Malta, being a member of the European Union allows non-Maltese nationals various routes to apply for residency in Malta. European nationals under EU legislation, as incorporated into Maltese law, are eligible to apply for Maltese residency if they intend to reside in Malta for more than 3 months. Ordinary residence is achieved through this route whereby an individual formally registers his presence with the local immigration and tax authorities.
Despite being the smallest EU member state, there are a number of reasons why individuals are relocating to Malta including the country’s strong economy, high quality healthcare and education, an English-speaking workforce and a favourable tax regime.
Legal Basis – The Malta Ordinary Residence
The right of EU nationals to establish themselves and their family in another EU country stems up from Directive 2004/38/EC on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States. The aim of this directive is to lay down the conditions for the right of free movement and impose limits to those rights on grounds of public policy, public security, or public health. It also clarifies the status of individuals who are employed, self-employed, students and unemployed nationals who are self-sufficient.
The key point under this directive is that an EU/EEA or Swiss national can live in another EU country for up to 3 months without any conditions or formalities, other than the requirement to hold a valid identity card or passport. If an individual intends to reside for more than 3 months, there is a requirement to register one’s residence.
The right of residence in another EU country applies to:
- Individuals who are employed or self-employed
- Individuals who are economically self-sufficient
- Individuals who are following a course of study including vocational training
This right also extends to family members of an EU nationals who satisfies the above conditions.
The Directive stipulates that Member States shall issue a residence card also to family members of an EU national even if those nationals are non-EU citizens. The Directive defines family members as:
- The spouse or partner of an EU national
- Children under the age of 21 who are economically dependent on the EU national
- Dependent direct relatives in the ascending line
Residential Property Requirement
Whichever eligibility criteria applies, the EU national is still required to have a residential property in Malta which can either be purchased or rented. Under the Ordinary Residence regulations, the legislation sets no minimum value for the rental or purchase price.
Taxation under Ordinary Residence in Malta
Individuals who obtain residency in Malta but are not considered to be domiciled, are taxed on source and remittance basis of taxation. A resident non-domiciled individual is taxed on income arising in Malta and foreign income, if this income is remitted or used in Malta. Accordingly, residents under this regime are not taxed on foreign source income not transferred to Malta, nor on any capital gains arising outside of Malta.
A limitation to this rule was introduced in 2018 whereby a minimum annual tax was introduced. Under this development non-domiciled residents of Malta are subject to pay a minimum annual ta of €5,000 if one earns at least €35,000 of annual income outside of Malta. The applicable tax rates for individuals are progressive tax rates between 0-35%, unless the individual applies for a Special Tax Status with the Commissioner for Revenue through his Authorized Registered Mandatory (ARM), which application is subject to few conditions.
How can we assist?
As a Maltese immigration firm our team has assisted numerous EU nationals and their family members to obtain EU residence in Malta and register with the local tax authorities. We can also assist with the filing of annual tax returns, application for Special Tax Status and all aspects of relocation in Malta.