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Qualifying Employment in Innovation and Creativity Rules - Article 56 (21) ITA

Act I of 2010 introduced Article 56 (21) ITA, an article which created a beneficial tax regime for

persons who receive emoluments payable under a qualifying contract of employment from an

eligible office in a role directly engaged in the development of innovative and creative digital

products.

Beneficial Tax Rate

Article 56 (21) contemplates a potentially favourable tax rate of 15% which may be applied at

the option of the tax payer with effect from Year of Assessment 2013.

If Article 56 (21) is applied, the individual will not be able to claim any relief, deduction,

reduction, credit, or set off of any kind apart from tax paid at source on employment income,

self employment and pensions etc.

In addition, when the option of using the beneficial rate of 15% on the qualifying employment

income is exercised, the said employment income will constitute the first part of that

individual's total income for the year of assessment in question and the tax on the remaining

income shall be calculated at the rate or rates that would have been applicable to the remaining

income had the option not been exercised.

Eligible Offices

Eligible offices include:

Chief Executive officer, Chief Technical Officer, Chief Creative Officer, Head of writing, Lead

in-World Writer, Lead Game programmer, Software Engineering Director, Game Developer,

Director of Online Community, Head of Art Design and Visualisation, Art Director, Digital Artist,

Commercial Director, Head of Game Design, Game Director, Game Designer, Audio Director,

Video Director, Producer and Head of Marketing.

Conditions

The following conditions should be satisfied to be able to benefit from the beneficial tax rate of

15%:

(a) The emolument income must be received with 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.

(b) The individual must receive employment income of a minimum of Euro 45,000 (exclusive of

(the annual value of any fringe benefits) from an eligible office. In the case where the income

from the qualifying contract exceed Euro 5,000,000 no further tax will be charged on the income

in excess of Euro 5,000,000;

(c) The individual should not be domiciled in Malta;

(d) The individual should be 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

prove to the satisfaction of the competent authority;

(e) The individual is in possession of professional qualifications to the satisfaction of the

competent authority;

(g) The individual 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

(h) The individual 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;

(i) The individual 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;

(g) The individual is in possession of a valid travel document;

(h)The individual is in possession of sickness insurance in respect of all risks normally covered for

Maltese nationals for himself and the members of his family.

Duration

Rules with respect to the duration of this scheme vary on whether the expatriate is an EEA/

Swiss National or a third country national.

Claw back and Penalties

The benefits provided for under this Scheme may be clawed back retrospectively in the case

where:

(a) The expatriate's stay in Malta is not in the public interest; and

(b) In the case of Non EU citizens, where the expatriate physically stays in Malta for more

than 1,460 days (i.e. 4 years) or if the expatriate acquires real rights over immovable property

situated in Malta.

In addition to penalties incurred, an individual who claims a benefit under the scheme when

not entitled to do so is liable to a penalty equal to the amount of benefit claimed and if the

benefit claimed had been already paid, the individual is liable to repay the benefit received plus

additional tax of 7% per month or part thereof.

Cessation of Rules

These rules shall cease to have effect on 31 December 2017.