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Malta’s approach to the global market has been making a difference for years, thanks to its favourable and competitive tax system that comprises of attractive features such as a full imputation system, refundable tax credit system and a large and expanding international tax treaty network.
Malta Tax Residency
The Income Tax Act (“ITA) does not incorporate a definition of the term ‘ordinary resident’. Thus, the derivation of such a concept may be elaborated by looking at the factual circumstances of a person.
A person can be a resident of Malta without being ordinarily resident, however, ordinary residence requires more than mere residence. It connotes residence in a place with some degree of continuity. Most of the principles applied in Maltese fiscal legislation, are construed on the Common Law model, most notably the principles of residence and domicile. Similar, to the UK, Maltese resident-not-domiciled individuals (or “res-non-dom”) are subject to tax on a source and remittance basis.
In the case of income arising outside Malta to a person who is not ordinarily resident in Malta or not domiciled in Malta, the tax shall be payable on the amount received in Malta.
No tax shall be payable on capital gains arising outside Malta to a person who is not ordinarily resident in Malta or not domiciled in Malta.
In other words, a person who is subject to tax in Malta on the basis of source and remittance will be taxed at the resident rates on:
- Any income earned in Malta; and
- Any foreign income to the extent received in Malta.
Malta will not require disclosure of or impose any tax on:
- Foreign source Capital Gains whether received in Malta or otherwise; and
- Foreign income which is not received in Malta.
This competitive tax ecosystem is appealing not only to corporations, businesses, entrepreneurs and wealthy individuals who are seeking the best and most suitable tax advise, but also for individuals who already have or are willing to take up tax residence in Malta through a non-investment programme.
How does the 183 Days Rule Work in Malta?
If you happen to spend more than 183 days in Malta during a single year, no matter the reason as to why you are there, you will be considered a tax resident of Malta for that year. If you are thinking of becoming a tax resident of Malta or are already one, it is imperative to comply with all the tax requirements, such as registering and submitting tax returns on time. Our team of tax experts will be more than happy to help you organise your taxes in Malta.
Can you be a tax resident in two countries?
It is important to differentiate between being a tax resident in Malta and just a resident in Malta. It's possible for someone to be considered a resident of Malta even if they are a tax resident of another country, and vice versa. Maltese tax law is based on domicile, rather than residency or citizenship status. In other words, if you aren't considered domiciled in Malta, only income and capital gains generated from activities within Malta are subject to taxation. Income earned outside of Malta that isn't brought into the country is not taxed. Furthermore, non-domiciled residents aren't required to pay taxes on capital gains earned outside of Malta, even if those gains are brought into the country.
Malta Double Taxation Agreement
The Malta Double Taxation Agreement is a treaty that Malta has signed with several other countries in order to avoid double taxation of income and gains. Under this agreement, taxpayers who earn income in one country and are residents of the other can claim relief from double taxation. The agreement typically provides for the exchange of information between the two countries to ensure that both countries' tax laws are respected. Malta has signed these agreements with many countries, including the UK, and the US, among others. These agreements are important for individuals and businesses that operate across borders, as they help to ensure that they are not unfairly taxed on the same income by multiple countries.
Different types of Malta Tax Residency Programmes
Our Team of Tax Advisors will be able to assist you and your family with your personal tax affairs, and especially with the tax-related side of the following programmes that will lead to Non-Investment Residence in Malta:
Key Employee Initiative
‘The Key Employee Initiative’ (KEI) has been introduced by Identity Malta with the aim of facilitating the issuing of single permits, which incorporate the work and residence permits, to highly-specialised third-country nationals who seek employment in Malta.
Highly Qualified Persons (HQP) Rules
This tax programme aims to attract highly qualified persons to occupy “eligible office” with companies licensed and/or recognized by the Malta Financial Services Authority – MFSA, Malta Gaming Authority – MGA or with undertakings holding an air operators’ certificate issued by Transport Malta.
The Malta Retirement Programme Rules
By virtue of the inclusion of the Subsidiary Legislation 123.134 to the Maltese Income Tax Act, a special tax status has been issued for retirees from EU, EEA countries and Switzerland when remitting their pension into Malta.
A person is an ordinary resident in a country by taking into account the duration of the individual’s presence in the country, frequency, regularity and nature of visits to the country, as well as business and family ties.
EU and Non-EU members can apply for Ordinary residence in Malta, albeit they are subject to different requirements.
Innovation and Creativity Rules
This taxation scheme was mainly devised to attract to Malta individuals working within knowledge-based industries such as iGaming, engineering, technology and product development in order to address the skills gap present in Malta’s labour market.
Under the Qualifying Employment in Innovation and Creativity (Personal Tax) Rules (the “Rules”), expatriates holding an eligible office under a qualifying contract of employment directly engaged in carrying out of duties or management of research, development, design, analytical or innovation activities, may opt to benefit from a reduced flat rate of tax of 15% on their employment income derived in respect of work or duties carried out in Malta.