Tax residence in Malta

Tax residence in Malta

Malta is made up of 3 small islands; Malta, Gozo and Comino, situated in the centre of the Mediterranean Sea, just south of Sicily.

Malta has been a member state of the European Union since 2004, member of the Schengen Area since 2007 and a member of the Euro zone since 2008. Malta is also a member of the Commonwealth.

Malta’s history is incredibly rich for such a small nation. The islands have been inhabited since approx. 5,200 BC and due to its geographical strategic importance, the islands have been fought over and ruled by a succession of Phoenicians, Romans, Moors, Normans, Sicilians, Spanish, the Sovereign Order of St John (ie Knights of Malta), French and British powers. Malta gained independence from the United Kingdom in 1964 and has been a republic since 1974.

Did you know that one of the oldest free-standing buildings in the world is situated in Gozo? The Neolithic Ggantija Temple complex is more than 5,500 years old and has been designated a UNESCO World Heritage Site.

The official languages of Malta are English and Maltese. Maltese is an official language of the EU, and the only Semitic language (written in Latin script) that has this status. It is descended from a variety of Arabic that was spoken in Sicily more than 1,000 years ago (Siculo-Arabic).

Malta has a Mediterranean climate with mild “winters” and warm (sometimes very warm) summers. It has on average approx. 300 days of sunshine a year, and practically no rain from April/May to September. Average temperatures are above 20 degrees Celsius from April to November, and average sea temperatures are above 20 degrees Celsius from June to November.

Maltese food blends influences from Italy, north Africa and Spain and naturally includes sea-food, pasta and meats. Rabbit stew is considered the national dish. Maltese potatoes are a sought-after vegetable in the Netherlands due to it being ripe much earlier than continental potatoes, and olives, lemons and oranges are cultivated in Malta.

Did you know that tomatoes from Malta and Gozo are used to make the ketchup sold by Asda, Sainsbury and Musgrave?

The Maltese economy is a highly industrialised and service based economy. It is classified as an advanced economy by the International Monetary Fund. Malta is considered a high-income country by the World Bank and an innovation driven economy by the World Economic Forum.

Income Tax Provisions – Remittance Basis of Taxation

A person who is tax resident in Malta, but not considered domiciled in Malta for tax purposes, is charged to tax in Malta on any income (including capital gains) arising in Malta, and on any income (but excluding capital gains) arising outside Malta which is received in (ie remitted to) Malta.

Income arising outside Malta which is not received in Malta, and capital gains arising outside Malta (even if received in Malta) is not charged to tax in Malta for a person who is tax resident, but not domiciled, in Malta.

The remittance basis of taxation is not available to persons who have (or have applied for) long-term residence or a permanent residence certificate or card in Malta (in terms of the Status of Long-Term Residents (Third Country National Regulations and the Free Movement of European Union Nationals and their Family Members Order).

Double Taxation Relief

Double taxation relief is available to Maltese tax residents in respect of tax levied outside Malta on any income received in Malta (which is subject to tax in Malta). Malta has concluded double taxation treaties with approx. 70 countries, and if no treaty is in place, Malta grants relief in terms of a domestic system of unilateral tax relief.

Did you know that the latest double tax treaty Malta signed is with Botswana?

Inheritance and Wealth Tax

Malta does not levy inheritance and wealth taxes. However, duty on documents and transfers is payable on transfers of certain types of property (including immovable property situated in Malta) regardless of the reason for the transfer. The current rate is 5% on immovable property.

RESIDENCE PROGRAMMES AVAILABLE

A number of options are available for a person wanting to take up tax residence in Malta, depending on nationality, background and personal circumstances.

Ordinary Residence in Malta

Persons who have stayed, or intend to stay, in Malta for a period longer than 3 months, should register their presence in Malta.

A citizen of EU/EEA/Switzerland has the right to enter, remain and reside in Malta. The registration procedure includes both forms and physical presence at the relevant offices in Malta.

A person, who resides in Malta (except for such temporary absences as may be considered reasonable and not inconsistent with a claim to be resident in Malta for tax purposes), is considered tax resident in Malta. In other words, a habitual and continuous physical presence in Malta constitutes tax residence.

Persons who are in Malta for a temporary purpose only without intent to establish tax residence in Malta, and who have not actually resided in Malta for a period equal to six months in any calendar year, are normally not considered tax resident in Malta.

Persons who have ordinary residence in Malta are taxed in Malta at the normal progressive income tax rates applicable (current maximum rate is 35%). There is no minimum annual tax liability.

The Residence Programme (RP)

Any non-Maltese person, who is an EU/EEA/Swiss national, may apply for status under the Residence Programme.

Status under the Residence Programme entitles the holder to a flat rate of tax of 15% on any income arising outside Malta which is received in Malta, subject to a minimum tax of €15,000 per annum (after deduction of double taxation relief).

There is no minimum period of stay in Malta, but persons with status under the Residence Programme must not stay in any one other jurisdiction for periods amounting to 183 days or more in any calendar year.

A number of conditions must be satisfied for a person applying for status under the Residence Programme. These include a qualifying property holding (rented for at least €9,600 per annum or purchased for at least €275,000), possession of valid sickness insurance and passing a “fit and proper” due diligence test. A lower threshold for the qualifying property holding is available for properties situated in Gozo or the south of Malta.

