Malta’s Favourable Tax Regime for UK Non-Doms

Malta offers several attractive tax residence programmes, especially for UK non-domiciled individuals (non-doms), thanks to its favourable tax regime. Below is an outline of these programmes, how they operate, the taxation of income received in or arising from Malta, and the benefits they offer to UK non-doms.

Malta Tax Residence Programmes

Malta has established various tax residence programmes to attract foreign nationals, including UK citizens. These programmes include:

Global Residence Programme (GRP)

The Malta Global Residence Programme was designed to attract non-EU/EEA/Swiss entrepreneurs, high-net-worth individuals (HNWIs), and investors. This programme grants applicants a special tax status with a personal tax rate of 15% on foreign income that is remitted to Malta.

Residence Programme (TRP)

Tailored for EU/EEA/Swiss entrepreneurs, HNWIs, and investors, this tax residency programme also offers a special tax status that sets the personal tax rate at 15% on external sources of income remitted to Malta.

Malta Retirement Programme (MRP)

The Malta Retirement Programme aims to cater to retirees and provides a special tax status to all nationals. It offers a flat tax rate of 15% on any foreign pension income received in Malta. In 2020, this programme was extended to include non-EU nationals alongside EU citizens.

United Nations Pensions Programme (UNPP) in Malta

The United Nations Pensions Programme (UNPP) complements the various special Malta tax residence programmes available to applicants. This programme is accessible to all non-Maltese beneficiaries receiving a pension from the United Nations Joint Staff Pension Fund.

Malta Highly Qualified Persons Rules (HQP)

The Malta Highly Qualified Persons Rules (HQPR) aim to attract highly qualified individuals in the financial, gaming, and aviation sectors by offering a flat tax rate of 15% on any income generated in Malta.

Malta Startup Residence Programme (SRP)

The Malta Startup Residence Programme (SRP) is available to startup founders, co-founders, core employees, and their family members (i.e., spouse, de facto partner, minor children, and dependent adult children). This programme is applicable to non-EU/EEA/Swiss nationals.

Nomad Residence Permit (Malta Digital Nomad Visa)

The Nomad Residence Permit allows non-EU/EEA/Swiss nationals to maintain their employment based in another country while legally residing in Malta. This permit is designed for individuals who can work remotely and independently of location, utilising telecommunications technology. The majority of Malta’s digital nomads have been European citizens, but due to the increased demand for remote work following the pandemic, Malta has opened this opportunity to non-EU/EEA/Swiss nationals as well.

Investment Services and Insurance Expatriate Residency in Malta

Expatriates employed by or providing services to investment services or insurance companies can benefit from a favourable tax status due to various tax exemptions. An investment services company refers to an organisation holding a license under the Investment Services Act or recognised by the authority to manage and provide advice on collective investment schemes. Similarly, an insurance company is one authorised under the Insurance Business Act whose activities exclusively pertain to insurance.

Malta Ordinary Residence Permit

The Malta Ordinary Residence Permit is available to individuals who establish habitual residence in Malta. This permit is not tied to specific programmes and is based on physical presence and the intent to reside.

Taxation of Income Received in or Arising in Malta

Malta utilises a remittance-based tax system for individuals who are residents but not domiciled in the country. This system offers significant benefits for UK non-domiciled (non-doms). Here’s an overview of how it functions:

Income Arising in Malta

Any income generated within Malta, such as employment earnings, business profits, or rental income from Maltese properties, is fully taxable in Malta at progressive rates of up to 35%.

Foreign Income Remitted to Malta

Income earned outside of Malta is only subject to tax if it is remitted (brought into) Malta. If foreign income remains outside Malta, it is not taxable in Malta.

Foreign Capital Gains

Capital gains realised outside Malta are not taxable, even if they are brought into Malta. This is a significant advantage for individuals with considerable investment portfolios or property sales abroad.

