Private Client

Private client matters in Malta are predominantly governed by the following statutes:

• the Income Tax Act and relevant subsidiary legislation thereunder;
• the Income Tax Management Act and relevant subsidiary legislation thereunder;
• the Civil Code;
• the Trust and Trustee Act;
• the European Succession Regulation;
• the Duty on Documents and Transfers Act;
• the Immigration Act; and
• the Maltese Citizenship Act.

The tax obligations of an individual may vary according to his or her status as:

• an ordinary resident of Malta (or not); and/or
• domiciled in Malta (or not).

A number of special regimes are available which may reduce the tax rates that apply to certain individuals. These include:

• the Malta Retirement Programme (flat tax rate of 15% subject to a minimum tax liability);
• the Global Residence Programme for non-EU/European Economic Area (EEA)/Swiss citizens (flat rate of 15% subject to a minimum tax liability);
• the Residence Programme for EU/EEA/Swiss citizens (flat rate of 15% subject to a minimum tax liability);
• the United Nations Pension Programme (exemption for pension income subject to a minimum tax liability);
• the special regime applicable to individuals deriving income from sports activities (flat tax rate of 7.5%);
• the tax on royalties on qualifying literary works;
• the special regime applicable to creative practitioners;
• the tax on investment services and insurance expatriates;
• the regime on qualifying employment in aviation, maritime activities and the servicing of offshore oil and gas industry activities; and
• the Highly Qualified Persons Rules for the Financial Services, Air Operator and Gaming Sectors and the Reproductive Technology Sector

Malta is a party to:

• more than 80 bilateral tax treaties;
• the Convention on Mutual Administrative Assistance in Tax Matters; and
• the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.

The tax charged on the transfer value of immovable property situated in Malta is based on revenue (or deemed market value).

Malta charges tax on the basis of:

• territoriality;
• ordinary residence;
• domicile; and
• remittance.

Briefly, Malta taxes:

• income and taxable capital gains arising in Malta;
• income and taxable gains arising outside Malta to an individual tax resident and domiciled in Malta; and
• income (but not capital gains) arising outside Malta to an individual who is tax resident but not domiciled in Malta, if such income is received in Malta (ie, remittance basis of taxation).

Malta does not charge tax based on nationality.

The ‘remittance basis of taxation’ means that an individual who is tax resident but not domiciled in Malta will be taxed on:

• any income and capital gains arising in Malta; and
• any income arising outside Malta which is received in Malta.

Capital gains arising outside Malta will not be subject to tax in Malta, even if received in Malta.

An individual who is ordinarily resident and domiciled in Malta, is a long-term resident in Malta or is married to a person who is ordinarily resident and domiciled in Malta will normally be taxed on a worldwide basis.

For an individual, ‘resident in Malta’ means an individual who resides in Malta, “except for such temporary absences as to the Commissioner may seem reasonable and not inconsistent with the claim of such individual to be resident in Malta”. Typically, physical presence in Malta for 183 days or more in any calendar year will establish residence in Malta for Maltese tax purposes.

The term ‘ordinary residence’ is not defined in law, but the concept seems to have been derived from pronouncements of the UK courts. A person can be resident in Malta without being ordinarily resident in Malta and ordinary residence requires something more than mere residence. Usually, a person who lives in Malta on a permanent or indefinite basis is deemed ordinarily resident in Malta.

The concept of domicile is very different from residence. An individual acquires a domicile at birth (domicile of origin) and changing domicile (to a domicile of choice) requires more than just residence. It is often a question of intent (to live permanently in a country) and where the individual considers ‘home’ to be. A person can only be domiciled in one place at a time and since intent plays an important role, it is normally up to the individual to claim a change in domicile. It is possible to be resident in Malta for a very long time without becoming domiciled in Malta.

The personal tax year starts on 1 January and ends on 31 December each year.

(a) What taxes are levied and what are the applicable rates?

Income tax is charged on income and capital gains at a person’s personal tax rate (which depends on status and level of income). For an individual taxed at single rates, in 2024:

• the first €9,100 is tax free;
• additional income up to €14,500 is taxed at 15%;
• any further income up to €60,000 is taxed at 25%; and
• income over €60,000 is taxed at 35%.

For a married couple taxed at married rates, in 2024:

• the first €12,700 of their aggregate income is tax free;
• additional income up to €21,200 is taxed at 15%;
• any further income up to €60,000 is taxed at 25%; and
• income over €60,000 is taxed at 35%.

It is possible for a married couple where both spouses earn income to elect to be taxed at single or parent rates.

