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Personal Taxation in Malta

Personal Taxation System for Residents

All Maltese domiciles and residents who earn a salary over €8,500 per annum must pay income tax ranging between 15% and 35%, depending on the amount of salary. A domicile is an individual who lives in Malta permanently, and a resident is an individual who physically spends more the 183 days a year in Malta, even inconsecutively. Those who reside in a foreign country yet still retain their Maltese citizenship must pay income tax on the earnings obtained in Malta, yet royalty income and local interest are not taxed.

 

Global Residence Scheme

The Global Residence scheme is applicable to all non-EEA, non-EU and non-Swiss nationals. In order to qualify under the Global Residence programme, individuals must purchase property in Malta worth at least €275,000. Properties in the South of Malta and the sister island of Gozo must have a minimum value of €220,000.  Renting property is also possible through this scheme, with a yearly total rental cost of €9,600 or €800 per month. Renting properties in the South of Malta or Gozo must have a minimum yearly rent of €8,750 or a monthly rent of €730.

 

Individuals who are part of the programme are entitled to an advantageous taxation rate of 15% on all income sent to Malta. All income earned in Malta will be taxed at a flat rate of 35%. A minimum an individual is taxed per year under the Global Residence scheme is €15,000.

 

The Benefits of Maltese Taxation

Malta is the sole European Union member state that implements a complete imputation taxing system. Those with shares in Maltese companies are taxed 35% on the interest or dividends received, but they are eligible to receive a refund of the tax paid by the company where distributions are made to them. So although the standard taxation rate of 35% may seem high, shareholders qualify to receive part or even the entire amount of tax paid by the Maltese company. This practice is what makes the Maltese tax system appealing and unique.

 

All individuals relocating to Malta are met with advantageous, tax-friendly procedures, with no customs duty, VAT or land and property taxes. Vehicle registration costs for permanent residents who import their vehicles is also at a favourable rate. In terms of property, the earnings received from the sales of property or investments can be freely repatriated as long as any tax due is settled beforehand.

 

The country’s tax laws also offer relief from double taxation, either via mediated double tax agreements between over fifty-five countries or by means of independent sources. Malta is promoted as being a Treaty region. A majority of the Treaties typically allow the withholding of taxes with regards to interest, royalties and dividends.

 

In Malta, no death duties are owed. In the case of a property being purchased in one name, and the said owner passes away, 7% of the provisional tax on the value of the property must be paid for by the heirs of the deceased. In the case of a property being bought jointly and one of the buyer’s passes away, 7% of the provisional tax is paid only on half of the value of the estate. Transfer duty is charged on immovable property and on shares in a local company (excluding stock exchange).

Malta Global Residence Programme

 

Malta Global Residence Programme

Since 2013, the Malta Global Residence Programme builds on the success of Malta’s reputation in attracting expatriates seeking an alternative residence base in a warm Mediterranean Island in the European Union.

Basis for Malta Global Residence Status

The aim of the Malta Global Residence Programme is to formally recognise as tax resident for Maltese tax purposes those foreign nationals satisfying the eligibility criteria of the Malta Global Residence Programme.  The Maltese Residence Programme requires that an economically self-sufficient residence candidate maintains a permanent address in Malta in the form of residential property purchased or rented in Malta or Gozo.

Taxation of Maltese Global Residents

Maltese residents are not subject to tax in Malta on foreign sourced income not remitted to Malta. Nor are they subject to tax on any foreign-sourced capital gains whether remitted to Malta or not.  Permanent Residents of Malta are entitled to taxation at the flat rate of 15% on remitted income.

Malta enjoys over 60 double tax treaties, persons who take up residence in Malta can receive their pensions in Malta free of tax at source and subject to a mere 15%.  Global residents also benefit from Malta’s double taxation agreements existing with most European countries, Canada, Australia and the USA, ensuring that tax is never paid twice upon the same income.  Overseas capital funds invested locally are of course only taxed on any interest or dividends generated thereon, again at a 15% flat rate.

