Highly Qualified Persons Rules, 2011

L.N. 106 of 2011

INCOME TAX ACT

(CAP. 123)

Highly Qualified Persons Rules, 2011

IN exercise of the powers conferred by articles 56(21) and 96 of

the Income Tax Act, the Minister of Finance, the Economy and

Investment has made the following rules

(1) The title of these rules is the Highly Qualified Citation and

coming into

Persons Rules, 2011.

force.

(2) These rules shall be deemed to have come into force on the

1st January, 2011.

(Rules 2 and 13)

Eligible employments and offices

Employments with companies licensed and/or recognised

by the competent authority consisting in the following

employments or offices

(a) Chief Executive Officer, Chief Risk Officer, Chief

Financial Officer, Chief Operations Officer, Chief Technology

Officer,

(b) Portfolio Manager, Chief Investment Officer, Senior

Trader/Trader, Senior Analyst (including Structuring Professional),

Actuarial Professional, Chief Underwriting Officer, Chief Insurance

Technical Officer,

(c)

Head of Marketing, Head of Investor Relations.

(1)

In these rules, unless the context otherwise requires: Interpretation.

"the Act" means the Income Tax Act;

"artificial arrangement" shall include an arrangement in terms of

which a beneficiary receives any benefit or payment, in whatever

form, from a person who is related to his employer and such

beneficiary does not declare for tax purposes such benefit or payment

in Malta or is not liable to tax on such income in Malta;

"business incentive laws" includes the Malta Enterprise Act and Cap. 463.

the Business Promotion Act;

Cap 325.

"Commissioner" means the Commissioner of Inland Revenue;

"competent authority" means the body referred to in article

12(1) of the Financial Institutions Act;

"eligible office" is an employment or office listed in the

Schedule;

"professional qualifications" means qualifications attested by

evidence of education qualifications or, by way of derogation, when

provided for by national law, attested by at least five years of

professional experience of a level comparable to education

qualifications and which is relevant in the profession or sector

specified in the work contract or binding job offer;

"education qualification" means any diploma, certificate or

other evidence of formal qualifications issued by an educational

establishment attesting the successful completion of a post-secondary

education programme, namely a set of courses provided by an

educational establishment recognised as a education institution by the

State in which it is situated. An education qualification shall be taken

into account, on condition that the studies needed to acquire it lasted

at least three years;

"professional experience" means the actual and lawful pursuit of

the profession concerned;

"public interest" includes the interests of public safety, the

protection of public order, national security, territorial integrity,

public health or morals;

"rights acquired under this law" means the right to elect to pay

tax at the reduced rate of tax contemplated in article 56(21) of the Act

and these rules;

"these rules" shall include the provisions of article 56(21) of the

Act and the rules contained in these Rules;

"third-country national" means any person who is not a citizen

of the European Union within the meaning of Article 20 of the Treaty

on the European Union and the Treaty on the Functioning of the

European Union.

(2) A person shall be deemed to be related to a body of

persons if

(a)

that person and the body of persons are, directly or

indirectly, controlled or beneficially owned to the extent of

more than twenty-five percent (25%) by the same persons; or

(b) that person owns, directly or indirectly, more than

twenty-five percent (25%) of the ordinary share capital or

voting rights of the body of persons.

(1) Income from a qualifying contract of employment

qualifies under these rules when it is received by a beneficiary and

consists in income subject to tax under article 4(1)(b) of the Act

(exclusive of the annual value of any fringe benefits) of a minimum

of €75,000 and consists of emoluments from an eligible office.

(2) A qualifying contract of employment shall be considered

to be such if the employment activity contemplated in the contract of

employment is an eligible office.

(3) Income shall not be construed to be income from a

qualifying contract of employment if it is paid by the employer who

has received a benefit or benefits under business incentive laws or

arrangement in terms of the business incentive laws or is paid by a

person who is related to the employer who has received a benefit or

benefits under any business incentive laws or arrangement in terms of

business incentive laws.

