ARTICLE
7 February 2024

Updated Tax Guidelines On Article 6 Of The Income Tax Act

On 22 January 2024 the Commissioner for Tax and Customs published updated guidelines in terms of Article 96(2) of the Income Tax Act (ITA)...
Malta Insurance

On 22 January 2024 the Commissioner for Tax and Customs published updated guidelines in terms of Article 96(2) of the Income Tax Act (ITA) in relation to Article 6 ITA Investment Services and Insurance Expatriate ("Expatriate").

Background

Investment Services Expatriate

The objective of Article 6 ITA is to attract to Malta highly skilled insurance and investment expatriates to work for companies licensed under Article 6 the Investment Services Act (ISA) or a company which is recognized by the relevant Competent Authority for the purposes of Article 9A ISA and whose activities solely comprise the provision of:

  • Management,
  • Administration,
  • Safekeeping, or
  • Investment advice to collective investment schemes as defined in ISA.

Insurance Expatriate

An Insurance Expatriate refers to an individual who is an employee or provides services to:

  • an insurance company authorized under Article 7 of the Insurance Business Act,
  • an insurance manager as defined in Article 2 of the Insurance Distribution Act, and
  • a company carrying on the business of insurance broking under Article 12 of the Insurance Distribution Act.

The Expatriate must either be:

  • not ordinarily resident and not domiciled in Malta, or
  • was not resident in Malta for a minimum period of three years immediately preceding the year in which he commences such employment with or provides services to any investment services company or insurance company as aforesaid and provided that during the said three years such individual has been engaged on a full-time basis in a similar position outside Malta.

The Tax Benefits

The expatriate is eligible for exemption from tax on the following personal expenses paid on his behalf or on behalf of his immediate family by the employing investments services company or insurance company:

  • removal costs in respect of relocation to or from Malta,
  • accommodation expenses incurred in Malta,
  • travel costs in respect of visits to or from Malta by the expatriate and his immediate family,
  • provision of a car,
  • a subvention of not more than €600 per calendar month,
  • medical expenses and medical insurance,
  • school fees of respective children.

The exemption from tax can be availed of for a period of ten years commencing in the first year in which the expatriate is liable to taxation in Malta.

Such payments incurred by the employer on behalf of an employee are normally taxed in the employee's hands as Fringe Benefits. The expatriate however may opt to avail of the exemption of the mentioned expenses paid for him by the employer. Whether the expatriate elects to claim the exemption or not, any expenses paid by the employer on behalf of the expatriate, or their immediate family need to be declared in the FS3 of the expatriate as fringe benefits in terms of the Fringe Benefits Rules, S.L. 123.55 of the Laws of Malta.

Where the expatriate claims the exemption, an employer will not be obliged to withhold tax that would have resulted under the Fringe Benefit Rules.

Additional Benefits

Since the expatriate is treated as non-resident in Malta for the purposes of Article 12 (1)(c) ITA he will be exempt from tax on income from:

  • interest, discount, premium or royalties,
  • gains or profits from the transfer, or on a transfer of any rights over:
    • any units in a collective investment scheme, as defined in Article 2 of the ISA,
    • any units relating to linked long term business of insurance,
    • any interest in a partnership which is not a property partnership,
    • any shares or securities in a company which is not a property company.

Such benefits shall continue to apply for the duration of the expatriate's employment in Malta.

Claiming the Exemptions – Form RA 32

The return attachment form RA 32 duly endorsed by the employer certifying that:

  • it is an investment services company or an insurance company satisfying the conditions in Article 6,
  • the amount of personal expenses paid on behalf of the expatriate and his immediate family are shown as Fringe Benefits in the expatriate's FS3.

An expatriate deriving income subject to tax under Article 4(1)(b) ITA being emoluments payable under a qualifying contract of employment may not benefit from the provisions outlined in the Highly Qualified Persons Rules S.L.123.126.

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.

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