Taxation in Malta

Malta Tax Domicile

The Malta Tax Domicile of an individual is the most persistent tax connection recognised in Maltese tax law and is acquired from one’s father at birth or after reaching the age of 18 by choice. Losing one’s Malta tax domicile cannot happen without intent, action and strong resolve.  Likewise, for a foreign non-dom person to acquiring tax domiciled status in Malta requires significant planning and implementation.

Domicile of Origin

A person acquires tax domicile of origin at birth automatically from the father.  Children born out of wedlock or losing their father, automatically adopt the domicile of their mother. Where the country of birth is different from the country of the father’s domicile, the father’s domicile prevails as the domicile of birth of that individual.

The strength of the domicile of origin is demonstrated by the automatic revival of this domicile upon abandoning the domicile of choice without the acquisition of a new one.  The tax domicile of origin remains relevant throughout the life of the person as domicile retains its capacity for revival.

Tax Domicile of Choice

It is very difficult to renounce the domicile of origin. Only upon reaching majority can a person exercise legal capacity to adopt a new domicile – a domicile of choice.  However, the burden of proof of the acquisition of a tax domicile of choice falls upon the taxpayer claiming this change in tax domicile.

To lose one’s domicile of origin one must acquire a domicile of choice. It is not sufficient to leave the country of domicile of origin permanently without clear evidence that the individual has no intention whatsoever to return to the country of his domicile of origin.  In order to do so one must be able to prove that:

  • He is resident in the new country.
  • He intends to reside there permanently or for an unlimited time.

One must be physically present in a country in order to acquire the domicile of choice. One must also consider criteria such as the individual’s business and family interests in the new country of domicile, the ownership of any property there and any remaining ties with other countries.

Tax Domicile by Operation of Law

To establish a definite legal system by which certain rights and obligations may be governed, the objective of the law is that no person shall be without a domicile. This is crucial today, especially because free movement has given not only rights to individuals but also obligations and in the interest of liability, it is necessary to hold that a person cannot posses more than one domicile at the same time.

Given the importance of having a domicile, in situations where one cannot establish the domicile of origin and is unable to make a choice, the law intervenes. The third kind of domicile is the domicile of dependence and it arises by operation of law.

It is a domicile in which the law establishes a person’s domicile, such as in the case of a foundling, where the law provides that a foundling acquires the domicile of the country where he is found.

It has been held that as the domicile of origin requires the child to take the domicile of the father at birth, in the case where either the child’s father is dead or the child is illegitimate, the child acquires the domicile of the mother.

Until one has the legal capacity to adopt a domicile of choice, his domicile of origin will be replaced by domicile of dependence should the person on whom he is legally dependent adopt a domicile of choice elsewhere. This means that until a person reaches adulthood his domicile will shift according to the domicile of the person on whom he is dependent. Women take up their husband’s domicile upon marriage and such domicile is maintained even if they are legally separated or if the husband passes away (Attard, 2005).

Non Dom Status

Foreigners considering taking up residence in Malta under whichever Malta immigration programme or any Maltese special tax programme, will oftentimes enjoy the benefit of non-dom status. Non doms who are resident in Malta are not subject to tax on their worldwide income and instead are subject to tax on income arising in Malta.  Residence can be acquired under the special tax status programme the Malta Global Residence Programme requiring a yearly minimum tax payment of merely €15,000 and an upfront investment of only €6,500.   Alternatively, one can acquire Permanent Residence for life for all the family under the Maltese Permanent Residence Programme by buying or renting a property in Malta.

Malta Tax Domicile Planning

Losing, acquiring or reviving tax domicile requires expert planning by experienced tax lawyers.  For an expert tax consultation on Maltese tax domicile and residence planning, book a meeting with one of our tax lawyers. With over 20 years advising on Maltese personal and corporate tax matters, we look forward to assisting you with planning your relocation, residence or tax domicile in Malta.

Personal Taxation of Maltese Residents

This overview of Malta’s personal taxation of Maltese residents applies to persons taking up residence under European freedom of movement rules, under any immigration rights or residence programme as well as under the Maltese Citizenship by Exceptional Services rules.

Personal Tax Connecting Factors

Under Maltese law, the connecting factors determining the taxability of individuals are domicile and residence, remnants of Malta’s British colonial history dating back to the 1940s.

Citizenship is not a factor that effects the taxation of individuals and therefore acquiring Maltese citizenship by exceptional services does not, alone and in itself, give rise to any tax consequences.  Contact us for Maltese tax advice on the tax implications of the residence required by the Maltese citizenship rules, to assess the extent to which it may result in tax residence and to plan all remittances required under the investor citizenship route.

Permanent resident status under immigration law, particularly the Permanent Residence Programme Regulations of 2021, is not equivalent to Maltese tax residence.  Accordingly, Maltese permanent residence permits issued under these Regulations do not automatically result in residents being considered tax resident in Malta given that this immigration programme does not require any minimum physical presence in Malta in any given year.  Contact us for a consultation on the requirements, implications and planning of tax residence in Malta.

Tax Resident Status

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

Taxation of Non-Malta residents

Non-tax residents are only subject to tax on local source income, that is income arising in Malta including salaries, local business profits, rental income and pension income.

Malta Tax of Foreign Domiciled Residents of Malta

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.  Res non-doms are not subject to Maltese taxation on their foreign source capital gains, whether remitted to Malta 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.

Taxation of Income in Malta

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.

Other Maltese taxes

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 on Malta Tax Domicile.

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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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