For persons qualifying for parent rates (eg, with children under the age of 18), in 2024:

• the first €10,500 is tax free;
• additional income up to €15,800 is taxed at 15%;
• any further income up to €60,000 is taxed at 25%; and
• income over €60,000 is taxed at 35%.

Individuals who are taxed in Malta on a remittance basis – usually because they are not domiciled in Malta – may be subject to a minimum tax of €5,000 per year if they have income outside Malta of €35,000 or more. This minimum does not apply to individuals who are beneficiaries under a special tax programme or regime.

(b) How is the taxable base determined?

Individuals are normally charged tax on their chargeable income, consisting of income and capital gains, less allowable deductions and exemptions. Chargeable income includes:

• gains or profits from a trade, business, profession or vocation;
• gains or profits from any employment or office (including fringe benefits);
• dividends, premiums, interest or discounts;
• any pension, charge, annuity or annual payment;
• rents, royalties, premiums and any other profits arising from property;
• any other gains or profits; and
• capital gains on:
• • immovable property;
  • marketable securities; and
  • other assets subject to capital gains tax.

(c) What are the relevant tax return requirements?

An individual must file a tax return by 30 June of the year following the basis year in question, recording all chargeable income arising or received in Malta (and any income or capital gains arising outside Malta if taxed on a worldwide basis). Individuals with employment income only may be classified as non-filers, in which case no tax return filing is necessary.

(d) What exemptions, deductions and other forms of relief are available?

• Exemptions:
• • Non-residents may be exempt from tax on interest, royalties, dividends and capital gains on securities, subject to the satisfaction of relevant conditions.
  • Royalties from qualifying intellectual property (currently applicable only to patents) may be exempt, subject to the satisfaction of relevant conditions.
  • Capital sums received by way of commutation of pension (up to 30% of the total pension), retiring or death gratuity, or received as consolidated compensation for death or injuries, are exempt.
• Deductions: Expenses of a private nature are normally not deductible, apart from certain payments, including the following:
• • alimony payments;
  • certain school fees;
  • childcare fees (subject to a maximum);
  • sports fees (subject to a maximum);
  • fees for studying at a recognised education institution;
  • certain national heritage donations; and
  • certain sports and cultural donations.
• Other forms of relief:
• • Relief for tax paid outside Malta is available if such income is charged to tax in Malta.
  • Tax credits are available for contributions to a private pension scheme, subject to the satisfaction of relevant conditions.

(a) What taxes are levied and what are the applicable rates?

Certain transfers may give rise to taxable capital gains, such as:

• transfers of:
• • immovable property;
  • securities;
  • intellectual property; and
  • beneficial interest in a trust; and
• de-grouping/value shifting when ownership in companies changes.

The gain is added to an individual’s chargeable income and taxed at his or her personal tax rate. Some transfers of immovable property situated in Malta may be taxed on the transfer value (and not the gain) at specific rates (eg 12%, 10% or 7%).

(b) How is the taxable base determined?

In general, the taxable base is the transfer value less the cost of acquisition.

(c) What are the relevant tax return requirements?

Taxable capital gains are included on a person’s individual annual tax return.

(d) What exemptions, deductions or other forms of relief are available?

• Exemptions:
• • Transfers of own residence where the property has been owned and occupied for at least three years as the transferor’s own residence;
  • Transfers of Malta government bonds/stocks;
  • Transfers of shares in companies listed on the Malta Stock Exchange;
  • Transfers of securities in a collective investment scheme listed on a recognised stock exchange;
  • Transfers of units relating to linked long-term business of insurance;
  • Transfers to close relatives; and
  • Transfers in connection with a dissolution of the community of acquests.
• Deductions: With regard to immovable property, costs such as the inflation element, ground rents paid, maintenance, improvements and expenses directly related to the transfer may be allowed.
• Other forms of relief: Relief for tax paid outside Malta is available if such income is charged to tax in Malta.

(a) What taxes are levied and what are the applicable rates?

There are no specific inheritance taxes in Malta, but transfer tax (ie, stamp duty) on certain assets, such as immovable property situated in Malta, may be applicable.

(b) How is the taxable base determined?

If transfer tax (ie, stamp duty) is applicable, as if it were transferred inter vivos.

(c) What are the relevant tax return requirements?

None.

(d) What exemptions, deductions or other forms of relief are available?

Certain transfers, especially to close relatives, may be exempt from transfer tax (ie, stamp duty).

(a) What taxes are levied and what are the applicable rates?

Certain income – such as interest income, some forms of capital gains and foreign investment income – may be treated as investment income for tax purposes and be subject to special rules re taxation. Normally, the applicable rate will be 15%.

