Tax incentive scheme to attract foreign executives comes into force

A tax incentive scheme targeted at highly paid foreign executives has come into force, a year and four months after it was first announced in the 2010 Budget.

The Highly Qualified Persons Rules 2011 is aimed at attracting foreign executives – mainly working in the financial services sector – who earn a minimum of €75,000 a year with a fixed income tax rate of 15 per cent. Any income over €5 million will be tax-free.

The new scheme is targeted at the following executive positions: chief executive officer, chief risk officer, chief financial officer, chief operations officer, chief technology officer, portfolio manager, chief investment officer, senior trader/trader, senior analyst (including structuring professional, actuarial professional, chief underwriting officer, chief insurance technical officer, head of marketing and head of investor relations. In determining whether an applicant should be eligible for the reduced tax rate, the new rules also include a clause which authorises the Minister for Justice to have the final say over the matter.

The clause states: “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.”

Joe Bannister, chairman of the Malta Financial Services Authority, told The Times Business: “The expansion of the financial services sector in recent years has created a demand for additional highly qualified personnel. Therefore the need is being felt for the ‘importation of knowledge’ particularly in those areas of the financial services sector where local talent in currently not available.

“The objective of Legal Notice 106 Highly Qualified Persons Rules 2011 is the creation of a scheme to attract highly qualified persons to occupy ‘eligible office’ with companies licensed and/or recognised by the Malta Financial Services Authority,” he said.