For EU and EEA nationals, in the absence of significant remittances of income, it may be more feasible to opt for the Ordinary Residence Scheme which imposes no minimum tax liability.

The following is a summary of the tax system applicable to Maltese residence under this residence programme.

 

Summary of Malta Global Residence Tax Rules

Basis of Taxation Local Source, Remittance
Tax Rate for Foreign Source Income remitted to Malta 15%
Tax on Capital Gains outside Malta Nil
Tax Rate for Local Personal, Business, Investment Income 35%
Minimum tax (per family) €15,000
Taxation per dependent Nil
Double Tax Treaty Relief applicable
Taxation per dependent Nil
Tax Residence Certificate Process available.
Inheritance Tax None

Eligibility for Maltese Global Residence Programme

Applications under the Malta Global Residence Programme are open to non-EU, non-EEA and non-Swiss nationals.  One application can include the main applicant as his spouse, financially dependent ascendants and other non-family members and dependent relatives that are shown to be bona fide members of the household.  Children under the age of 25 are automatically eligible for inclusion.  Applicants must demonstrate their financial self-sufficiency and must be in possession of valid sickness insurance cover.

Within 12 months of taking up residence under the Malta Global Residence Programme, the residence permit holder needs to comply with the requirement of acquiring or renting property in Malta.  Residence candidates are required to demonstrate that an address is available to them in Malta by buying or renting property in Malta.  Candidates for the residence programme need to meet minimum property value requirements at €275,000 for property in Malta and €220,000 for property in Gozo and the Southern Region of Malta.  Candidates have the option to rent property in Malta at €9,600 or property in Gozo and the Southern Region of Malta at €8,750 in annual rent.

The following is a summary of the programmes rules on eligibility of applicants.

 

Summary of Malta Global Residence Programme

Eligible for inclusion in application:
Main Applicant’s spouse Yes
Dependants < 25 years
Non-Family Members Discretionary
Taxation per dependent Nil
Minimum Property Purchase Price / Annual Rent
 Malta: €275,000 / €9,600
Southern Region of Malta, Gozo €220,000 / €8,750
Sickness Insurance Coverage Required

 

 

Malta Global Residence Programme: The Rules

Permit holders are required to reside not more than 183 days in any foreign jurisdiction in any year. The programme does not impose any formalities for evidencing any minimum residence requirement.  Residents also need to demonstrate a valid sickness insurance coverage for all EU risks including Malta.

Malta Global Residence Programme Permits are issued subject to the following conditions:

Residence Permit Conditions

Maltese domicile Not allowed
Maximum Residence in other countries < 183 days
Employment, Business, Office in Malta allowed

Malta Global Residence Programme Applications

Applications are to be processed via Mandataries authorised by the Maltese Government to handle application process and act as liaisons between the applicant and the Maltese authorities.  Our immigration firm is registered as an authorised mandatary by the Maltese immigration and tax authorities according to Maltese law.  Led by Dr Priscilla Mifsud Parker, our winning Immigration & Relocation Law team is the oldest specialised immigration law practice in Malta. We have successfully represented individuals and families ranging from expatriate retirees, emigrants seeking employment, applicants for work permits, to HNW individuals on the Forbes List.

We are able to advise you on the tax and legal implications and requirements of the Malta residence application process and indicate expected time frames based on the specific circumstances and nature of your application. Our advice covers the rules applicable to immigrating to Malta under a number of available residence programmes as well as practical relocation assistance ranging from transportation and insurance to schooling and health insurance coverage.

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Malta Permanent Residence Programme

The Malta Permanent Residence Programme, launched in 2021 by means of Legal Notice 121 of 2021, offers permanent residence in Malta upon successful completion of a four-tier due diligence process.

Residency cards are issued for 5 years and are renewable indefinitely provided the investor maintains a Maltese address and all other Programme requirements and eligibility. The MPRP is based on either a property investment or on the rental of property, together with the payment of a contribution to the government and a donation to charity. Processing takes between 4 to 6 months.