(b) How is the taxable base determined?

The right to be taxed under the special rules for investment income is optional and is normally exercised by an election communicated to the payer of the income.

(c) What are the relevant tax return requirements?

None – income taxed under the investment income provisions need not be included in the tax return. If no election is made, the income should be included and taxed at a person’s individual tax rate.

(d) What exemptions, deductions or other forms of relief are available?

N/A.

(a) What taxes are levied and what are the applicable rates?

Apart from any capital gains tax that may apply, transfer tax (ie, stamp duty) may be applicable. The rate is normally 5%.

(b) How is the taxable base determined?

Stamp duty is normally charged on the higher of the transfer price or the market value.

(c) What are the relevant tax return requirements?

None.

(d) What exemptions, deductions or other forms of relief are available?

Certain transfers, especially to close relatives, may be exempt from transfer tax (ie, stamp duty).

N/A.

Maltese value-added tax (VAT) is charged on goods or services provided to Malta resident individuals at the general rate of 18%. Some goods or services are subject to lower rates and some goods or services are not subject to VAT. Other indirect taxes include customs and excise duties on certain goods and services (eg, alcoholic drinks, tobacco, insurance premiums).

Succession in Malta is mainly governed by the Civil Code. Other applicable rules may be found in:

• the Income Tax Act (re taxation of inheritances);
• the Duty on Documents and Transfers Act (re stamp duty); and
• the Trust and Trustees Act.

The general rule with regard to succession of immovable property situated in Malta is that Maltese law will apply (lex situs). However, for movable property, the general rule is that the law of the domicile of the deceased at the time of death will apply (lex domicilii). A will made outside Malta will normally have effect in Malta if it is made in the form prescribed by the law of the place in which the will is made.

EU Regulation 650/12 has been incorporated in Maltese law whereby the law of the last habitual residence of the deceased will apply. There is also the possibility of choosing the law of nationality of the deceased by declaration.

In the absence of specific rules with regard to conflict of laws, Maltese courts have adopted the principles of English common law.

The Civil Code has provisions regarding a reserved portion for descendants and surviving spouses.

The reserved portion for descendants is a right of credit on the value of the estate of the deceased and depends on the number of children that the deceased has:

• Children are entitled to a reserved portion of one-third of the value of the estate (in equal portions) if the deceased has up to four children.
• If the deceased has five or more children, they are entitled to a reserved portion of one-half of the value of the estate (in equal portions).

Limited grounds for disinheritance apply.

The reserved portion for a surviving spouse is a right of credit on the value of the estate of the deceased and depends on whether the deceased has children or other descendants at the time of death:

• A surviving spouse is entitled to a reserved portion of one-quarter of the value of the estate if the deceased has children or other descendants.
• If the deceased does not have children or other descendants, the surviving spouse is entitled to a reserved portion of one-third of the value of the estate.

A surviving spouse has right of habitation over the property occupied as his or her principal residence at the time of death. Such right ceases upon remarriage.

A pre-determined mode of succession is contemplated by law if the deceased has not made up a will. An estate will devolve in favour of descendants, surviving spouse, ascendants, collateral relatives or the government of Malta as follows:

• If the deceased has children or other descendants, the entire estate will devolve upon them.
• If the deceased has a surviving spouse but no children or other descendants, the entire estate will devolve upon the surviving spouse.
• If the deceased has both children or other descendants and a surviving spouse, the estate will devolve upon the children or other descendants (one-half) and the surviving spouse (one-half).
• If the deceased has no children, other descendants or surviving spouse:
• • the estate will devolve upon the nearest ascendant(s) if the deceased has no siblings;
  • if the deceased has ascendant(s) and siblings, the estate will devolve upon the ascendant(s) (one-half) and siblings (one-half);
  • if the deceased has no ascendant(s) but siblings, the estate will devolve upon the siblings; and
  • if there are no ascendant(s) or siblings, the estate will devolve upon the nearest collateral relative(s) in whatever line (up to the 12th degree).
• In the absence of any ascendant(s), siblings or collateral relatives, the estate will devolve upon the government of Malta.

The Maltese courts have general jurisdiction to decide disputes related to succession; and the Partition of Inheritances Tribunal has special jurisdiction in certain specific circumstances where the heirs do not agree on how a partition of the inheritance is to take place.

Wills are governed mainly by the Civil Code. A will made outside Malta will normally have effect in Malta if it is made in the form prescribed by the law of the place in which it is made.

The Maltese courts have consistently adopted the principles found in English common law. With regard to the capacity of the testator, the principle is that the law of the testator’s domicile on the date of the will applies. A legatee will have capacity to receive under a will if he or she has capacity under:

• the law of his or her domicile; or
• the law of the testator’s domicile.

