MALTA Law and Practice Contributed by: Rosanne Bonnici and Rebecca Diacono, Fenech & Fenech Advocates
1. Tax 1.1 Tax Regimes
line entitled “Tax Residence” and, more recently, by one entitled “Foreign Workers”, timed to coincide with Malta’s offering of a visa or residence permit to digital nomads interested in spending time there. The Guide - line provides guidance on several key issues – such as the principle that an individual who moves to Malta to establish their residence there becomes tax-resident there as of the date of their arrival, regardless of the duration of their stay in Malta in any particular year – and on issues surrounding remittances used to cover “ordinary expenses”, and so on. Individuals who are res non-dom (ie, not beneficiaries under any one of the tax programmes discussed below) are now subject to a minimum annual tax charge of EUR5,000, assum - ing they have received at least EUR35,000 of foreign- sourced income in the tax year concerned. Self-Assessment Malta operates a self-assessment system of taxation. Individuals who are tax residents in Malta are taxed at progressive rates of tax, with the maximum tax band reaching 35%. Individuals may opt to apply “single”, “married” or “parent” tax rates – the latter two where applicable and subject to statutory conditions. The tax year for individuals is the calendar year, and individuals are obliged to submit a tax return, where applicable, by June 30th of the following year. Tax payable on certain forms of income, such as employ - ment income, is deducted at source. Where tax on a particular source of income is not deducted at source, the taxpayer shall become subject to the payment of provisional tax thereon (payable in three instalments throughout the tax year on account of the estimated current tax year liability). Tax programmes Malta has several attractive tax programmes in place, open to both EU/EEA/Swiss and non-EU/EEA/Swiss nationals, with the most commonly utilised pro - grammes being the Residence Programme (TRP) and the Global Residence Programme (GRP). A key benefit of both programmes is a flat 15% rate of tax on any foreign-sourced income remitted to Malta, subject to a minimum annual tax payment of EUR15,000. In light of the fact that the funds remitted to Malta to cover ordinary expenses may be deemed to be income in nature (unless proven otherwise), as per the Guideline,
The Income Tax Act (ITA) imposes income tax and capital gains on a limited number of chargeable assets, with respect to individuals, companies, trusts, foundations and partnerships. Malta does not currently have any wealth tax, gift tax or inheritance tax in force, but the Duty on Documents and Transfers Act (DDTA) levies transfer duty (stamp duty) on the transfer of a limited number of assets, both during a person’s lifetime and upon death. Individuals Individuals may become tax-resident in Malta in one of two ways: • by spending 183 days or more in Malta over a 12-month period; or • by moving to Malta with the intention of residing there indefinitely, basing themselves in Malta and only spending as much time away for business or leisure purposes as would be in line with a claim that a person is residing in Malta. The ITA applies the concepts of “residence” and “domicile”, as well as that of “ordinary residence” (these being principles formerly applied by the United Kingdom, as Malta’s tax laws date back to when it was a British colony). Malta also operates a remit - tance-based system of taxation for individuals (and other persons alike). Accordingly, individuals who are resident but not domiciled in Malta (so-called res non- doms) for tax purposes are subject to tax in Malta on: • foreign-sourced income, but only to the extent that it is remitted to Malta; These principles, and supplementary interpretative guidance on a number of practical issues that apply to individuals who are resident in Malta and benefit from the remittance basis of taxation, are now set out in a Revenue Guideline entitled “The Remittance Basis of Taxation for Individuals under the Income Tax Act” (the “Guideline”). This is supplemented by a Guide - • income arising in Malta; and • capital gains arising in Malta.
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