Malta Permanent Residence Programme: Benefits

  • Maltese Permanent Residence grants families the right to reside and stay indefinitely in Malta: a Certificate of Malta Permanent Residence for Life is issued after approval upon complying with the investment requirements.
  • Malta is part of the Schengen Area and investors enjoy visa-free movement within the Schengen Area, with no visa applications required prior to travel and freedom of movement within the 26 countries that form the Schengen Zone for 90 days out of a 180-day period.
  • The Malta Permanent Residence Programme allows its beneficiaries the right to reside, settle and stay in Malta indefinitely.

Learn more about the benefits of the Malta Permanent Residence Programme.

Malta Permanent Residence vs Other Golden Visas

Malta continues to take note of a competitive marketplace of European countries competing in their attractiveness for foreign investors. Accordingly, some competitive advantages:
  • The Malta Permanent Residence Programme is the only European residency program to allow a property rental option without requiring the purchase of property before applying for residence, making the process both easy and convenient in times when travel restrictions are the norm.
  • The required investment need only be made on approval at the end of the process and not at the outset.
  • Permanent residence is indefinite as long as all Programme obligations are maintained..
  • Property ownership is not obligatory since a rental option is available.
  • Residence cards are renewed every 5 years.
  • English is an official language and is widely spoken in Malta. However, the Malta Permanent Residence Programme does not apply a language test at any stage.

Eligibility for Malta Permanent Residence

In order to be eligible for the programme, the applicant must show that he is in possession of €500,000 in capital, of which €150,000 must take the form of financial assets, such as bank deposits or stocks.

Family applications are allowed by the Malta Permanent Residence Programme.  The following family members may be included in a family application for Maltese permanent residence::

  • spouses or unmarried long term partners;
  • dependent unmarried children with no age limit, as well as
  • parents and grand parents on either side.

Investments Qualifying for Malta Permanent Residence

Subject to a non-refundable government administration fee of €10,000 payable on submission of the PR application, all investments and the government contribution are payable only on approval. The Malta government contribution is lower if the applicant chooses to buy rather than rent a qualifying property.

The Property Investment Option

Permanent Residence under the Malta Permanent Residence Programme requires a fixed government contribution of €68,000 together with a minimum residential property investment in Malta of at least €300,000 in Gozo or the South of Malta, or at least €350,000 in the rest of Malta.

The Property Rental Option

Property ownership is not obligatory, and applicants may opt to rent rather than purchase property in Malta – this attracts a higher non-refundable government contribution of €98,000. The minimum qualifying rent for property in the south of Malta is €10,000 and €12,000 in the rest of Malta.

Hence, an applicant must:

  1. Choose a property investment (rental or purchase)
  2. Pay a contribution of €68,000 when purchasing or €98,000 when renting a property
  3. Pay a €2,000 donation to an approved charity or NGO.

Malta Permanent Residence: Time Frame

From the Agency’s side, there is a renewed commitment towards increased efficiency, with a targeted processing time of 4-6 months, leaving due diligence of applicants as paramount over speed considerations.

Malta Permanent Residence: Contributions

The fees under the new MPRP regulations are as follows:

  • €68,000 / €98,000 government contribution (in case of property purchase/rental respectively).
  • Parents/grandparents: €7,500

A philanthropic donation of €2,000 to an approved charity or NGO in Malta is also to be paid after the approval.

Competitiveness of Maltese PR

Malta continues to take note of a competitive market place of European countries competing in their attractiveness for foreign investors. Accordingly, some competitive advantages:

  • Permanent residence status is not lost if the resident does not reside in Malta in any given year.
  • No need to purchase property if property rent is preferred to start with.
  • Persons planning their tax resident status in Malta should seek tax advice on the minimum presence and other criteria required for tax residence.

Tax System for Malta Permanent Residents

The Malta Permanent Residence Programme is tax neutral and does not offer any tax benefits, nor does it create any adverse tax effects. Malta’s tax system applies independently of the MPRP.

Tax resident status is not an automatic consequence of acquiring permanent residence in Malta.

