Malta: Residence In Malta: Tax Advantages in the Sun

The Republic of Malta consists of three islands, Malta, Gozo and Comino. They are situated in the center of the Mediterranean Sea, just 80 kilometers off the southern coast of Sicily, Italy. The climate is typically Mediterranean with mild winters, pleasant spring and autumn seasons and hot summers. Malta is the more heavily populated island; Gozo is quieter and more rural whereas Comino is uninhabited, except for a hotel.

The population is just under 400,000 and the official languages are English and Maltese. In practice everybody in Malta can speak English. The mainstay of the economy is tourism; the secondary pillars of the economy are the financial services sector, manufacturing, the semi-conductor industry and the Freeport.

Malta became independent from Britain in 1964 after being a colony for more than 200 years. It is a Republic since 1973. It is a fully-fledged democratic country with respect for the rule of law.  Malta is a member of the major international organizations including the United Nations and the Council of Europe, the International Monetary Fund and will become a full member of the European Union in May 2004.

Malta has a sound infrastructure, both financial and geographical. Telecommunications, postal links, courier services, banking and all other services are generally speaking very efficient and of a very high standard. The national airline, AirMalta, operates 35 flight routes mostly within Europe and the Mediterranean regions and most major European airlines have frequent flights to Malta. There is a frequent sea link with Italy.

Malta today offers persons of any nationality whatsoever the possibility of acquiring Permanent Residence Status. The residence scheme is the most advantageous one world-wide as will become apparent.

The English speaking population makes integration and communication easy; all official documentation is written in English; laws are written in English and Maltese; commercial and business relationships are generally speaking carried out in English. There are also private English-speaking schools, which offer a high level of education; the University is open to children of Permanent Residents. There are also a number of private hospitals offering a very high quality medical service.

The standard of living is high, comparable to other European countries of the Mediterranean region whereas the cost of living is generally cheaper than in Europe. It is therefore possible to live a better life with a lesser expenditure. There is a very low crime rate and foreigners are very rarely targeted, provided common sense is used, as in all situations. Children can be very safely brought up and there is a general care and awareness given by the people to children and elderly persons, particularly where foreigners are concerned. Most foreigners who come to live in Malta are surprised at the help and attention they are given by the local population.

Most importantly, the taxation level imposed on Permanent Residents is very advantageous. Tax at 15% is only levied on income brought into Malta and global income is not taxed in any way subject to a minimum payment of Lm1,800 (EURO 4,500) per annum;

The Permanent Resident’s global income, which is not brought to Malta, is not taxed in any way.

Once the permit is issued and the permit holder has registered with the Inland Revenue Department in Malta, the Maltese tax authorities will certify that for Maltese taxation purposes, the permit holder is resident in Malta. On the basis of this certificate, most countries (and in particular those which have a double taxation treaty with Malta), will consider the permit holder to be resident in Malta for tax purposes; the consequence of this varies from country to country. Some countries will not tax their citizens at all if they are resident in Malta; others will tax them at a much lower rate; others still will require their citizens who move their residence to Malta to sever all connections with their home country; other countries will require their citizens not to be present in their home country for more than a certain number of days in one calendar year. It is impossible to list the conditions, which each and every country imposes on its citizens who are resident outside of their country, because each country has its own taxation rules. However, in general, moving one’s residence to Malta is always highly tax advantageous, particularly for high net worth individuals.

The holder of a Permanent Residence Permit also gets an exemption from customs duty on household and personal effects brought into Malta, furniture and other domestic articles (excluding firearms and weapons of all kinds) and one car provided they are brought to Malta within six months of the issue of the permit. Personal effects and the vehicle may be taken back out of Malta with no charge.

Once a Permanent Resident decides to abandon his Maltese residence, accumulated capital and income may be taken back out of Malta with no restrictions. No death duty (succession tax) is payable in Malta but on a person's death there is a 5% charge on immovable property situated in Malta.

When the Permanent Resident abandons his Maltese residence, he is entitled to re-sell any immovable property and take the capital out of Malta but the profit made from the sale is taxed as a Capital Gain; the rate for Capital Gains Tax is 35% at the present moment.

The main advantage of the Maltese scheme is that no minimum stay or residence in Malta is required after the Permit has been issued; but when the Permanent Residence Permit is first issued the holder must come to Malta at least once within the first twelve months to have his passport stamped and to register with the Inland Revenue Department. Moreover within twelve months from the issue of the permit, the holder must either purchase an apartment for not less than EURO 75,000 or lease/rent property for not less than EURO 4,500 per year.

Housing is still relatively cheap in Malta, compared to the rest of Europe and the Mediterranean. The legal costs and taxes for buying property are also relatively low and usually will be in the region of 10% of the purchase price. Once the property is purchased, there are no further payments or expenses to be made. There are no rates, contributions or any other sort of payment. Permanent Residents cannot be employed by a Maltese person or Maltese registered company and cannot offer freelance services to Maltese persons or Maltese registered companies. However a Permanent Resident may use Malta as a base to work from, provided that he does not offer his services on the local market.  A Permanent resident may also be employed by or offer his freelance services to persons or companies outside Malta.

The documents required for obtaining a Permanent Residence Permit are the following. Careful note should be made about the requirements because missing or incomplete documents will hinder the issue of the permit

1. Photocopy of passport for applicant and for his wife and children if any – no need for verification or authentication
2. Three passport photographs for applicant and for his wife and children if any – preferably in colour
3. Birth certificate for applicant and for his wife and children if any – originals or copies issued by a state authority; where the document is not in English, an official translations should be supplied
4. Marriage certificate (if applicable) – originals or copies issued by a state authority; where the document is not in English, an official translations should be supplied
5. Banker’s statement that applicant has an income in excess of Euro 25,000 or capital assets in excess of EURO 375,000 – original
6. Police conduct certificate for applicant and for his wife and children over 14 years if any – originals or copies issued by a state authority;
7. A declaration by applicant, spouse and children over 14 that they have no previous convictions or ongoing criminal proceedings; this must be signed before a Commissioner for Oaths or Justice of the Peace; (we will send a draft this by fax or e-mail)
8. A client details form (which we will send by fax or e-mail)
9. An application form signed by the applicant (we will send this by fax or e-mail) and which should be left blank for us to fill in with the required details

Please note also the following:

10. If the applicant is living with a woman but they are not married, two separate applications must be filed and both parties must satisfy the income requirements
11. If any one of the applicants has been divorced, a marriage certificate and a divorce certificate should be sent – originals or copies issued by a state authority
12. British citizens, instead of a Police conduct certificate, should obtain a Personal Access Enquiry Form from the police station of their place of residence
13. Where police authorities do not issue conduct certificates, the applicant must send three character references from his bank, lawyer, accountant, employer or ex-employer or similar and the reference should state that the applicant has a sound financial position and where possible, that he has an income of more than EURO 25,000.

A correctly submitted application is approved in about three to four months.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.