Maximize the benefits of NHR by forming a company in Malta

Many people take advantage of Portugal’s NHR program, but did you know you can maximize the benefits of NHR by forming a company in Malta? Here is why expats in Portugal should consider Malta to set up a business.

Overview of the NHR program

Portugal’s non-habitual resident program is designed to draw in some of the world’s most talented professionals and investors, thereby enhancing the country’s standing on an international scale. Launched in 2009, it can offer tremendous tax reductions for qualifying individuals. For instance, those who meet certain criteria may pay only a 20% rate on income or even totally exempt pensions from private sources. The policy has been immensely successful, with over 10,000 people benefiting from its benefits today.

Key advantages

The Portugal NHR program offers several appealing tax benefits that can be enjoyed over a decade-long period. Qualifying applicants are eligible to receive an exemption on most foreign income, as well as a 20% flat rate for Portuguese source incomes. This is significantly lower than the usual rates of up to 48%. Furthermore, there’s no minimum stay requirement and the country is seen as part of a white-listed tax environment within the European Union. Even better, gifts or inheritance given to direct family members will be exempt from taxes, while there is also absolutely no wealth tax imposed. Lastly, free remittance of funds to Portugal is allowed in this scenario. Find more information on the Portuguese government finance website.

Double tax treaties

Portugal’s Non-Habitual Resident (NHR) tax regime facilitates the ability of individuals to benefit from Double-Taxation Agreements (DTAs). These DTAs provide a flexible solution allowing for income earned abroad to be taxed in the source country, meaning that NHR individuals are not liable for taxation on most foreign source income. To accommodate this, Portugal has already established agreements with 79 countries (including Malta) and is committed to following the OECD model tax convention whenever an agreement does not exist. This means that those enjoying NHR status can make use of these arrangements and receive foreign income free from any obligation to pay taxes.

Why establish a business in Malta

Malta is a prime business location, boasting an established financial and professional services sector. With its friendly people, pleasant climate, stunning scenery and rich culture, there are countless reasons why business-minded individuals should consider setting up shop in this small country. Beyond the aesthetics, Malta also offers an array of practical and lifestyle advantages that make it an ideal destination for entrepreneurs.

Tax in Malta as a digital nomad

The Maltese corporate tax system is designed to incentivize businesses on the island by offering beneficial tax reliefs and plans. With its advantageous position inside the EU, Malta is an ideal jurisdiction for companies looking to form either a holding company or trading enterprise, providing many avenues for effective tax planning. Businesses incorporated and managed from within Malta are subject to a worldwide rate of 35%. However with Maltese tax law provisions, this can be lowered to an attractive 5%. This is achieved through a tax refund system allowing foreign shareholders of a registered business in Malta to get back up to 6/7th of taxes paid in the form of dividend payments. This results in an effective taxation rate of only 5%.

Our services

At Papilio Services, we understand the importance of adhering to local legislation. That’s why we provide registered office space in Malta as an option for our clients. Not only will this help them meet their legal and compliance requirements, but it also eliminates the need for costly office space when establishing a company.

Forming a company in Malta is an excellent way to maximize the benefits of NHR. The process is straightforward and cost-effective, with many tax advantages that make it an attractive option for expats in Portugal. We cannot advise on Portugal NHR applications, however we can put you in touch with one of our trusted partners, and we’re more than happy to work with your existing Portugal tax advisor. If you would like to learn more about how we can help you form your company in Malta, please contact us to set up a free consultation.