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TAXATION
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Personal Tax
For tax purposes an individual is normally regarded as being resident in Malta for particular year if, in that year, his stay in Malta exceeds 183 days. Foreigners residing in Malta however, are not taxed on their worldwide income, but only on Maltese source income and capital gains and on foreign source income remitted to Malta. Foreign source capital gains are not taxed even if remitted to Malta. The basis of taxation is therefore identical to that of Residents Scheme permit holders.
Ordinary Residency
An individual may also take up residence in Malta by declaring his intention within three months of arrival in Malta. A person taking up residence in Malta must complete and submit a form (EU or non-EU) at the Immigration Division at Police Headquarters.
The local authorities would require such foreign individuals to prove that they have sufficient means to live in Malta without being a burden on the country.
An individual may also become a resident of Malta as a consequence of taking up employment in Malta. A foreigner taking up such employment would require employment permission, which would be applied for by his employer.
Residents opting for this ‘Ordinary Residency’ are taxed on what they remit to the island and are taxed at these rates;
| Married Tax Rates | |
Single Tax Rates |
| First €10,482 | Nil |
First €10,482 | Nil |
| Next €8,153 | 15% |
Next €5,241 | 15% |
| Next €4,659 | 25% |
Next €2,912 | 25% |
| Remainder over €23,294 | 35% |
Remainder over €15,723 | 35% |
Other Provisions
Household effects originating from EU countries may be brought freely into Malta at any time. Goods originating from non-EU countries may be brought into Malta without the payment of VAT or Customs Duties by a person who intends to have his primary residence in Malta. Customs may ask for related proof.
Repatriation of capital and income
It is possible for a foreign resident to repatriate the following without any formalities:
• Any unspent remainder of the income or capital brought to Malta in excess of the minimum transfer amounts in accordance with the Residence Scheme or Rule.
• Any income this has accumulated during stay in Malta;
• Any proceeds from the sale of property/other investments.
Inheritance and capital transfer tax
Death duties: No death duties are payable in Malta however transfer duty is charged on the transmission of immovable property and/or any shares owned in a locally registered company (excluding shares in companies listed on the Malta Stock Exchange).
There is no real estate tax in Malta. Tax on capital gains arising from the sale of real estate in Malta does exist but residents are exempt if they have used the property as their main residence for three consecutive years and the property is disposed of not later than one year of vacating it.
Tax-related Incentives
Only 15% Tax for Foreign Residents
High Net Worth Individuals Rule (HNWI).
In September 2011, the old ‘Permanent Residents Scheme’ was replaced by a new one, referred to as the High Net Worth Individuals Rule (HNWI). The following is a list of incentives and advantages applicable to beneficiaries recognised as High Net Worth Individuals:
• A Low flat rate of income tax of 15% with a minimum tax liability of € 20,000 after double taxation relief per annum, plus an additional €2,500 per dependent. The tax is calculated on foreign income (excluding capital gains) remitted to Malta;
• High Net Worth Individuals are not subject to tax on worldwide income. Foreign source income is taxed in Malta to the extent that it is received in or remitted to Malta;
• There is no real estate tax in Malta. Tax on capital gains arising from the sale of real estate in Malta does exist but residents are exempt if they have used the property as their main residence for three consecutive years and the property is disposed of not later than one year of vacating it.
• Malta’s tax legislation provides for relief from double taxation, whether through negotiated double tax agreements with a substantial number of countries worldwide, or through unilateral provisions. Certain foreign income remitted to Malta qualifies for a reduced withholding rate of foreign tax (this applies typically to individuals, interest and royalties), or is exempt from foreign tax (this applies typically to private pensions and to certain capital gains). The provisions of each particular treaty entered into by Malta must, however, be consulted to determine the treatment of each item of income in each particular case.
Double taxation treaties in force as at end-June 2011:
| Albania | Finland | Lebanon | San Marino |
| Australia | France | Libya | Singapore |
| Austria | Georgia | Lithuania | Slovakia |
| Barbados | Greece | Luxembourg | Slovenia |
| Belgium | Germany | Morocco | South Africa |
| Bulgaria | Hungary | Montenegro | Sweden |
| Canada | Iceland | Malaysia | Spain |
| China | India | Netherlands | Switzerland |
| Croatia | Ireland | Norway | Syria |
| Cyprus | Isle of Man | Pakistan | Tunisia |
| Czech Rep. | Italy | Poland | U.A.E. |
| Denmark | Rep. of Korea | Portugal | U.K. |
| Egypt | Rep. Kuwait | Qatar | U.S.A. |
| Estonia | Latvia | Romania | |
CONDITIONS FOR APPLICATION TO BENEFIT FROM THE HIGH NET WORTH INDIVIDUAL RULES
EU nationals, nationals of the European Econimc Area and Swiss nationals
European Union nationals, those from the European Economic Area and Swiss nationals who are eligible have the right to pay tax at a beneficial rate of 15% on foreign source income (with the possibility to claim double taxation relief), subject to a minimum payment of €20,000 per annum, plus an additional minimum tax of €2,500 per dependent.