A beneficiary is an individual who meets all of the Beneficiary.

following conditions

(a)

he is an individual who derives income subject to

tax under article 4(1)(b) of the Act, being emoluments payable

under a qualifying contract of employment, and received 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;

(b) he is protected as an employee under Maltese law,

irrespective of the legal relationship, for the purpose of

exercising genuine and effective work for, or under the direction

of, someone else, is paid, and has the required adequate and

specific competence, as proven to the satisfaction of the

competent authority;

(c)

he proves to the satisfaction of the competent

authority that he is in possession of professional qualifications;

(d) he is not a person who has benefitted under article 6

of the Act;

(e)

he fully discloses for tax purposes and declares

emoluments received in respect of income from a qualifying

contract of employment and all income received from a person

related to his employer paying out income from a qualifying

contract as chargeable to tax in Malta;

(f)

he proves to the satisfaction of the competent

authority that he performs activities of an eligible office; and

(g) he proves to the satisfaction of the competent

authority that

(i) he is in receipt of stable and regular resources

which are sufficient to maintain himself and the members

of his family without recourse to the social assistance

system in Malta;

(ii) he resides in accommodation regarded as

normal for a comparable family in Malta and which meets

the general health and safety standards in force in Malta;

(iii) he is in possession of a valid travel document;

(iv) he is in possession of sickness insurance in

respect of all risks normally covered for Maltese nationals

for himself and the members of his family; and

(v)

he is not domiciled in Malta.

(1) When an individual exercises the option available

under article 56(21) of the Act in respect of a year of assessment, the

minimum amount of income which shall be chargeable to tax at the

reduced rate provided for in that sub-article in respect of that year of

assessment shall be deemed to be €75,000

Provided that the minimum amount of income of €75,000

shall be adjusted annually in line with the Retail Price Index as

published in the Gazette by the National Statistics Office

Provided further that should income from a qualifying

contract of employment exceed the sum of €5,000,000, no further tax

would be charged on income from a qualifying contract of

employment in excess of €5,000,000

Provided also that the rate of 15% shall apply without

possibility to claim any relief, deduction, reduction, credit or set-off

of any kind. Notwithstanding the generality of foregoing, a

beneficiary shall be allowed deductions of tax under article 23 of the

Income Tax Management Act.

(2) The option available under article 56(21) of the Act may

not be exercised in respect of any year of assessment preceding the

year of assessment 2012.

(1) Subject to the provisions of rule (7), the option

available under article 56(21) of the Act shall, with respect to EEA

and Swiss nationals, apply for a consecutive period of five years

commencing from the year preceding the first year of assessment in

which that person is first liable to tax under the provisions of the Act.

(2) Subject to the provisions of rule (7), the option available

under article 56(21) of the Act shall, with respect to third-country

nationals, apply for a consecutive period of four years commencing

from the year preceding the first year of assessment in which that

person is first liable to tax under the provisions of the Act.

(3) Rights acquired under this law shall be deemed to have

been withdrawn with immediate effect if the grant of benefits under

these rules and the beneficiary’s stay in Malta are not in the public

interest.

(4) Rights acquired under this law shall be deemed to have

been withdrawn with retrospective effect if a beneficiary is a third-

country national and he either -

(a)

physically stays in Malta, in the aggregate, for more

than 1,460 days; or

(b) directly or indirectly acquires real rights over

immovable property situate in Malta or holds a beneficial

interest directly or indirectly consisting in, inter alia, of real

rights over immovable property situated in Malta.

(1) The option available under article 56(21) of the Act Persons already

may not be exercised by any person who was employed for a period in Malta.

exceeding two years preceding the 1st January, 2011, under a contract

of employment requiring the performance of his duties in Malta.

(2) A person referred to in rule 6(1), who is an EEA or Swiss

national who up to two years before the entry into force of these rules

was employed under a contract of employment requiring the

performance of his duties in Malta, shall benefit from these rules for

not more than three consecutive years commencing from the year of

assessment 2011. In the event, that such an EEA or Swiss national

would have been employed as aforesaid for up to one year, such

person shall benefit under these rules for not more than four

consecutive years commencing from the year of assessment 2011.

