QUALIFYING EMPLOYMENT IN INNOVATION AND CREATIVITY (PERSONAL TAX) RULES

SUBSIDIARY LEGISLATION 123.141

QUALIFYING EMPLOYMENT IN INNOVATION

AND CREATIVITY (PERSONAL TAX) RULES

1st January, 2013 *

LEGAL NOTICE 106 of 2013, as amended by Legal Notice 462 of 2014

68 of 2018 and 282 of 2019.

The title of these rules is the Qualifying Employment in

Innovation and Creativity (Personal Tax) Rules.

(1)

In these rules, unless the context otherwise requires

"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 for Revenue;

"Corporation " means the Malta Enterprise Corporation as

established in the Malta Enterprise Act;

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

carrying out or management of research, development, design,

analytical or innovation activities as may be further specified in the

Guidelines published 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, degree or other

formal educational achievement in a subject area relevant to an

eligible office, attained through an educational establishment attesting

the successful completion of a post-secondary education programme at

graduate level as recognized by the Malta Qualifications Recognition

Information Centre as established by article 6 of the Mutual

Recognition of Qualifications Act;

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

role comparable to that of the eligible office as may be further

specified in a Guideline document issued by the Corporation;

''relevant qualification'' means any diploma, certificate, degree or

other formal educational achievement in a subject area relevant to an

eligible office, attained through an educational establishment attesting

the successful completion of a post-secondary education programme at

graduate level as recognized by the Malta Qualifications Recognition

Information Centre as established by article 6 of the Mutual

*see regulation 1(2) of these Regulations as originally promulgated.

Recognition of Qualifications Act;

"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" includes the provisions of these rules and of article 56

(21) of the Act;

"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 fifty-two thousand euro (€52,000) 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.

A beneficiary is an individual who meets all of the

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

in fulfilling the role required by the eligible office, 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 relevant qualification or relevant

experience;

(d) he is not an individual who has benefited 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 Corporation that he

performs activities of an eligible office; and

(g) 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 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.

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

shall apply for

(a) a consecutive period of up to four (4) years

commencing from the year immediately preceding the

year of assessment in which the individual is first

liable to tax under the provisions of the Act;

(b) by application, to any additional periods of up to five (5)

consecutive years.

(2) Subject to the continued adherence to these rules the rights

acquired shall continue to apply if the individual enters into a new

contract of employment which is also considered to be an eligible

office and there is no more than thirty (30) days between the

termination of one contract of employment and the commencement

of the other contract of employment.

(3) Rights acquired under these rules 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 these rules shall be withdrawn if a

beneficiary directly or indirectly acquires immovable property situated

in Malta or any real rights thereon.

Deleted by Legal Notice 282 of 2019.

(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

th e A c t s h a ll n ot a p p l y t o t h a t i n c o m e . I n su c h a c a s e , t h e

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

be exercised by means of a declaration signed by the beneficiary

and 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) 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.

(2) The Corporation shall issue a formal determination that an

individual has proven to its satisfaction, compliance with these

rules and shall in such formal determination specify also the

number of years in which the option available under article 56(21)

of the Act can be availed of in accordance to these rules.

(3) The Corporation shall forward a copy of any determination

issued to the Commissioner.

(4) After consultation with the Corporation, the Minister

responsible for Justice shall determine whether a beneficiary’s

permanent stay in Malta is not in the public interest.

Deleted by Legal Notice 282 of 2019.

(Deleted by Legal Notice 462 of 2014)

No determination shall be issued by the Corporation after the

31 st December 2025 and no further benefit may be availed after year of

assessment 2030.