Tax Resident Status

Tax resident status results from a residence in Malta of over 183 days, or where residents have spent less than the 183 days in Malta, they may demonstrate various connecting factors evidencing their intention to reside in Malta ordinarily. Permanent residents of Malta requiring formal confirmation of their tax residence status in Malta are able to obtain this through a separate procedure – prior legal advice is recommended. Contact us for a tax consultation.

Non Tax Residents

Non-tax residents are only subject to tax on local source income. Tax residents of Malta enjoy a remittance basis of taxation, often referred to as res non-dom taxation, whereby they are only subject to Maltese tax on their foreign income only to the extent remitted to Malta, and not on their foreign source capital gains, whether remitted or not. The enjoyment of the res non-dom tax regime by persons having incomes sources abroad exceeding €35,000 are subject to a minimum annual tax of €5,000.

Under Maltese law, the connecting factors determining the taxability of individuals are domicile and residence, remnants of Malta’s British colonial history. Citizenship is not a factor that effects the taxation of individuals.

Income is taxable in Malta only if it arises in Malta. Income arising abroad, is only taxable in Malta if a person is tax resident in Malta and only on that portion that is remitted to Malta. Capital gains are taxable in Malta only if arising in Malta but are subject to various exemptions. Capital gains arising out of Malta are not subject to tax, nor are they reportable, whether remitted to Malta or not.
Malta has no wealth or capital taxes, no wealth reporting obligations, no inheritance taxation, no property taxes, no dividend taxes, and no system of rates.

Learn more about personal taxation of Maltese Residents

Our Malta Permanent Residence Services

ACC is a Maltese Immigration Firm holding licence number AKM-ACCA-21. We guide high net worth international families and their businesses on subjects as diverse as residency & citizenship, corporate, tax, financial services, fintech, property.  Over the last 20 years, our Malta Permanent Residence specialists have successfully represented hundreds of individuals and families ranging from expatriate retirees, emigrants seeking employment. We are committed to promoting Malta as a welcoming investment and relocation destination, with a history of hospitality and multi-culturalism.

We are able to advise you on the tax and legal implications and requirements of the residence application process and indicate expected time frames based on the specific circumstances and nature of your application. Our advice covers the rules applicable to immigrating to Malta under a number of available residence schemes as well as practical relocation assistance ranging from transportation and insurance to schooling and health insurance coverage.

 

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Residency Options

European Union Nationals

The Residents Scheme Regulations were enforced in 2004 and outlined the certain criteria individuals must comply with in order to be eligible to take up residence in Malta.

A certificate must be obtained from the Inland Revenue Department to allow residency. This certificate is valid indefinitely as long as the individual fulfils certain conditions annually. It typically takes three months from the date of application to issue the certificate. The minimum sum of tax is to be paid within thirty days of the application’s approval. It is to be credited against the taxation payable for the first year of residence.

Individuals must fall into at least one of the three categories below in order to be eligible to obtain residency in Malta.

  • Employed: To obtain ordinary residence an individual must work in Malta either as an employee or self-employed.
  • Economically self-sufficient: Individuals applying for ordinary residence must prove to be financially stable. They must have a minimum capital of €14,000 or a weekly earning of €92.32 is required for single individuals and a minimum capital for married couples is €23,300 or €108.63 per week.
  • Own worldwide capital: Must own worldwide capital amounting to a minimum of €349,000. It is also required that the individual remit at least €13,950 to Malta per year, in addition to €2,300 for each spouse or dependant. A holder of a Residents Scheme document is obliged to buy or lease a property in Malta. The minimum worth of apartments is €69,000 and of houses €116,000. In the case of leasing, the minimum monthly rent must be €4,150.

Third Country Nationals

Individuals must fall into at least one of the two categories below in order to be eligible to obtain residency in Malta.

Employed: An employment license is necessary for non-EU citizens to work in Malta. Individuals who are qualified in information technology or financial services are favoured over other occupations and consequently may receive a permit more easily.

Self-Employed: To be certified as self-employed or a business owner, a third country national must meet specific criteria.

