Tax Benefits for Financial Services and Insurance Expatriates

In terms of Article 6 of the Income Tax Act, an Investment Services or an Insurance Expatriate is eligible for exemption from tax on the following personal expenses paid on his behalf or on behalf of his immediate family by the employing investments services company or insurance company:

a) Removal costs in respect of relocation to or from Malta,

b) Accommodation expenses incurred in Malta,

c) Travel costs in respect of visits to or from Malta by the expatriate and his immediate family,

d) Provision of a car in Malta,

e) A subvention of not more than €600 per calendar month,

f) Medical expenses and medical insurance,

g) School fees of respective children.

Who can qualify for this exemption?

An Insurance Expatriate refers to any individual who is an employee of, or provides services to, an “insurance company” that is defined by Article 6 as meaning:

•                           a company authorised under Article 7 of the Insurance Business Act; or

•                          an insurance manager as defined in Article 2 of the Insurance Distribution Act; or

•                          a company carrying on the business of insurance broking under article 12 of the Insurance Distribution Act.

An Investment Services Expatriate shall mean any individual who is an employee of, or provides services to, a company that is:

•                          an investment services company holding an investment services license issued under Article 6 of the Investment Services Act; or

•                          a company which is recognised by the relevant Competent Authority for the purposes of Article 9A of Investment Services Act,  

and whose activities solely comprise of the provision of the following: Management,  Administration,  Safekeeping, or Investment advice to collective investment schemes as defined in the Investment Services Act.

To qualify for this exemption, an Investment Services Expatriate or an Insurance Expatriate has to satisfy the above-mentioned conditions, and either:

a) is not ordinary resident and not domiciled in Malta; or

b) was not resident in Malta for a minimum period of three years immediately preceding the year in which he commences such employment with or provides services to any investment services company or insurance company as aforesaid and provided that during the said three years such individual has been engaged on a full-time basis in a similar position outside Malta.

How do apply the exemption?

The payments mentioned above that are incurred by the employer on behalf of an employee are generally taxed in the employee’s hands as Fringe Benefits. However, an investment services expatriate or insurance expatriate may opt to claim an exemption from tax for any of the mentioned expenses paid for him by the employer.  The exemption is indeed optional and  it is up to the expatriate to decide whether to make a claim for the exemption or not.

Where an exemption is to be claimed, the employer should treat these expenses as an exempt fringe benefit and must not declare them in the FS3.  The exemption from tax is available to the expatriate for a period of ten years commencing with the first year in which the expatriate is liable to taxation in Malta.

The employing company must exclude the amount of exempt fringe benefit from the gross emoluments of all employees falling within the scope of Article 6 of the Income Tax Act. No further forms or submission are required by the employer.

Exclusion:  A person  benefitting from the exemption under article 6, may not also benefit from the provisions outlined in Subsidiary Legislation 123.126, Highly Qualified Persons Rules.