With regard to formal validity, a will is normally valid if it complies with:

• the law of the place where the will was executed at the time it was executed; or
• the law of the domicile/habitual residence/nationality of the testator at the time the will was executed or domiciled at the time of death.

A will regarding immovable property should comply with the law of the jurisdiction in which the immovable property is situated.

A will made outside Malta will normally have effect in Malta if it is made in the form prescribed by the law of the place in which the will is made. In other words, the heirs should assess compliance with such rules. In case of disputes, an interested person may go to the Court of Voluntary Jurisdiction to seek an opening of succession in his or her favour.

Normally, it is unlawful for two or more persons to make a will under the same instrument. However, a husband and wife can make a unica carta will under the same instrument. There are rules with regard to capacity for disposing and receiving under a will and the registration of wills (public or secret), which require notarial acts.

With regard to ordinary wills, a public will must be received and published by a notary in the presence of two witnesses and registered in the Public Registry (its existence, not the contents). A secret will may be written by the testator and sealed and delivered to a notary who draws up an act of delivery on the will itself (or on a sealed envelope containing the will). The will is then delivered to the court for registration. Its existence will be clear only once a notary performs the relevant searches upon the opening of a succession. There are circumstances in which wills can be accepted having followed less stringent formalities, such as with privileged wills (eg, wills made at sea).

Other formalities include:

• capacity (including age, not being interdicted, being capable of understanding and of sound mind); and
• requirements with respect to witnesses (including age, residence, relationship and no interest in the will).

A will should always be drawn up in conformity with the applicable formalities, including capacity to make a will.

Best practice includes ensuring that the testator is acting of his or her own free will and not under undue influence from an interested party, so instructions should be taken from the testator on his or her own. It is important that the testator understands:

• what his or her assets are;
• the effect of making the will; and
• whether any claims may arise against his or her estate.

The following are essential:

• a proper description of assets and liabilities (if any) that are included in the will; and
• a proper identification of heirs and legatees.

Ensuring that the testator’s instructions are properly understood, any advice is documented and any concerns are recorded is recommended; and a proper file with all notes should be kept.

No one is obliged to accept an inheritance devolving upon him or her and a person can renounce his or her inheritance.

The imposition of conditions that are impossible or contrary to law or morals will vitiate a disposition. Conditions which restrain an heir from the benefit of inventory may be ignored; as may conditions which are unintelligible (ie, not annulling the disposition).

Any interested person may go to the Court of Voluntary Jurisdiction or the Partition of Inheritances Tribunal.

Succession usually commences when an interested person goes to a notary or lawyer who will carry out searches for public or secret wills. If no wills exist, the estate is divided according to the provisions of law.

Persons inheriting immovable property must make a declaration causa mortis and register this at the Public Registry. The appointment of an administrator is not mandatory.

Again, in case of disputes, any interested person may go to the Court of Voluntary Jurisdiction or the Partition of Inheritances Tribunal.

Trusts are governed mainly by the Trusts and Trustees Act in Malta, which sets out rules on:

• the creation of trusts; and
• the mandatory licensing and supervision of trustees.

The Hague Convention on the Law Applicable to Trusts and Their Recognition is integrated into Maltese law.

The Trusts (Income Tax) Regulations deal with:

• registration obligations (if applicable); and
• taxation of Maltese trusts (ie, where the trustee is resident in Malta).

Malta caters for both trusts and foundations and foundations are governed mainly by the Civil Code.

The Trusts and Trustees Act deals with the validity and recognition of trusts whose proper law is not that of Malta; while the Hague Convention on the Law Applicable to Trusts and Their Recognition is incorporated in the Trusts and Trustees Act. When the proper law of a trust is a foreign law, the validity of the trust, its construction, its effects and the administration of the trust:

• will be governed by such foreign law; and
• will be recognised and given effect to in Malta in accordance with the convention and the Trusts and Trustees Act (but may be subject to mandatory Maltese rules).

The application of mandatory rules will not produce the failure or invalidity of the trust, but terms may be varied to comply with mandatory rules.

Common types of trusts include:

• bare trusts;
• discretionary trusts;
• security trusts;
• charitable trusts;
• fixed interest trusts;
• life interest trusts;
• contingent trusts; and
• trusts for commercial transactions.

Foundations in Malta can be set up as:

• private foundations (for the benefit of a named person or class of persons); and
• purpose foundations (for the fulfilment of a specified purpose).