  1. An individual must have invested a minimum of €500,000. Expenditure on the investment should be solely capital, and should include fixed assets (property, machinery) used for the occupation and should be representative of the business plan proposed upon application. Extra expenses including legal fees and wages must not be paid via the initial invested sum of €100,000.
  2. An individual must qualify as a gifted innovator and propose an attractive business plan. This plan must include employing a minimum of three EU citizens within eighteen months of the business being founded.
  3. An individual must hold a high ranking position in a company that forms part of a project that is advocated by Malta Enterprise and which the Employment and Training Corporation (ETC) has knowledge of; or
  4. An individual must hold the title of exclusive representative of a foreign company that aims to set up a new branch in Malta.

Legal Process for Buying Property in Malta

Buying Property in Malta

Property in Malta has always been a sound investment securing moderate capital growth even in the worst of times.  Over the years numerous government initiatives have contributed towards various tax advantages directed at foreign businesses, professionals and retirees, making Malta a tempting destination and in turn this has had a positive effect on the demand for property be it for rental, residence or even investment. Here is an introduction to the legal process for buying property in Malta.

Procedures For Buying Property in Malta

  1. Together with a professional and reliable real estate agent the client’s requirements are established.
  2. A property is selected that reflects the client’s needs and a price is agreed with the seller.
  3. A legal aid is sought for the inspection of the property and contractual portion of the purchase.
  4. A Preliminary Agreement (locally known as a konvenju) is drawn up and signed. This agreement is typically valid for three months.
  5. A deposit of 10% of the value of the property is normally paid when signing the above agreement on account of the purchase price.  In most cases this deposit is held by the Notary public on behalf of the buyer and transferred to the seller once the root of title of the property has been satisfactorily established.
  6. Both parties i.e. the vendor and the purchaser are legally bound by the agreement.
  7. Once the root of title has been established a final deed is signed and the new owners of the property receive the keys.

Expenses To Expect when Buying Property in Malta

Stamp duty fees in Malta, reductions and when it is not applicable:

Stamp Duty fee in Malta

Stamp duty fees amounting to a maximum of 5% of the purchase price are applicable when purchasing a property in Malta and payable by the purchaser  as follows:

  • An initial stamp duty equivalent to 1% of the value of the property is paid to a Notary on signing of the  Preliminary agreement (konvenju).  This fee  is then submitted to the Inland Revenue Department and a receipt verifying payment is given.
  • The final 4% of the value of the property is paid on the day of the final deed. The Notary then submits the deed to the Inland Revenue Department and a receipt from the IR Commissioner is given.

Stamp Duty on Immovable Property in Malta

Stamp duty is only chargeable on Immovable Property and is not paid on any movable items (furniture and fittings) being transferred together with the immovable property.

When the property being purchased is to be used as the purchaser’s ordinary place of residence a reduction in Stamp duty fees applies.  In this case Stamp duty is charged as follows:

  • 3.5% on the first €150,000 of the value of the property; followed by
  • 5% on the value of the property exceeding €150,00

AIP Permit for Non-Maltese Nationals

When acquiring property in Malta, Non-Maltese nationals require an AIP (Acquisition of immovable property by a non-resident) permit. The purpose of this permit is to ensure that the applicant/purchaser is a person of good standing. This restriction does not apply to properties located in areas termed Special Designated Areas or to EU citizens when purchasing property which is to serve as their primary residence. Special Designated Areas (SDAs) are established top-end residential areas that possess no acquisition restrictions. Therefore when a property is located in a Special Designated Area both EU and non-EU permanent residents may buy property with the same rights as Maltese citizens.

Taxes when Selling Property in Malta

When selling a property in Malta the tax to be paid (if any) depends on two factors:

Main Residence factor

Capital gains taxes are not applicable if a property that is used as a primary residence is owned for at least three years, on the condition that is it sold within one year of the owner leaving the property. Or:

Investment Property

  • 12% final tax of the property’s value; Or
  • Where the property has been owned by the same person for less than 12 years, one may opt out of the above rule and apply tax equivalent to 35% on the profit.

