Malta is a popular destination for expats and legal entities. The tax system in the country can be beneficial, especially for those who know how to operate it. The main principles are explained in this guide by Julia Loko, Investment Programs Expert\ at Immigrant Invest.
Who is considered a tax resident in Malta: The Factors
Physical presence, or domicile status, is one of the factors that determine the tax resident status. A person who spends more than 183 days in the country during a calendar year becomes a Maltese tax resident, regardless of whether they intend to reside permanently.
The 183-day rule is a key determinant, and the days spent in Malta do not need to be consecutive. The total number of days physically present in Malta is what matters.
Non-domicile taxation. Expats who are non-domiciled residents in Malta are only taxed on income that is remitted to Malta. Any income earned outside the country and never brought to it is not subject to Maltese taxation
Note that non-domiciled tax residents married to a domiciled resident pay taxes as domiciled residents.
Ordinary residents are also considered taxpayers. The ordinary residence concept implies that Malta is the place where the individual habitually lives. The 183-day rule is not necessary in this case. This status is usually relevant to those who split their time between Malta and other countries.
Centre of vital interests. An individual may be considered a tax resident if their personal, economic, and social ties are stronger in Malta than in any other country, even if they spend less than 183 days there.
Employment or business activity. Individuals employed or conducting business in Malta, especially if their primary income is from Malta, may be considered tax residents.
Permanent address. Having a permanent address in Malta, along with family ties or business activities, can influence tax residency.
Intentions and circumstances. The intention to reside in Malta long-term, such as through property acquisition or establishing plans, may affect tax residency status.
Tax Residency Certificate and tax status in Malta: the difference
Malta Tax Residency Certificate confirms an individual’s tax residency in Malta. It is used to benefit from Malta’s double taxation treaties.
To get the certificate, one must:
- Prove eligibility for tax residency through presenting bank transactions, utility bills, or real estate agreements dated within the 183-day period;
- Register as a taxpayer and get a Tax Identification Number (TIN);
- Apply through the Inland Revenue Department (IRD) with proof of residence and financial documents. Processing takes a few weeks.
Malta tax status is mostly granted to individuals under specialized residency programs, such as Malta Global Residence Permit — more on it later.
Personal income taxes for expats in Malta
Non-residents in Malta are taxed only on income earned within Malta. Marital status or family situation does not affect tax rates. This applies to the self-employed expats and digital and nomads as well.
Income tax rates for non-residents:
- up to €700 — 0%;
- €701 to €3,100 — 20%;
- €7,801+ — 35%.
Non-residents do not have access to deductions or preferential rates available to residents.
No wealth or inheritance taxes are imposed on expats. However, fees like the duty on documents and real estate transfers, may still apply in specific cases.
Property and capital gains taxes for expats in Malta
Property taxes are not imposed in Malta. Spelling and purchasing taxes are as follows:
- capital gains tax — 8% to 10%, depending on ownership duration and whether it was their primary residence. Exemptions may apply for long-term ownership or primary residences;
- stamp duty of 5% is applied to expats purchasing property in Malta. First-time buyers may receive reduced rates.
Investors in Malta may avoid capital gains tax on a principal residence held for three or more years. Selling investment properties after five years may qualify for reduced tax rates.
Rental income for expats in Malta is taxed at a 15% flat rate under the optional scheme. This simplifies tax reporting, since there is no need to file detailed accounts.
Filings for individual taxes in Malta align with the calendar year (January 1 to December 31). For example, tax returns for 2023 were due by June 30, 2024.
Returns can be filed electronically, with extension requests possible under certain circumstances, though not automatically granted.
Tax residency for legal entities
A company is considered tax resident if it is incorporated in Malta or if it is managed and controlled from Malta.
Foreign companies operating in Malta but not considered tax residents are only taxed on Malta-sourced income.
Standard corporate tax rate in Malta is 35%. Shareholders of a Maltese company (including expat shareholders) may claim a tax refund paid by the company on distributed profits.
The most common refunds are:
- 6/7 — reduces the tax rate to 5% on trading income;
- 5/7 — reduces the rate to 10% on passive interest and royalties;
- 2/3 — if the distribution benefits from double taxation;
- full, for qualifying holding companies with substantial shareholding in subsidiaries) — reduces the rate to 0% on dividends and capital gains.
VAT rate in Malta is 18%. Companies, including expat legal entities, must register for VAT if they engage in taxable activities and exceed certain thresholds.
Some industries, such as financial services and healthcare, may be exempt from VAT.
Double taxation agreements (DTAs): Malta has DTAs with over 70 countries to prevent double taxation.
No specific transfer pricing legislation exists in Malta, but transactions between related parties must be conducted at arm’s length. The Commissioner for Revenue can adjust profits if transactions are not carried out as such.
General Anti-Avoidance Rules (GAAR) allow the tax authorities to disregard or recharacterize transactions that are deemed artificial.
Controlled Foreign Company (CFC) rules are in place under the EU’s Anti-Tax Avoidance Directive (ATAD). These rules may tax the undistributed profits of foreign subsidiaries controlled by a Maltese company if those profits are subject to low or no tax in the foreign jurisdiction and arise from non-genuine arrangements.
Exit taxes are also applied under the ATAD on the transfer of assets or tax residency out of Malta, before they leave the jurisdiction.
How to become an expat in Malta
One of the ways to move to Malta is by participating in the Malta Permanent Residence Programme. Another is joining the Malta Global Residence Programme (GRP).
The Malta GRP was created for non-EU, non-EEA, and non-Swiss investors and their families. Eligible family members include: spouses, partners, and principally dependent children under 25, siblings, parents and grandparents.
There are two investment options:
- €220,000+ in purchasing real estate.
- €8,750+ a year in renting real estate.
Regardless of the option, investors must pay €5,500+ administration fee, and maintain their investment throughout the residency.
Income tax under the the Malta GPR program is as follows:
- 0% — on foreign income not transferred to Malta;
- 15% — on foreign income transferred to Malta;
- 35% — on transferred foreign income.
The tax must be paid before April 30 of the year preceding the reporting year.
The residence permit can be renewed after the first year if the investor maintains the aforementioned retirements. After the first renewal it can be renewed for two more years.
In conclusion
Malta’s tax laws can be beneficial for individuals and companies alike — which makes it such a popular expat destination.
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