Double Taxation Relief

Malta has an extensive network of double taxation treaties with over 80 jurisdictions, including the UK, ensuring that income is not taxed twice. Relief is provided through either tax credits or exemptions.

Benefits for UK Non-Doms

UK non-doms can take advantage of several features of Malta’s tax residence programmes:

a. Remittance-Based Taxation

UK non-doms who establish tax residency in Malta benefit from the remittance-based system, which means they are only taxed on foreign income that is brought into Malta, enabling effective management of their tax liabilities. Foreign income and capital gains that remain outside Malta remain untaxed.

b. No Inheritance or Wealth Taxes

Malta does not impose inheritance tax, estate tax, or wealth tax, making it particularly appealing for UK non-doms who may face inheritance taxes in the UK.

c. Favourable Tax Rates

Although Malta’s top income tax rate is 35%, the effective tax rate can be significantly lower through the utilisation of tax credits, deductions, and exemptions available under Malta’s tax treaties.

d. Double Taxation Relief with the UK

The Double Tax Treaty between the UK and Malta prevents UK non-doms from facing double taxation on income that is taxable in both jurisdictions. For example, dividends paid by a UK company to a Malta resident may be taxed in the UK, but the recipient can claim a tax credit in Malta. Additionally, occupational pensions (excluding government service pensions) are typically taxed only in the recipient’s country of residence, namely Malta.

e. Exemption for Foreign Capital Gains

Foreign capital gains are fully exempt from Maltese tax, even if they are remitted to Malta. This is an important benefit for UK non-doms with substantial investments or property sales abroad.

f. Special Tax Rates under Residence Programmes

For instance, under the Global Residence Programme (GRP), foreign income remitted to Malta is taxed at a flat rate of 15%, with a minimum annual tax liability of €15,000. This is especially advantageous for high-income individuals.

g. Pension Income Benefits

Under the Malta Retirement Programme (MRP), pension income that is remitted to Malta is taxed at a flat rate of 15%. This is beneficial for UK retirees receiving pensions from the UK.

h. Non-Discrimination Provisions

The Double Tax Treaty between Malta and the United Kingdom ensures that UK nationals residing in Malta are not subject to discriminatory taxation compared to Maltese nationals in similar circumstances.

Practical Example for UK Non-Doms

Consider a UK non-dom who becomes a resident in Malta under the Global Residence Programme:

– Foreign Employment Income: If they earn £200,000 from employment in the UK and remit £50,000 to Malta, only the £50,000 is taxable in Malta at 15%, resulting in a tax liability of €7,500.

– Foreign Capital Gains: If they sell a property in the UK for a gain of £100,000, this gain is not taxable in Malta, even if the proceeds are remitted.

– Rental Income in Malta: If they possess a property in Malta and earn €20,000 in rental income, this is fully taxable in Malta at progressive rates.

Key Considerations

– Domicile Status: To benefit from Malta’s remittance-based system, individuals must be residents but not domiciled in Malta. Domicile is a complex legal concept tied to an individual’s permanent home and intentions.

– Minimum Tax Requirements: Some programmes, like the GRP, require a minimum annual tax payment regardless of the income remitted to Malta.

– Property Requirements: Many residence programmes require individuals to purchase or rent properties in Malta that meet specific criteria.

Compliance with UK Tax Rules

UK non-doms must also navigate UK tax obligations, especially if they retain assets or income sources in the UK.

Conclusion

Malta’s tax residence programmes offer significant benefits to UK non-doms, particularly through the remittance-based taxation system, exemption of foreign capital gains, and favourable tax rates on foreign income. Combined with the absence of inheritance and wealth taxes, as well as robust double taxation relief agreements, Malta is an attractive destination for UK non-doms seeking to optimise their tax position. However, careful planning and professional advice are essential to ensure compliance with both Maltese and UK tax laws. Please contact us should you require any more information regarding the aforementioned tax residency programmes or any other international tax compliance obligations.