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Establishing your tax residency in Malta
We are talking about Malta. Its privileged geopolitical location, its otherworldly beaches, and historical sites have made it one of the must-see places in The Mediterranean.
Malta is known as an open-air museum. But its rich history and deep cultural Christian roots aren’t the only reasons why there are so many ex-pats moving to the islands.
The island was the first EU country to establish a CBI program, which quickly became the most prestigious on the planet. And it has one of the most solid economies in the whole EU. In fact, Malta and Germany were the only countries that didn’t suffer a recession during the European debt crisis in the early 2010s.
And, on top of that, Malta offers one of the best non-dom regimes in Europe to attract foreign investors to the island offering a special 15 % personal income tax rate. Add to that a double taxation treaty network of over 70 agreements, and you’ll see why we love Malta so much.
Compare that income tax rate to the OECD average (almost 24%) and you’ll probably start seeing why so many foreigners are moving to Malta.
Add that you’d be moving to one of the most beautiful Mediterranean islands with everything that the Mare Nostrum promises: a wonderful climate, breathtaking sights, heavenly beaches, welcoming people, good wine, and mouthwatering food.
But Malta is more than a pretty face with fantastic tax optimization opportunities. It offers first-level financial services and boasts a diversified, technological, and service-oriented thriving economy. Small economies are generally too reliant on FDI, which makes them vulnerable, but the diversification of the Maltese economy has helped it build a rock-solid economy and reputation.
Most of the island’s industries are high-tech, including semiconductors, medicine, software, aero-parts, and finance.
Relocating your tax residency to Malta offers:
- The possibility of qualifying for a non-dom regime with a 15 % income tax rate.
- Establishing a company in a jurisdiction with a marvelous corporate tax refund system.
- Living in a country with advanced industries.
- Establishing crypto, e-gaming, or forex business in one of the pioneers of licensing in those areas.
- Taking advantage of its amazing tax treaty network of more than 70 agreements.
- Using the terrific, remittance-based, Maltese tax system for tax planning.
The Maltese tax system
Jurisdictions with attractive tax systems tend not to offer too much beyond that amazing benefit, but Malta is one of the exceptions. It comes with a sophisticated tax system, which is fully supported by the EU and the OECD, which is fully onshore but with almost unheard benefits. Moreover, it also has a deeply diversified economy with a plethora of options for all kinds of skilled workers, entrepreneurs, and investors, and the possibility of gaining citizenship and residency by investment.
At first glance, seeing a 35 % corporate tax rate and a 35 % top income tax rate may not seem too attractive.
But the devil is in the details.
On the corporate side, Malta has a tax refund system (full refund, 6/7ths, 5/7ths, 2/3rds, and foreign tax relief) that can fully exempt certain holding companies from corporate tax and lower the tax rate of many companies to 5 %.
On the personal side, Malta has a non-dom status that reduces the income tax rate to 15 %.
As you read it. Let’s name a couple of examples. Imagine you’re a German citizen that relocates to Malta under the non-dom regime and you earn €100,000 per year (the number is simply for simplification purposes). Let’s not complicate the example with deduction, church tax, or filing as a couple.
In Germany, that would mean, after a complex calculation process, a total tax burden of around €35,000. That means you only get to keep €65,000 of your hard-earned money. And that’s without considering regional taxes.
Now, let’s imagine you make the same amount in Argentina. Without complications or deductions, it generally would mean you’d get to keep around €62,000 of your money.
In both cases, if you apply to one of the pathways that would allow you to relocate to Malta under the non-dom regime, you’d be taxed on a flat 15 % rate. That means you’d keep €85,000 of your €100,000 employment income as long as you make it or remit it to Malta.
Malta has no wealth taxes, and the system is based on domicile. Those with Maltese citizenship aren’t automatically considered tax residents, meaning only remittances are taxed. Non-domiciled residents (we’ll explain more on that ahead) are taxed on their Maltese-remitted income. This also applies to non-resident citizens, meaning they can reside in other jurisdictions to optimize their taxes.
Malta has one of the best double taxation treaty networks, with more than 70, including jurisdictions such as Macau and the Cayman Islands, yet having full compliance with the OECD and the EU.
