas for third country nationals the scheme applies for a consecutive period of up to four years (hereinafter referred to as "the duration") after the expiry of which the employment income would be chargeable to tax at standard rates of tax applicable to the individual.
Specifically, in the case of the aviation sector and for the purposes of these new rules, the benefits will only be available to qualifying beneficiaries employed on or after 1 January 2012. A person who exercised employment in Malta prior to 1 January 2012, is not eligible for the scheme.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.