The Maltese tax regime offers distinct advantages, depending on your residency status, with a system that works somewhat differently from the UK.
Whether you are already living or working in Malta or planning a move, it makes sense to evaluate your residency, determine the most advantageous financial structures, and understand the pros and cons of any decisions you may make.
In this article, Chase Buchanan’s Malta team summarises the different tax incentives, visa programmes and key points to bear in mind around cross-border tax liabilities.
Maltese Tax Residency Defined
Tax residency and visa residency are two contrasting things. Your tax residency position will depend on how long you stay in Malta yearly rather than whether you hold a valid visa or permit.
Many expats assume they are tax residents in the country where they live, but this is not always the case.
Although some exceptions apply, the general tax residency rules are as follows:
- Residents of Malta who are in the country for 183 days or more are treated as tax residents within that period.
- New residents become categorised as such from their arrival date, not including the duration of stay in a previous year.
- People who live permanently in Malta are considered ordinarily resident, whereas those who are in Malta for long stays but not indefinitely need to assess their status. They may become ordinarily resident if they live in Malta for 183 days a year for three consecutive years.
Note that ordinary residents will not remain in this tax category if they decide to move abroad if the relocation is either indefinite or permanent.
Temporary travel outside Malta (of less than 183 days) will not usually mean losing residency status, particularly where the individual maintains economic or personal ties.
Considerations for Expat Tax Residents in Malta
Malta offers several investment and visa programmes with attached tax benefits. For most, the tax obligations are significantly lower than in their home country, without annual property taxes, inheritance or wealth tax.
The two most popular visa schemes are the Global Residence Programme and the Citizenship by Direct Investment initiative.
Malta Citizenship by Investment
Expatriates, including non-EU citizens, can invest in the Maltese economy and receive a residency permit alongside their families, with the option to progress to full citizenship.
They may either live in Malta for three years and then apply for a second passport or pay a higher contribution and apply after one year of residency. Applicants must make an economic contribution, donate to an appropriate charitable cause, and own or rent a residential home.
The tax advantages include:
- No tax on income derived from outside of Malta if it is not remitted to the country.
- No tax on capital gains, even if the profit is transferred to Malta.
- Local tax rates against Maltese sourced income.
Malta’s Global Residence Programme
Another route to Maltese residency is the Global Residence Programme, designed for non-EU foreign nationals who receive a special tax status.
A similar investment requirement applies, but the difference is that there is no minimum stay requirement, although successful applicants cannot live in another country for over six months of the year.
The tax rates available differ:
- A flat rate of 15% tax is applied to foreign income sent to Malta.
- Minimum tax contribution of €15,000 a year.
- Flat rate 35% tax charged on income arising in Malta.
- No tax on foreign-source income not remitted to the country.
Double taxation relief also applies, so anybody living in Malta and paying taxes there cannot be obliged to pay dual taxes on the same income or event. This final point is most relevant for expatriates who retain UK assets or income sources, such as owning a rental property in Britain.
While you will still need to declare the income and file a tax return in the UK, the double tax treaty means that, normally, you will only need to pay the higher rate rather than being taxed in both Britain and Malta.
Potential Changes to Maltese Visa Regulations
Although the Maltese visa programmes remain open to applicants, it may be for a limited time. Challenges brought by the EU court system are looking to taper citizenship by investment schemes and add extra checks to residency permit applications.
Therefore, if you intend to relocate to Malta or apply for a visa or permit through one of the above schemes, it may be advisable to expedite the process.
It seems unlikely that visa schemes will close altogether, but similar programmes in Cyprus and Bulgaria have stopped accepting new applications after pressure from the EU Commission.
Comparing Taxation as a Non-Resident in Malta
It might seem that tax residency isn’t an influential factor in deciding where to live, but it can significantly affect your finances.
Non-residents living part of the year in Malta are still liable to pay tax, although only on income or capital gains arising within the country. Without flat-rate tax bands or exceptions granted to visa applicants, this will often mean paying much higher taxes than necessary, according to the standard income tax bands.
For 2022/23, these go up to 35% on income over €60,000.
The question of tax becomes more relevant for retirees, as your exposure will depend on whether you hold a pension fund in the UK and are therefore liable for British income tax rates – rather than a 15% flat rate applied in Malta.
Different pension structures, such as a self-invested personal pension (SIPP), may be advantageous depending on your income levels and in which country your earnings currently arise. Either way, it is important to clarify whether you are a tax resident, where you are liable to declare and pay taxes and look at secure financial strategies to lower your overall tax burden.
We hope this article clarifies some important points to consider when evaluating your tax residency position and making decisions about the best way to manage your finances as a Maltese resident.
Please contact the Chase Buchanan Malta Office at your convenience for further guidance or to discuss any of the factors explored.