Both trusts and foundations can be set up to:

• prevent the property of a deceased person from vesting absolutely in his or her heirs;
• preserve and generate family wealth;
• avoid the division of assets into smaller shares;
• include special management provisions; and
• segregate assets from the general property of a beneficiary.

Yes, foreign trusts are recognised under the applicable regulations set out in the Trusts and Trustees Act, which incorporates the Hague Convention on the Law Applicable to Trusts and Their Recognition.

Trusts can be created:

• inter vivos (where a settlor transfers assets to a trustee to be held for the benefit of beneficiaries); or
• causa mortis (by way of a will).

The Trusts and Trustees Act provides that a trust may come into existence in any manner, including by:

• a unilateral or oral declaration;
• an instrument in writing (including by a will);
• operation of law; or
• judicial decision.

Unit trusts must be created by a written instrument.

A foundation may only be formed through a public deed or through a will.

The administration of a trust is performed by the trustee, in accordance with its terms and the Trusts and Trustees Act.

The administration of a foundation is performed by an administrator, in accordance with its terms and the Civil Code.

Trustees must:

• act with the prudence, diligence and attention of a bonus paterfamilias;
• act in utmost good faith; and
• avoid any conflict of interest.

A trustee’s duties include:

• safeguarding the trust property from loss or damage;
• keeping accurate accounts and records of their trusteeship;
• disclosing information to beneficiaries upon request; and
• keeping trust property distinct and separate from own property.

Trustees may not normally benefit under the trust (other than getting paid for the service provided).

The administrators of a foundation have similar responsibilities to those of the trustee of a trust.

Trustees must register a trust in Malta with the commissioner for revenue, unless:

• all the income attributable to the trust consists of income arising outside Malta (or income such as interest, royalties or dividends); and
• all the beneficiaries of the trust are persons who are not domiciled or not ordinarily resident in Malta.

Where the trustee of a trust is a person resident in Malta, tax will be payable on any income attributable to the trust. However, a number of exemptions exist, and a trust that only derives income arising outside Malta and has beneficiaries that are resident outside Malta will normally be transparent for Maltese income tax purposes, in which case no Maltese tax will be payable.

The trustee of a Maltese trust may irrevocably elect to compute the chargeable income of a trust as if such income were derived by a company ordinarily resident and domiciled in Malta.

A Maltese foundation is treated as a company ordinarily resident and domiciled in Malta for tax purposes.

The administrator of a Maltese foundation may irrevocably elect to compute the chargeable income of a foundation as if such income were derived by a Maltese trust.

A trust registered for tax purposes must file returns:

• with regard to:
• • gains on transfers of beneficial interests; and
  • income attributable to a trust; or
• where a trust has elected to be taxed as a company.

A foundation must:

• file returns with respect to income and capital gains as if it were a company; and
• report any changes in the foundation set-up.

Beneficial ownership declarations for both trusts and foundations must also be filed, together with notifications of any changes.

A trust should always be drawn up in conformity with the applicable formalities and all applicable legal requirements.

Best practice includes understanding as much as possible about the settlor and beneficiaries, including:

• family history and relationships;
• the sources of wealth;
• the objectives and purposes of the trust; and
• any particular specific circumstances of the beneficiaries.

Ensuring that the settlor is acting of his or her own free will, and not under undue influence from an interested party, is important, so instructions should be taken from the settlor on his or her own. It is also vital that the settlor understands:

• the effects of the settlement; and
• the limitations on future influence and control of the assets settled into the trust.

Settlors should seek advice on the tax and other implications of settling assets in a trust.

A proper description of assets settled in the trust and proper identification of beneficiaries are essential.

Ensuring that the settlor’s instructions are properly understood, any advice is documented and any concerns are recorded is recommended; and a proper file with all notes should be kept.

In general, transparency with regard to tax and beneficial ownership of entities, trusts and foundations is ever-increasing. This has put and will continue to put limitations on privacy and confidentiality, and rules on the mandatory exchange of information are expanding.

Trends such as increased mobility and choice as to where work and services can be performed – especially with regard to electronically or internet-based services – means potentially more complexity when determining a person’s residence for tax purposes. However, it also means that new features, such as the new Nomad Residence Permit rules and the associated tax rules, will continue to be developed.

The distinction between domicile and residence – and the resulting tax consequences, including a remittance-based system of taxation – remain features of the Maltese tax system.

Malta continues to be well regulated and ensuring that all compliance and reporting obligations are satisfied is essential. Seeking proper advice in all relevant jurisdictions before making changes or setting up structures is a must. Malta can offer a wide range of opportunities for private client wealth management, with tax efficient and regulatory robustness.