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Tax Guidelines on Qualifying Employment in Aviation (Personal Tax) Rules

Background

The Aviation sector is a significant player in the local economic development; having an estimate direct contribution of 2.5 percent to the GDP in 2014 and an approximate number of 5,500 direct jobs, accounting for 3.4 per cent of the total workforce. New legislation has breathed new life into Malta’s aviation industry and the country has been steadily building up a cluster of aviation services including maintenance, air operator certificate holders, training, legal and financial services. As outlined in a number of Government policy documents, Malta aims to develop into a fully-fledged aviation centre that supports the entire spectrum of aviation-related services.

The objective of the Qualifying Employment in Aviation (Personal Tax) Rules (SL 123.168) is to give a long-term vision to the sector in order to adequately equip the necessary operations with the skills required and control the limitations encountered due to a limited availability of human resources.

Eligible Offices

  • Chief Executive Officer
  • Chief Operations Officer
  • Chief Financial Officer
  • Chief Risk Officer
  • Chief Financial Officer
  • Chief Technology Officer
  • Chief Commercial Officer
  • Chief Investment Officer
  • Chief Insurance Officer
  • Accountable Manager
  • Deputy Accountable Manager
  • General Manager
  • Flight Operations Manager
  • Nominated Person Flight Operations Training Manager
  • Nominated Person Training
  • Ground Operations
  • Nominated Person Ground Operations
  • Continuing Airworthiness Manager
  • Nominated Person Continuing Airworthiness Compliance Manager
  • Quality Systems Manager
  • Safety Manager
  • Flight Dispatch Manager
  • Instructor Manager
  • Head of Marketing
  • Head of Public Relations
  • Actuary
  • Underwriting Manager
  • Risk Management Officer
  • Key account manager
  • Product coordinator
  • Material coordinator
  • Engineering reporter
  • Aeronautical engineer
  • Head of Maintenance Operations
  • Aviation Systems Developer
  • Key Aviation Specialist

Conditions for Eligibility

The rules came into force with effect on the 24th May 2016 and apply to income which is brought to charge in year of assessment 2017 (basis year 2016). The rules apply to individuals not domiciled in Malta.

Individual income from a qualifying contract of employment qualifies under these rules when it is received by a beneficiary in an eligible office. Such income is subject to tax at a flat rate of 15% provided that the income amounts to at least 45,000 euros (forty-five thousand euros) annually. The 15% tax rate applies for a consecutive period of five years for European Economic Area (that is, EU countries as well as Norway, Iceland and Liechtenstein) and Swiss nationals and for a consecutive period of four years for third country nationals.

The four or five year period, as the case may be, commences from the year when the individual concerned first becomes taxable in Malta. In cases where the individual was taxable in Malta but not benefiting under this Scheme and subsequently becomes eligible under the Scheme, he/she can benefit only if the four or five year period has not elapsed; the benefit is then available for the years remaining from the date of eligibility under the Scheme until the said four or five year period from the date of first being subject to tax in Malta elapse.

An individual may benefit from the 15% tax rate if the person satisfies all of the following conditions:

  1. e 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;
  2. 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;
  3. he proves to the satisfaction of the competent authority that he is in possession of professional qualifications or experience;
  4. 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;
  5. he proves to the satisfaction of the competent authority that he performs activities of an eligible office; and
  6. he proves to the satisfaction of the competent authority that:
    1. 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;
    2. 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;
    3. he is in possession of a valid travel document;
    4. 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
    5. he is not domiciled in Malta.

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.

Application

An application for a formal determination relating to eligibility must be made to the Chairman, Transport Malta using this form.

The benefit is exercised for each year of assessment by means of a declaration made on the RA21 form signed by the beneficiary and endorsed by Transport Malta. The form once endorsed by Transport Malta is to be attached to the income tax return and filed with the Inland Revenue Department by the tax return date.

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