Buying Property Through a Company

Buying a property through a company is done typically to use retained earnings within the company directly. Distribution from the company to the shareholder is non-existent and consequently there is no dividend tax. This may be utilized for the purpose of protecting assets. Get in touch with us to learn more about the legal process for buying property in Malta
 

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Renting Property in Malta

What does renting residential property in Malta involve?

The steps required to rent a property in Malta are quite simple. The two most important decisions to be made are the type of property and location.  It is important to work with the right agency having the right properties as well as, to have the right person to show you the right properties and not waste your precious time. Having sourced your ideal rental property the terms of the lease are established to typically include:

  • Rent payment details;
  • A reimbursable security deposit usually equivalent to one month’s rent;
  • Agency fees (generally half of the first month’s rent plus 18% VAT)
  • Maintenance agreements
  • Expiration date of the lease period

Property rental prices vary depending on the type of property, whether it is furnished, its location and leasing duration. More often than not, rental properties are fully furnished, however it is possible to find unfurnished options. Short-term rentals, typically classed as being less than six months, normally include external amenities such as water, electricity and an Internet connection. Long-let renting clients usually pay for external amenities and based on their consumption, this typically amounts to €50 per month, per individual.

 

Where in Malta should I rent?

Where to rent depends very much on the client.  Malta and the smaller island of Gozo present a good selection of rental properties, ranging from modern sea view apartments to luxuriously finished country farmhouses. The Inner Harbour region is known as being the most tourist-populated part of Malta. This region encompasses the towns of Sliema, Swieqi, St Julian’s, Balluta and Msida, offering a more modern, ‘city-like’ feel to the island.

The Southern and Western parts of the island are known for offering a more calm and laid back lifestyle. Towns include Siggiewi, Zebbug, Birzebbuga and Marsaskala. For those after a completely authentic and traditional Maltese way of life, Gozo is the place to try.  All towns in Malta offer necessary amenities such as grocery shops, police stations, post offices and pharmacies.

 

What does Malta have to offer?

Malta’s weather is a major factor in its popularity. It has warm winters and hot summers. Typically, the temperature in winter does not fall below 10 degrees Celsius. In summer, it can rise to over 35 degrees Celsius.

The Maltese islands are a unique blend of history and festivity. There are many cultural events and sites to visit, such as Neolithic temples, ancient cities and street feasts, as well as many exclusive clubs and restaurants. Malta also offers a good selection of beaches and holiday resorts.

Malta’s health services are renown, having placed 5th in the World Health Organization’s (WHO) survey of global healthcare. Healthcare is offered free of charge to all Maltese nationals and EU citizens in possession of a European Health Insurance card (EHIC).  Non-Eu citizens seeking to apply for residence in Malta are to be covered by an All-risk medical insurance policy.
 

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Buying Property in Malta

Buying property in Malta

The islands of Malta and Gozo offer a wide selection of properties in varying surroundings, some encompassing sea and country views, others city residencies and even gated communities.

Types of Residence in Malta

Once the decision has been made to invest in  property, the next step is to select the preferred type of residence. Property in Malta is divided into six categories: apartments, maisonettes, villas, houses of character, terraced houses and farmhouses. Other factors to be considered are location, size, property style, resources and services such as schools and proximity of entertainment, and most importantly a budget.  Your local real estate agent is just as important.  Seek advice to select a suitable agent able to offer a customized service and proper guidance.

Notary Public, Preliminary Agreement and Deed when Buying Property in Malta

Having selected the right property, agreed on a price and the terms and conditions of acquisition, the next step is to appoint a Notary public to draw up a Preliminary Agreement (locally known as a konvenju) to be signed by the vendor and the purchaser.  At this stage the norm is for the purchaser to pay a deposit of 10% on account of the selling price to secure the eventual transfer of the property. In most cases and unless otherwise agreed the deposit is held by the Notary public on behalf of the buyer and transferred to the seller on final deed of sale once the root of title has been accurately established.  A provisional stamp duty equivalent to 1% of the purchase price is also paid by the purchaser on signing of the preliminary agreement. (Learn more on Stamp Duty Fee in Malta)

Before a final deed is enacted, the notary public will verify the legal title, and confirm that there are no outstanding debts burdening the property.    Once this is done and the purchaser finalizes the necessary financial requirements for the purchase and the final deed is signed.