Malta taxes the following income on the income tax for residents:
- Trading income
- Employment income
- Dividends, interests, premiums, or discounts
- Pensions (with exceptions)
- Sales and rent of immovable property
And for non-residents:
- Profits from permanent establishments in Malta
- Profits from office or employment exercised in Malta
- Income derived from immovable property in Malta
Malta doesn’t levy inheritance, wealth, or gift taxes. It has a 5 % stamp duty for immovable property sales.
The Maltese non-dom regime
Now, you’re probably wondering if the above-mentioned brackets apply to you if you decide to move to Malta.
There’s no simple answer; it depends.
First, we must explain the difference between tax residency and tax domicile in Malta. You can be a tax resident in Malta if you apply and are accepted in one of the varied residency schemes in Malta or the citizenship by investment program. In each of these cases, you’ll pay a 15 % income tax on your Maltese-sourced or remitted income.
Domicile is where you’re permanently settled. In the case you are considered to have your tax domicile in Malta, then you’ll declare your worldwide income in Malta.
However, if you’re a resident, non-domiciled foreigner, Malta only applies a remittance-based system. You’ll pay taxes on:
- Income generated in Malta.
- Capital gains deriving from Malta.
- Foreign-sourced income remitted to Malta except for capital gains income.
How can you enter the non-dom status? The system applies to those in one of the following residency programs:
- Global Residence Program
- Individual Investor Program
- Residence Program
- Retirement Program
- Highly Qualified Person Rules
Let’s explain each one of them.
The global residence program is Malta´s residency by investment program for non-EU citizens. It requires you to:
- Purchase €250k worth of government bonds.
- Make a €30k donation to the National Development Social Fund (NDSF.)
- Buy a property for at least €270k or rent a property for €10k per year.
- Hold your investments for at least five years.
It will grant you the possibility to live and work permanently in Malta, and a 15 % flat income tax rate with a non-dom residency status is you remit at least €25k per year to Malta. You must live in Malta for at least 90 days per year.
The individual investor program is the citizenship by investment program. It will give you a Maltese passport and the freedom to live, work and invest across the EU. It has tougher requirements:
- A €650k donation to the NDSF.
- Invest €150k in securities.
- Purchase a residence of at least €350 or rent one for an annual rent of minimum €16k.
- Hold your investments for at least five years.
This program may take over a year for you to receive the passport, but you won’t be required to live in Malta while you’ll hold an EU passport.
The residence program is only for EEA and Swiss nationals. You’ll receive the non-dom benefits as long as you remit at least €15k to Malta and don’t leave in any other jurisdiction aside from Malta more than 183 days per year. It requires you to buy a property for at least €275k or rent one for €9.6k per year.
The retirement program is also exclusive for EEA and Swiss nationals. The tax resident will receive the 15 % tax rate of foreign pension income as long as he or she remits at least €7.5k per year. They must reside in Malta for at least 90 days per year and not stay in any other jurisdiction for more than 183 days per year.
Lastly, the highly qualified persons rules are open for EU and non-EU citizens. They can benefit from the program for five years that can be extended to ten if they are EU citizens or four years that can be extended to eight if they are non-EU citizens. To be eligible, they must:
- Work on certain areas of the financial, aviation, and gaming industry.
- Receive employment income of at least €85k.
- Have at least five years of work experience.
- Hold professional qualifications.
If you want to know more about our citizenship and residency services in Malta, check out our article right here.
Who are we, and what can we do for you?
In Mundo, we help our clients live, work, and invest freely. That’s our core value, freedom. We help family offices, high net worth individuals, and investors from all over the world make better business decisions that help them live freely.
That’s why we offer first-level immigration, corporate, banking, financial, asset protection, and tax services all over the world. In Malta, we work with a team with over 25 years of experience providing immigration services and tax advice for high net worth individuals and their families.
We can offer the best advice and the best solutions for you if you want to establish your tax residency in Malta.
Malta has one of the best non-dom regimes in the whole world boasting a 15 % income tax rate, which is one of the lowest in the EU and significantly lower than the USA and Canada. It will lead you to terrific simplification of your tax planning and to significantly reducing your overall tax burden, even cutting it in half.
Malta offers one of the best non-dom regimes in Europe and a fantastic tax system in a friendly business environment filled with breathtaking sights and high-tech industries. Want to know more about our services? Enquire now!
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