Status under the Residence Programme must be applied for through an authorised registered mandatory, and a non-refundable government application fee of €6,000 must be paid on application.

The Global Residence Programme (GRP)

Any non- EU/EEA/Swiss national may apply for status under the Global Residence Programme.

Status under the Global Residence Programme entitles the holder to a flat rate of tax of 15% on any income arising outside Malta which is received in Malta, subject to a minimum tax of €15,000 per annum (after deduction of double taxation relief).

There is no minimum period of stay in Malta, but persons with status under the Global Residence Programme must not stay in any one other jurisdiction for periods amounting to 183 days or more in any calendar year.

A number of conditions must be satisfied for a person applying for status under the Residence Programme. These include a qualifying property holding (rented for at least €9,600 per annum or purchased for at least €275,000), possession of valid sickness insurance and passing a “fit and proper” due diligence test. A lower threshold for the qualifying property holding is available for properties situated in Gozo or the south of Malta.

Status under the Global Residence Programme must be applied for through an authorised registered mandatory, and a non-refundable government application fee of €6,000 must be paid on application.

The Malta Retirement Programme (MRP)

Any non-Maltese person, who is an EU/EEA/Swiss national, may apply for status under the Malta Retirement Programme, unless he/she also has a non-EU/EEA/Swiss passport.

Status under the Malta Retirement Programme entitles the holder to a flat rate of tax of 15% on any income arising outside Malta which is received in Malta, subject to a minimum tax of €7,500 (+€500 per dependent) per annum (after deduction of double taxation relief).

A person with status under the Malta Retirement Programme must be resident in Malta for a minimum of 90 days a year (averaged over any 5-year period) and must not stay in any one other jurisdiction for periods amounting to 183 days or more in any calendar year.

A number of conditions must be satisfied for a person applying for status under the Malta Retirement Programme. These include a qualifying property holding (rented for at least €9,600 per annum or purchased for at least €275,000), possession of valid sickness insurance and passing a “fit and proper” due diligence test. A lower threshold for the qualifying property holding is available for properties situated in Gozo or the south of Malta.

The pension income of a person with status under the Malta Retirement Programme must constitute at least 75% of the person’s chargeable income and must be all received in Malta.

Status under the Malta Retirement Programme must be applied for through an authorised registered mandatory, and a non-refundable government application fee of €2,500 must be paid on application.

The United Nations Pensions Programme (UNPP)

Any non-Maltese person may apply for status under the United Nations Pensions Programme.

Status under the United Nations Pensions Programme entitles the holder to an exemption from paying tax on the UN pension income and a flat rate of tax of 15% on any other income arising outside Malta which is received in Malta, subject to a minimum tax of €10,000 (+ an additional €5,000 for a spouse in receipt of a UN pension) per annum (after deduction of double taxation relief).

There is no minimum period of stay in Malta, but persons with status under the United Nations Pensions Programme must not stay in any one other jurisdiction for periods amounting to 183 days or more in any calendar year.

A number of conditions must be satisfied for a person applying for status under the Residence Programme. These include a qualifying property holding (rented for at least €9,600 per annum or purchased for at least €275,000), possession of valid sickness insurance and passing a “fit and proper” due diligence test. A lower threshold for the qualifying property holding is available for properties situated in Gozo or the south of Malta.

At least 40% of the person’s UN pension must be received in Malta.

Status under the United Nations Pensions Programme must be applied for through an authorised registered mandatory, and a non-refundable government application fee of €4,000 must be paid on application.

The Malta Residence and Visa Programme (MRVP)

Any non- EU/EEA/Swiss national, may apply for a residence certificate under the Malta Residence and Visa Programme.

Status under the Malta Residence and Visa Programme does not entitle the holder to any special tax rate on any income arising outside Malta which is received in Malta, and does not subject the holder to a minimum tax charge.

There is no minimum period of stay in Malta, but persons with status under the Malta Residence and Visa Programme must not stay in any one other jurisdiction for periods amounting to 183 days or more in any calendar year.

A number of conditions must be satisfied for a person applying for status under the Malta Residence and Visa Programme. These include a qualifying property holding (rented for at least €12,000 per annum or purchased for at least €320,000) held for at least 5 years, possession of valid sickness insurance and passing a “fit and proper” due diligence test. A lower threshold for the qualifying property holding is available for properties situated in Gozo or the south of Malta.

A person with status under the Malta Residence and Visa Programme must be able to show an annual income outside Malta of at least €100,000 or assets situated outside Malta worth at least €500,000 and must invest in Maltese shares or government bonds for at least €250,000 (for a minimum period of 5 years).

Status under the Malta Residence and Visa Programme must be applied for through an authorised registered mandatory, and a non-refundable government application fee of €5,500 must be paid on application. An additional government application fee of €24,500 is payable upon a successful application.

Conclusion

Papilio Services Limited is an authorised registered mandatory and are able to handle all requests for application/registration under any of the above programmes.

If you have any further questions or queries regarding tax residence in Malta, please do not hesitate to contact Thomas Jacobsen on info@papilioservices.com.