(3) A person referred to in rule 6(2), who is a third-country

national who up to two years before the entry into force of these rules

was employed under a contract of employment requiring the

performance of his duties in Malta, shall benefit under these rules for

not more than two consecutive years commencing from the year of

assessment 2011. In the event that such a third-country national

would have been employed as aforesaid for up to one year, such

person shall benefit under these rules for not more than three

consecutive years commencing from the year of assessment 2011.

(1) Where any person, in order to obtain benefits under

these rules, makes use of artificial arrangements, the Commissioner

shall, by order in writing, determine the liability to tax of the said

person, for any year of assessment, in such manner and in such

amount as may be necessary, in the circumstances of the case to

nullify benefits obtained under these rules. A person who disagrees

with an order served upon him as aforesaid shall have the same rights

to object to that order and to appeal from a decision of the

Commissioner refusing that objection as if that order were an

assessment issued under the Income Tax Management Act and the

relevant provisions of that Act relating to objections and appeals shall

apply mutatis mutandis

Provided that if any person claims a benefit under these

rules when that person was not entitled to the said benefit, such

person shall be liable to pay a penalty equal to the amount of benefit

claimed and if the benefit was in fact paid to him that person shall in

addition be liable to repay the benefit received and to additional tax of

seven per cent per month or part thereof commencing from the month

in which the said benefit was paid to him up to the month in which he

repaid the benefit and any payment made by the said person in respect

of the tax repayable by him in terms of this proviso shall first be

applied against any additional tax due thereon

Provided further that liability to pay additional tax in terms

of the preceding proviso shall not be applicable when the person

referred to therein proves that he has acted in good faith.

(2) For the purposes of this rule, ‘benefit’ shall mean the total

tax saved by an individual who elects to apply these rules.

(1) For the purpose of ascertaining an individual’s right

to exercise the option referred to in these rules and ensuring the

proper application of these rules, the Commissioner and the

competent authority may require that individual to produce, within

the time indicated by the Commissioner and the competent authority

in that request, such further information and documents as the

Commissioner and the competent authority may consider necessary,

including certifications and declarations of the employer of that

individual.

(2) If an individual fails, without any valid reason, to comply

with any request relating to his income made to him by the

Commissioner and the competent authority in accordance with this

rule, the Commissioner and the competent authority may order that

article 56(21) of the Act shall not apply to that income. In such a case,

the Commissioner may make an assessment and the tax on that

income shall be calculated at the rates provided for in the Act without

any reference to the said sub-article.

The option available under article 56(21) of the Act shall Manner in

be exercised by means of a declaration signed by the beneficiary and which

exercised.

endorsed by the competent authority made on such form or in such

manner as the Commissioner may require and attached to or included

in the tax return for the relative year of assessment. It shall not be

deemed to have been validly exercised unless the income to which it

applies has been fully and correctly declared in the said tax return and

unless the said declaration and tax return are filed by not later than the

relative tax return date

Provided that when the said declaration or the relative tax

return is filed later than the tax return date, the Commissioner may

treat the option as having been validly exercised if he is satisfied that

the delay was due to a reasonable excuse.

(1) For the purposes of rule 4, the competent authority Determinations

shall issue a formal determination relating to anything which needs to and attestations.

be proven to its satisfaction in terms of these rules.

(2) An application for a formal determination relating to

eligibility under these rules shall be made on such form or in such

manner as the competent authority may require and shall contain the

information and documents therein requested.

(3) After consultation with the competent authority, the

Minister responsible for justice shall determine whether a

beneficiary’s stay in Malta is not in the public interest.

For the purposes of rule 9, the competent authority shall, Exercise of

following an application, filed by a beneficiary, endorse the form benefit.

required by the Commissioner.

For the purposes of rule 3, the employments and offices Eligible offices.

which are eligible for the reduced rate of tax are listed in the

Schedule.