In October 2022, Malta Enterprise and the Residency Malta Agency ("the Agency") have jointly launched the Malta Start-Up Residence Programme ("Programme") for third country nationals wishing to invest in Malta. The new Programme seeks to attract non-European Union and non-EEA entrepreneurs who wish to set up innovative start-ups and scale-ups in Malta. The Programme also seeks to support such entrepreneurs' and their family's immigration process in Malta.
Under the Programme, Malta Enterprise and the Agency will closely be monitoring the business and economic viability of the start-up's approved projects.
The Programme offers a three-year residency permit to third-country nationals wishing to invest in Malta through start-up enterprises. The Programme is open to founders of the start-up company and their family members, as well as to core employees of the enterprise.
After the three-year residency period ends, the beneficiaries of the Programme will be able to further renew their residency for five years. This, provided that their start-up is still in business and that the beneficiaries still meet the eligibility requirements they applied under.
Core employees will also have the option of renewing their permit for an additional three years.
The Programme pertains to start-ups operating in the manufacturing, software development, industrial services analogous to manufacturing, health, biotech, pharmaceuticals, and life sciences, or eco industries.
Start-ups which operate other innovative economic activities, enabled through knowledge and technology and which provide services or products which are not readily available in the relevant market, or which shall be provided through a novel process may also fall within the remit of the Programme.
As per the Guidelines issued by the Agency, the start-up would have to meet a further set of eligibility criteria, including:
- The start-up must be fully incorporated and registered in Malta, and must not be registered outside of Malta for more than seven years; and
- The start-up must not have been formed through a merger, acquired the business of another start-up or distributed dividends; and
- The start-up either needs to place €25,000 in tangible investments or have a paid-up share capital of €25,000 or more; and
- If the start-up has more than four co-founders, the start-up must have an additional €10,000 in either tangible investment or paid-up share capital per additional founder; and
- The start-up must not have more than six co-founders.
Moreover, individuals applying under the Programme must satisfy the following requirements:
- They must have a physical presence in Malta, in that they are living and paying their taxes in Malta; and
- They have a concrete intention to develop and expand their business in Malta; and
- They are the founder, co-founder or a core employee of the enterprise; and
- They are in possession of sufficient financial resources to support themselves and their families; and
- They have sufficient health insurance coverage in Malta for themselves and their families; and
- They do not have previous applications for residence or citizenship status rejected in Malta or abroad, and do not have a criminal record or pending criminal charges against them.
Tax Implications in Malta
Considering that the Programme requires a prospective applicant to have tangible presence in Malta by way of paying taxes, it would be pertinent to note that tax status in Malta is based on two major principles: domicile and residence.
In brief, the domicile of a person is based on the intention to permanently reside in a place. Domicile usually follows the person's country of origin. That is, where the person was born or where their parents were born. On the other hand, a person may also opt to acquire a domicile of choice, if they can prove that they do not intend to return to their domicile of origin and permanently reside in the country of the domicile of choice.
Residence in turn requires physical presence in Malta, and tax residency is generally determined based on whether a person has resided in Malta for at least 183 days in a calendar year. Residence may also be determined according to the person's personal, social, and economic ties with Malta.
Third country nationals residing in Malta would generally be considered as being non-domiciled and resident in Malta and would thus be taxed on a source and remittance basis of taxation.
Accordingly, they would be taxed on all income arising in Malta, regardless of where the income is received, and will be taxed at the resident progressive rates of tax which are capped at 35%. However, income arising outside of Malta would not be taxed in Malta even if it is received in Malta. Any capital gains arising outside of Malta would not be taxed in Malta even if they are received in Malta, given that such capital gains are not used to support day-to-day expenses such as living expenses.
Should a person not be considered as being resident in Malta for tax purposes, such person would be taxed on a territorial basis. In this case, Maltese tax would be due on only that income arising in Malta.
It is also to be noted that any eligible employees working with start-ups licensed or recognised by the relevant authorities in Malta may also qualify under the Highly Qualified Persons Rules, and benefit from a 15% flat tax rate in certain circumstances.
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.