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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 expats moving to the islands.
The island was the
first EU country to establish a CBI program, which quickly became the most
prestigious in 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: 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 Persons Rules
Let’s explain each
one of them.
The global
residence programis the residency by investment program of Malta 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 programis 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 rulesare 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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