Qualifying Employment in Innovation and Creativity

L.N. 106 of 2013

INCOME TAX ACT

(CAP. 123)

Qualifying Employment in Innovation and Creativity

(Personal Tax) Rules, 2013

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 Qualifying Citation amd

Employment in Innovation and Creativity (Personal Tax) Rules, commencement.

2013. (2) These rules shall be deemed to have come into force on the

1st January, 2013.

(Rules 2 and 13)

Chief Executive Officer

Chief Technical Officer

Chief Creative Officer

Head of Writing

Lead In-World Writer

Lead Game Programmer

Software Engineering Director

Game Developer

Director of Online Community

Head of Art Design and Visualization

Art Director

Digital Artist

Commercial Director (Digital Licensing)

Head of Game Design

Game Director

Game Designer

Audio Director

Video Director

Producer

Head of Marketing

€0.72

(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;

"Commissioner" means the Commissioner of Inland Revenue;

"Corporation" means the Malta Enterprise Corporation as

established in the Malta Enterprise Act;

"eligible office" is an employment in a role directly engaged

in the development of innovative and creative digital products as

listed in the Schedule and ascertained by the Corporation;

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

protection of public order, national security, territorial integrity,

public health or morals;

"qualification" means any diploma, certificate or other

evidence of qualifications issued by an educational establishment

attesting the successful completion of a post-secondary education

programme recognized by the Malta Qualification Recognition

Information Centre as established by article 6(1) of the Mutual Cap. 451.

Recognition of Qualifications Act;

"relevant experience" means at least three years of experience in

a role comparable to that of the eligible office;

"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 forty-five thousand euro (€45,000) and consists of emoluments

from an eligible office

Provided that the minimum amount of income of forty-

five thousand euro (€45,000) shall be adjusted annually in line with

the Retail Price Index as published in the Gazette by the National

Statistics 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

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

Corporation;

(c)

he proves to the satisfaction of the Corporation

that he is in possession of a qualification or relevant experience

to the eligible office;

(d) 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;

(e)

he proves to the satisfaction of the Corporation

that he performs activities of an eligible office; and

(f)

he proves to the satisfaction of the Corporation

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 forty-five thousand euro (€45,000)

Provided that the minimum amount of income of forty-five

thousand euro (€45,000) 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 five million euro

(€5,000,000), no further tax would be charged on income from a

qualifying contract of employment in excess of five million euro

(€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 the 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 2013

Provided that the option may not be exercised in respect of

income gained in any year preceding the year in which the option was

approved by the Corporation.

(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 not more than

three 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

Provided that if the first year of assessment has occurred

prior to 2013 the option shall still be available only for the year of

assessment 2013 or after within the four year period from the first

year of assessment.

(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 not more than three 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

Provided that if the first year of assessment has occurred

prior to 2013, the option shall still be available only for the years of

assessment 2013 or after within the three year period from the first

year of assessment.

(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, inter alia, of real rights

over immovable property situated in Malta.

The option available under article 56(21) shall not be Persons already

available to any person who has previously benefited from the in Malta.

provisions of the said article through any other rules or regulations

made under the Act

Provided that, subject to the provisions of rule 6(1) and (2),

any person who is benefiting from these rules shall not lose the right

to the benefit if the person is offered a new contract of employment

which is also considered to be an eligible office and there is no more

than fifteen days between the termination of one contract and the

commencement of the other contract of employment.

(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

Corporation may require that individual to produce, within the time

indicated by the Commissioner and the Corporation in that request,

such further information and documents as the Commissioner and the

Corporation 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 Corporation in accordance with this rule, the

Commissioner and the Corporation 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 Corporation 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 Corporation shall Determinations

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

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 Corporation may require and shall contain the

information and documents therein requested.

(3) After consultation with the Corporation, 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 Corporation shall, following Exercise of

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

the Commissioner.

For the purposes of rule 2, the eligible employments and Eligible offices.

offices that are eligible for the reduced rate of tax are listed in the

Schedule.

These rules shall cease to have effect on the 31st Cessation of

these rules.

December 2017.