The Maltese climate, culture, history and lifestyle make Malta an attractive place to live in. The fact that this is coupled with a beneficial tax system for people taking up residence in Malta makes Malta an even more desirable location.

Introduction to Malta

Situated in the middle of the Mediterranean Sea, the Maltese archipelago consists of five islands, having a total area of 315 km2. Malta has a warm and healthy climate, enjoying blue skies for about 300 days a year. There are no biting winds, fog, snow or frost, and the annual rainfall averages a mere 550mm.

English, together with Maltese, is an official language in Malta, with everything being in English, from street signs to menus at restaurants. English is also the main medium of official documentation in banking and commerce. Italian is also widely spoken in Malta.

After becoming a full member of the European Union in 2004, Malta adopted the Euro in 2008, which played a pivotal role in Malta's rise as a financial centre of repute within the European Union. Various leading banks, insurance companies, fund managers, i-gaming companies and multinationals have since relocated part or all of their operations here.

Origins of Maltese tax system

Maltese tax law finds its origins in the former UK tax system and is based on UK tax law principles. The Income Tax Acts levied a tax on income and not on capital, and the distinction between items of income and capital is fundamental in

Maltese tax law. Today certain gains are subject to tax, but the general principle remains that unless specifically taxable, capital receipts are not subject to income tax.

Tax Status

The tax liability of individuals depends on their residence, ordinary residence and domicile.

Persons who are ordinarily resident and domiciled in Malta are subject to income tax in Malta on their worldwide income and certain capital gains.

Foreigners living in Malta are generally considered ordinarily resident in Malta but are not usually regarded as being domiciled in Malta. In this case one is not taxed on their worldwide income, but only on Maltese source income and certain capital gains and on foreign source income received in / remitted to Malta.

There is therefore no Maltese tax levied on:

  • Any foreign source income which is not received in / remitted to Malta; and
  • Any foreign source capital gains, even if this is received in / remitted to Malta.

Tax Treaties

Malta has a wide treaty network which mainly follows the OECD Model convention. Although Malta's treaties may often be used to restrict other countries' tax claims over certain income (such as pensions), in a number of Malta's treaties this will only be true where the income is received in Malta, and is therefore taxed in Malta. In terms of recently published rules, foreign source income which is received in Malta may be taxed in Malta at the beneficial flat rate of 15%.

High Net Worth Individual Rules for EU nationals

Individuals taking up residence in Malta may, subject to qualifying for the special tax status, benefit from a beneficial flat rate of tax of 15% on all foreign income which is received in Malta in terms of this special tax status, subject to the fulfilment of certain conditions, including:

  • Certain minimum criteria on the property where the individual lives:

    • If owned: it must have been purchased for over EUR 400,000;
    • If leased: the minimum annual rent payable must be EUR 20,000;
  • The applicant must be in receipt of stable and regular resources which are sufficient to maintain them and their dependents without recourse to Malta's social assistance system;
  • The applicant must be in possession of a valid travel document;
  • The applicant and his dependents must be in possession of a EU wide sickness insurance covering all risks normally covered for Maltese nationals;
  • The applicant must not be domiciled in Malta, and must not intend to be domiciled in Malta within 5 years from benefitting from the reduced rate;
  • The applicant does not benefit from a reduced rate of tax under other rules applicable in Malta.
  • The applicant must be a non- Maltese National.
  • The individual must be an EU/EEA or Swiss National.

However, the Government is expected to introduce a new set of rules shortly entitled the Global Residence Programme Rules for EU nationals to bring the thresholds mentioned above in line with those indicated in the Global Residence Programme Rules.

Physical Presence

Over and above the above conditions the applicant's lifestyle must reflect their status as a resident of Malta, therefore the applicant must not stay in any one other country for more than 183 days in a calendar year.

The minimum tax payable in Malta for nationals of any EU or EEA country and Switzerland is EUR 20,000, plus a further EUR 2,500 per dependant.

Continuing Compliance

The aforementioned conditions are continuing obligations which must be adhered to for the duration of the application of the beneficial tax treatment.

Highly Qualified Expatriates

Expatriates moving to Malta to take up employment in the top offices of companies licensed or recognised by the Malta Financial Services Authority, the Lotteries and Gaming Authority or with undertakings holding an air operators' certificate issued by the ATM and in receipt of a minimum annual salary of €81,205, may benefit from a flat rate of tax of 15% for a determined number of years, subject to the fulfilment of certain conditions.

In addition, investment services expatriates and insurance expatriates who do not qualify for, or opt not to benefit from, the 15% flat rate of tax, may benefit from an exemption from tax on certain fringe benefits, including a monthly subvention of €600, accommodation and vehicle expenses.

Malta Retirement Programme Rules

In terms of these rules, EU, EEA or Swiss nationals in receipt of a pension may, subject to qualifying for the special tax status, benefit from a flat 15% Maltese tax rate on their foreign source income which is received in Malta, subject to the fulfilment of certain conditions. For further information please see our "Retiring in Malta" factsheet1.

Global Residence Programme Rules for non-EU nationals

In terms of these rules, non EU nationals taking up residence in Malta may, subject to qualifying for the special tax status, benefit from a beneficial tax rate of 15% on any income arising outside Malta which is received in Malta subject to the fulfilment of certain conditions, including:

  • Certain minimum criteria on the property where the individual lives:

    • If owned, the value of the property must be at least €275,000 if situated in Malta and at least €220,000 if situated in the South of Malta or Gozo;
    • If leased, the minimum annual rent payable must be €9600 if situated in Malta and €8750 if situated in the South of Malta or Gozo.
  • The applicant must be in receipt of stable and regular resources which are sufficient to maintain himself and his dependants without recourse to the social assistance system in Malta;
  • The applicant must be in possession of a valid travel document;
  • The applicant and his dependants must be in possession of a EU wide sickness insurance covering all risks normally covered for Maltese nationals;
  • The applicant must not be a long-term resident;
  • The applicant must be fluent in one of the official languages of Malta; Maltese or English; and
  • The applicant must not benefit from a reduced rate of tax under other rules applicable in Malta.
  • The applicant must not be an EU/EEA or Swiss National.

Physical Presence

Over and above the aforementioned conditions the applicant's lifestyle must reflect their status as a resident of Malta, therefore the applicant must not stay in any one other country for more than 183 days in a calendar year.

The minimum Malta tax payable, in terms of these rules, is €15,000.

Inheritance and capital transfer tax

There is no general inheritance tax system. However, upon the transfer or transmission (upon death) of:

  • Immovable property situated in Malta or shares in a company mainly owning immovable property situated in Malta: 5% duty;
  • Marketable securities (mainly shares in Maltese companies): 2% duty – although exemptions may apply.

Wealth Tax

There is no wealth tax in Malta.

Footnote

1. https://www.kpmg.com/MT/en/IssuesAndInsights/Doing%20Business%20in%20Malta/Pages/default.aspx?k=+&u=http%3a%2f%2fwww.kpmg.com%2fMT%2fen%2fIssuesAndInsights%2fDoing+Business+in+Malta&redirect=false

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.