The permanent resident, who must be a non-Maltese domiciliary and be in possession of a health insurance along with stable, regular resources, must own a property worth €400,000 or rent a property for €20,000 per annum. An exception is being made for property purchased up to September 2011, worth the previous minimum of €116,000.
The qualifying property holding must not be a shared property, and the HNWI must pass a fit and proper test through an international due diligence exercise. Only an Authorised Registered Mandatory can handle the application and communication process. There is an application fee of €6,000.
Permanent residents must retain their qualifying property holding, their health insurance and stable resources. Although they must reside in Malta for a minimum of 90 days a year they cannot become Maltese domiciles and cannot stay in any other jurisdiction for more than 183 days a year (becoming tax residents there).
Residents will now be able to work or operate a business in Malta. Income derived from such activity is charged at 35%.
The issue of a certificate typically takes around three months from the date of the application. The minimum amount of tax shall be payable within thirty days of approval of the application and shall be credited against the tax due for the first year of residence. The holder of a permit must take up residence within 12 months from the issue of the said permit.
Non-EU nationals and other country nationals
HNWIs who are not EU, EEA and Swiss nationals have the same rules as EU, EEA and Swiss nationals along with a few other special rules: if the beneficiary intends to become a long-term resident or is already a long-term resident, he/she must enter into a qualifying contract that contemplates a financial bond of €500,000 and an additional €150,000 per dependant to cover potential social costs.
A qualifying contract is an agreement that is entered into between the Government of Malta and the applicant wherein the applicant delivers to the Government of Malta a sum of €500,000 and €150,000 for every dependent (“The Bond”) which the Government of Malta holds by title of gratuitous voluntary deposit.
The Bond will be restored to the applicant if such applicant declares and proves to the Government of Malta that he/she has renounced to the special tax status granted under HNWI Rules, prior to the expiration of four years from the date of the qualifying contract.
If the applicant either intends to become a long-term resident prior to the expiration of four years from the date on which he has applied for special tax status in terms of high Net Worth Individuals Rules, or becomes a long-term resident prior to the expiration of four years from the date on which he has applied for special tax status in terms of the High Net Worth Individuals Rules he/she will forfeit all the rights over the Bond. In other words a non-EU Resident may become a permanent resident under the new scheme after four years, once he/she forfeits the €500,000 Bond.
Under the new regulations, residents will now be able to work or operate a business in Malta, whereby income derived from such activity is charged at 35%.
High Net Worth Individual Rule simplified
| EU Nationals | Non-EU Nationals |
| Property Qualifications | Purchase €400,000 | Purchase €400,000 |
| Rental €20,000 p.a. | Rental €20,000 p.a. |
| Taxation | Preferential rate of 15% | Preferential rate of 15% |
| Minimum Tax | €20,000 p.a. +
€2,500 p.a. for each dependant | €25,000 p.a. +
€5,000 p.a. for each dependant |
| Physical Residence | Must reside for min of 90 days.
Must not stay in any other jurisdiction for more than 183 days. | Must reside for min of 90 days.
Must not stay in any other jurisdiction for more than 183 days. |
| Health Insurance | Applicable | Applicable |
| Fees for Application | €6,000 | €6,000 |
| Long term - Residency | N/A | Obtain and regularly renew visa or enter into a qualifying contract. |
Annual Requirements
An individual who benefits from special tax status must submit the Annual Tax Return, in respect of each calendar year in which he was resident in Malta under the scheme. Any material changes that affect the beneficiary’s special tax status must also be indicated in the said Return.
In order to ensure that an individual may properly benefit from this tax treatment, the Commissioner of Inland Revenue may require the individual benefiting from a special tax status to produce information and documents including certifications and declarations within a time specified by the Commissioner in the request itself.
The above information is just a general guideline and does not replace the need to consult with a tax professional should the need arise.
For a complete and detailed picture, kindly follow this link to the website of the Inland Revenue Department (Malta).
http://www.ird.gov.mt/regulations/hnwi.aspx
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