Capital Gains Tax in Malta

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There are many reasons why an individual or business may wish to relocate to Malta, such as a stable economy and investment opportunities. However, the main reasons for the majority of these are centered around substantial financial gains. It should be noted that capital gains tax regulations in Malta are extremely attractive to those who are seeking to become embedded in a highly diverse financial ecosystem.

It is prudent to examine the finer points associated with capital gains tax in Malta and with this mind, the professionals at CSB Group can provide invaluable assistance. 

Capital Gains Tax in Malta

There are a number of factors that determine the applicable tax rate on capital gain tax, such as type of assets and its source. Let us begin by listing the types of assets that will be liable for this tax.

Capital Gains Tax in Relation to Personal and Business Assets

In the vast majority of everyday cases, capital gains tax will apply to all securities (stocks and shares) as well as intellectual property holdings. The same is true when referring to immovable property (such as real estate assets and hereditary allowances). These gains will be included with the taxable income associated with the individual or business entity.

It is also important to note that any capital gains accrued outside of Maltese jurisdiction will be taxed if the individual in question is legally domiciled in Malta.

Taxes Associated with Immovable Properties

While this is sometimes classified as a type of capital gains tax, the correct nomenclature is actually Property Transfer Tax (PTT). It should be highlighted that this tax is not attached to any profits. It is instead linked to the initial transaction cost. Maltese regulations currently stipulate that a flat rate of 8% of the value of the transaction will be charged. There are three additional caveats to mention before moving on:

  • Any property that was acquired prior to 1 January 2004 will be subject to a PTT of 10%.
  • A property purchased before 25 November 1992 will be charged a 7% tax.
  • In the event that an immovable property is sold within five years of its initial purchase, the tax will be further reduced to 5%.

Capital Gains Tax in Malta Attributed to Stocks and Shares

Certain securities may likewise be subject to capital gains tax in Malta. For instance, assets purchased via a share acquisition are often liable for a stamp duty tax. This duty is calculated based upon the market value of the assets at the time (the net value of the combined stocks and/or shares). The rates of taxation are as follows:

  • A flat 2% of the current market value.
  • 5% in the event that 75 % of any immovable assets are located within Maltese legal jurisdiction.

In the event of a loss, a group company is permitted to transfer these losses to another group as long as common shareholding between the two is greater than 50 %. Note that any such transfer must be completed within the same fiscal year.

A final point to highlight involves capital gains tax and Malta in the event of a sale. In this situation, the individual or business will be subject to a flat rate of 35 %. However, some exemptions may arise on occasion. These will be discussed in greater detail a bit later.

Joint Filings for Married Couples

The current capital gains tax laws in Malta permit a married couple to file a joint tax calculation. In other words, all intellectual property and income will be considered to represent that of a single individual. Spouses can also choose to file their tax returns separately. This is important to highlight, as many foreign individuals who choose to reside in Malta will be domiciled with a legal Maltese resident.

What Types of Capital Gains Tax Exemptions Exist in Malta?

One of the reasons why a growing number of individuals have chosen to relocate to Malta involves the rather generous capital tax exemption clauses which exist here. Therefore, let us list the most pertinent and explain each one in a bit more detail.

Capital Gains Associated with Non-Residents of Malta

Those who are currently not legal residents of Malta or who are considered temporary residents will not be subject to taxation on any capital gains that was garnered outside of Maltese jurisdiction. They will instead only be liable for capital gains which occurred within Malta.

Gross Foreign Capital Gains

As mentioned in the previous section, an individual who is resident but not domiciled in Malta will not be required to pay any tax on capital gains that were derived outside of Malta even if remitted to Malta and can be substantiated by supporting documentation. A Malta resident but non domiciled individual would only be taxable in Malta on foreign sourced income remitted to Malta and therefore it would be important to identify the source of remittance to Malta in the form of capital or income for tax purposes.

Fixed-Rate Investments

According to Maltese capital gains laws, any asset considered to yield a fixed rate of return (such as CDs, money market funds and corporate bonds) will not be subject to capital gains tax in Malta should these be subject to a final withholding tax.

Stocks, Shares and Asset Transfer Exemptions

It may be possible to obtain a tax exemption in the event that shares are transferred within a company that is listed on a recognised stock exchange. However, this will not normally apply to the majority of collective investment schemes.

In the event that an asset is transferred between two entities within a group company, no profits or losses will generally arise. Thus, intra-group capital gains tax will not apply subject to certain conditions being met and claw-back clauses in place.

There are likewise instances when gains accrued by non-residents will be exempt from capital gains tax. One example involves the transfer of assets associated with a collective investment programme based in Malta. Securities in Maltese companies and long-term insurance holdings may also enjoy this type of exemption. The only possible exception may involve Maltese companies holding specific types of domestic immovable property.

How CSB Group Can Provide Capital Gains Assistance

It is now clear to see why capital gains tax in Malta is often favourable for businesses as well as individuals. However, this is often an unfamiliar system for those who may have recently arrived. There are also nuances and caveats which will arise from time to time. This is when the team of experts at CSB Group can offer targeted levels of assistance.

Our professionals will provide customised solutions based on the needs of the client in question. This enables us to address even the most challenging of capital gains tax issues while simultaneously fostering long-term relationships with our clients. Note that we specialise in corporate tax, personal tax, international tax, and VAT compliance. These are but a handful of solutions which have already expedited the relocation of many individuals who choose to do business in Malta.

Should you have any additional questions or concerns, please do not hesitate to contact us directly. We will be more than happy to help.

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