320 Foreign Chief Executives Paying 15% Income TaxMEDIA ROOM
A total of 320 professionals who have taken up residence in Malta are benefiting from a maximum tax rate of 15% on their €75,000-plus salaries. Financial services practitioners and business people were briefed on the figure during a seminar held this week dealing with government programmes which attempt to lure tax exiles to Malta to buy high-end properties and enjoy their retirement, and tax rebates, here.
Residence in Malta
Industry members – among which a collection of lawyers, tax accountants, auditors and realtors – feel they are still reeling from the effects of the postponed ‘permanent residency scheme’, the forerunner of the Global Residence Scheme, a residence system for tax exiles settling down in Malta.
The PRS’s postponement, allegedly after a non-EU national managed to claim expensive healthcare treatment from the national register, led to the creation of the onerous ‘high net worth individuals’ scheme, much rued by the industry because of a €500,000 bond that property buyers had to pay. This programme has now been fashioned as the Global Residence Scheme, but without the half-million bond.The professional expat scheme, on the other hand, has played an important role in attracting foreign investment to Malta to set up back-office and services bases, such as those dealing in internet gaming, IT, and even aviation services, by giving chief executive positions a capped tax rate. Under this scheme, CEOs pay 15% income tax as long as that income amounts to at least €75,000 and up to a maximum €5 million – the excess is exempt from tax.
Earlier this week, the Economist latched on to claims first reported in the Italian financial newspaper Il Sole 24 Ore that Italian financiers are moving offices to Malta – a staunch opponent of the Tobin Tax – to evade any financial transaction taxes being contemplated across EU Member States.
The system was originally devised to tax currency exchanges, and now is used in Europe to tax high frequency trading and sovereign credit default swaps. French President Francois Hollande believes the tax can generate €500 million in 2013 for France alone. Biagio Milano, an independent trader for Ifmadvisor, an association of independent operators and consultants who oppose the tax, told Il Sole that he is seeking a Maltese residence permit to set up a company in Malta.
Malta is no tax haven and does not allow any banking secrecy, but the reality is that a host of international companies relocate their businesses and back-office services to Malta to get refunds of up to 85.7% (6/7) on dividends. Companies like energy giant Npower have dodged paying up to £108 million in UK corporation tax by posting a loss in the UK, and instead shifting its profits to a company in Malta called Scaris. In 2010, Australia’s Commonwealth Bank used a six-person back-office firm in Malta, CommBank Europe, to save €38.9 million in taxes, using its Sliema office.
Tax in Malta
The system is onshore and above-board, levying a 35% tax on all income – though it is then refunded up to 80%. And foreigners who draw pensions in Malta also pay just 15% tax if they costing at least €275,000.