European Union citizens do not require a permit to purchase immovable property in Malta, although in order to purchase a second immovable property, one must have resided in Malta for a minimum of five years, otherwise a permit is also required.

Non-European Union foreigners in possession of an AIP (Acquisition of Immovable Property) permit or those who will not use the property as a primary residence must abide by local regulations.

The benefits of living in Malta

Malta is appealing as a place of residence due to it is multidimensionality, as it is both immersed in history and teeming with entertainment options. It provides a substantial amount of cultural and archaeological sites, yet it is home to buzzing nightlife and numerous outdoor activities, such as water sports including sailing, paragliding, golf and horseback riding. There are hundreds of exclusive clubs and restaurants, and three modern casinos set against beautiful backdrops.

The island’s pleasant climate, favourable tax laws, renowned healthcare and education system, low level of crime and friendly English-speaking nation, make Malta an exceptional destination. Its location in the centre of the Mediterranean offers easy access to the rest of Europe and North Africa, with an assortment of airlines offering international connections.

There are the added benefits of Malta being a very small country and not being on a global radar. Its size means that nothing is too far away. It takes forty-five minutes by car to go from one end to the other. Malta’s low profile allows for it to retain its uniquely laid back lifestyle and to not be overrun by tourists all year round. The smaller island of Gozo is undiscovered to a greater extent. It makes for an even more relaxing experience than Malta, which is considered hectic in comparison.
 

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Business in Malta

Why Malta?

Malta is one of the few civil law jurisdictions that not only has developed its own domestic law but also recognizes the judiciary of foreign law.  The act of the setting up is regulated by the Maltese Trust and Trustees Act of 2005 and which incorporates within its provisions the Hague Convention on the Law Applicable to Trusts and on their recognition, which Malta has ratified.

A trust can be created in various ways: via a unilateral decision, an oral agreement, by a judicial decision, an instrument in writing and even by operation of the law.

Setting up a Maltese Trust

A trust under Maltese law is described as a legal agreement between two parties: the settlor and the trustees. The settlor places assets (bank accounts, real estate, stocks and bounds, furniture or art) under the power of the trustee for the welfare of a beneficiary or for charitable purposes.

The main advantages of Maltese trusts are the country’s reasonable set-up and maintenance costs (50% cheaper than competing EU domiciles), the support offered by the MFSA (Malta Financial Services Authority), the flexible regulatory and legal structure, and the fiscal benefits for the fund and fund manager, the investors and the administrator to business organisations and high net worth individuals.

This distinctive structure is additionally strengthened by the widespread use of the English language in the legislation, education and business enterprises. There are currently 130 licensed trust management companies (both local and foreign) offering global trust and trustees services.  Our Managing Director is a director of a leading trust company Claris Capital.

The Benefits of Malta-registered Trusts

Domestic Issues:

  • Avoiding expenses and delays relating to Malta or overseas probate processes
  • Conserving assets until minors reach the age of maturity
  • Protection in the event of the settlor or the beneficiary’s incapability
  • Allocation of assets to the settlor’s heirs without the assets being transferred immediately upon the settlor’s death

Tax Issues:

  • Minimizing estate taxes
  • Assets can be hidden from third parties
  • Moving considerable tax burdens onto beneficiaries with more advantageous tax impositions

Practical Issues:

  • To have investments under one roof and overseen by specialists
  • Aiding charities

Tax Implications of a Trust

Under Maltese law the stipulated rule is that tax liability emerges when at least one of the trustees of the trust resides in Malta. The tax is determined in relation to the income attributable to the trust. This would compromise the total income tax under Maltese law, which would result from or are derived by the trustee at any stage in the life of the trust.

However, the inclusion of a transparent model in Malta’s tax laws allow in certain circumstances, for the tax authorities to inspect the trust and to either tax the transaction or absolve it, depending on the different factors that would attribute jurisdiction to tax in Malta or otherwise.
 

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