Malta has become an extremely popular destination amongst foreigners over the years, due to its favourable climate, low tax rates, English speaking population and prime location in the centre of the Mediterranean. Furthermore, Malta embodies the Mediterranean joie de vivre, making the island an ideal destination for holiday homes, for people working in lucrative industries and for those looking to retire.
Malta forms part of the Schengen area, which allows people within this group of countries to travel freely across borders. Malta also has a visa waiver agreement with a number of countries.
If one decides to become a permanent resident, they will benefit from just 15% tax on the income brought to the country. Owing to double tax treaties with various countries, it is unlikely that taxes will have to be paid to the country of origin.
Residency in Malta
Becoming a resident does not mean that the person has been granted citizenship. However, s/he may enter or leave the country as they please for as long as required.
There are two types of residency, namely ordinary residence and permanent residence. Ordinary residency applies to those coming to Malta from the European Union. The tax paid ranges from 0 to 35% of the person’s income, minus tax credit, depending on earnings and marital status.
Permanent residency is open to expats worldwide. This includes EU citizens and it must be decided by consulting with a lawyer which scheme would be more suited to the EU citizen’s particular situation.
Malta Retirement Programme (MRP)
Malta has launched a generous tax incentive scheme to encourage European individuals to transfer their pensions to Malta and take up residency on the island. This Scheme is exclusively available to EU nationals, those countries forming part of the EEA, or Swiss nationals. Income tax will be fixed at 15% with a limited tax liability of €7,500 per annum and €500 for each dependant.
There are certain conditions in order to be applicable for this scheme, including:
- They must purchase a property in Malta worth at least €275,000 or €250,000 in Gozo. Alternatively, they may rent a property for €9,600 per annum in Malta or €8,750 in Gozo.
- They must reside in Malta for at least 90 days per annum
- Applicants may NOT spend more than 183 days in a calendar year out of the country.
- The entire pension would have to be remitted and taxed in Malta, and the said pension income shall constitute at least 75% of the income chargeable to tax in Malta.
- Applicant shall not be in an employment relationship.
- Applicant must be in possession of sickness insurance recognised across the EU
The Global Residence Programme
In contrast to the Residence programme which is mainly targeted towards EU citizens, this programme aims to attract individuals who are not nationals of the EU, EEA or Switzerland and who do not reside in Malta.
This scheme is exclusively available to non- EU nationals and income tax will be fixed at 15% on any foreign income remitted to Malta. This favourable income rate also applies to income from the spouse, minor children or adult children of the beneficiary. Other income that is chargeable to tax in Malta is taxed at the rate of 35%. This includes Malta-source bank interest and dividends distributed by a company resident in Malta. The beneficiary retains the right to benefit from double tax relief under Maltese Domestic law.
The Individual Investors Programme (IIP)
This programme grants citizenship by a certificate of naturalisation to individuals and their families to contribute to the economic and social development of Malta. After strict background checks and stringent vetting of applicants, they may be granted citizenship in exchange for contribution.
Applicants must be at least 18 years of age, provide proof of residency for at least one year preceding application and meet the following investment requirements:
- Possession of real estate with minimum value of €350,000 to be held for at least 5 years or lease a residential property of minimum value of €16,000 p.a for a period of 5 years
- Main applicant must make a contribution of €650,000 to the National Development and Social Fund with additional contributions for dependants
- An investment of stocks, bonds or special purpose vehicles with a minimum value of €150,000, held for a minimum period of 5 years
- Global Health insurance coverage of at least €50,000 for applicant and each dependant.
Highly Qualified Persons Rules
Malta is also working to attract foreign specialised executives in the financial services, gaming and aviation industries, with a 15% flat personal tax rate on annual income exceeding €81,457 up to €5 million arising in the course of their employment in Malta. Annual income in excess of €5 million is exempt from tax in Malta.
The expansion of financial services in recent years is showing a significant need for additional highly qualified workers. This programmes sets the rules in terms of which highly qualified non-Malta domiciled employees may benefit from a flat personal tax rate of 15% chargeable on their employment income.
Individuals must be in possession of relevant professional qualifications or adequate professional experience relevant to the profession or sector specifiedin the work contract and employment shall be with a company that is licensed and/or recognised by the Malta Financial Authority, the Gaming or Transport Authority.
Living in Malta
In addition to the above tax benefits, Malta has no inheritance tax, but duty of 5% is payable on the transfer or transmission of immovable property. Malta also has Special Designated Areas, which allows expats to purchase properties in certain areas of the island without the need for any permits.
Relocating to Malta offers rich culture, tranquil surroundings, crystal blue waters and expansive history, with countless Baroque churches and cathedrals, stunning architecture dating back hundreds of years, ruins of ancient temples and settlements, Roman remain and UNESCO world heritage sites. It is little wonder that the island is a beloved home to its locals and is also becoming the ideal home for an ever-increasing influx of expats from all over the world.
Technical information courtesy of Grant Thornton (Malta)