This Article explores Malta personal taxation and what makes it so attractive for foreign individuals looking to make Malta their new home.
Malta has a wonderful reputation in attracting wealthy and skilled families, and individuals keen to enjoy the relaxed Mediterranean lifestyle, great weather, friendly locals, and favourable tax conditions.
Introduction: Maltese Income Tax System for Individuals
In Malta personal tax is levied on individuals based on their; residence, domicile and source of income.
Individuals who are ordinarily resident and domiciled in Malta are taxed on their worldwide income, which includes all income and capital gains whether arising in Malta or not.
- Certain individuals, who are resident but not domiciled in Malta, are only taxable on their income and capital gains arising in Malta and on any foreign income arising outside of Malta that is remitted to Malta. Therefore, foreign capital gains derived by individuals' resident but not domiciled in Malta will not be subject to income tax in Malta, even if such capital gains are received in or remitted to Malta.
In the case of an individual who is neither resident nor domiciled in Malta, the person will only be taxable on income arising in Malta.
In accordance with article 56 of the Income Tax Act (ITA), individuals resident but not domiciled in Malta have their income taxed in Malta on the basis of progressive rates, which vary from zero percent (0%), to a maximum of thirty five percent (35%), depending on their chargeable income and whether the individual is eligible to enjoy the single, parent or married rates. Have a look at the latest Resident Tax rates.
Tax System for Employed Individuals
Every individual deriving income from employment in Malta is required to pay social security contributions and income tax to the Maltese Tax Authorities. Generally, social security contributions on employment income are equivalent to ten percent (10%) of the gross income earned, capped at a maximum of approximately €2,500 annually (appropriate amount deducted weekly).
With regards to income tax, as explained above, progressive rates apply. Income tax is deducted by the employer from the gross income earned by the individual as agreed by the Maltese Tax Authorities, through the Final Settlement System ('FSS'), on a monthly basis.
Tax System for Self-Employed Individuals
In the case of self-employed individuals, social security contributions are calculated at the rate of fifteen percent (15%), of net income earned in the previous year, capped at a maximum of approximately €3,600 annually (€74.96 weekly).
Income tax is payable via three provisional tax payments on; 30 April, 31 August and 21 December each calendar year. Any additional tax, in excess of the provisional tax paid, will be settled in June of the following year, at the same time as submission of the income tax return.
In the situation where the provisional tax paid exceeds the income tax due for that year, the Maltese Tax Authorities will refund back the difference within a six-month period, subject to certain conditions.
Minimum Tax for Resident non-Domiciled Individuals
Since 1st January 2018, individuals and married couples ordinarily resident but not domiciled in Malta and receiving foreign source income, in excess of €35,000 per annum, which is not remitted to Malta, have been subject to a minimum annual tax liability in Malta of €5,000, unless they fall under the scope of a special tax scheme.
If the income chargeable to tax in Malta results in a tax liability, before taking into account any relief, less than the minimum tax, the taxpayer shall be deemed to have received additional income in Malta, and the total tax liability on the income will equal the minimum tax of €5,000 Payment of Tax in Malta.
The payment of Personal Tax takes place in three different ways:
- The Provisional Tax System: This includes individuals engaged in a trade, business, profession, or vocation. These individuals are liable for the annual payment of taxes under the Provisional Tax (PT) system. PT is paid in three instalments during the year, and the amount of PT due is calculated on the tax due, by the individual, in the benchmark year.
- The Self-Assessment System: Applicable for an individual in Malta who has not paid under the PT or FSS. The tax will be collected by 30th June of the year following which the income has been received.
- The Final Settlement System (FSS): Individuals receiving a salary or wage are liable for paying taxes under The Final Settlement System (FSS). The payor of the income deducts tax payments from the monthly wage of the employee.
Stamp Duty: Property and Shares
It is important to note that Malta does not levy inheritance tax. However, in the case of a transfer of immovable property situated in Malta, stamp duty needs to be paid by the person transferring, at the rate of 5% of the market value of the property at the time of transfer. In the event that an individual is purchasing a property for the first time, the first €200,00 will be exempt from stamp duty.
In relation to the transfer of shares in Maltese companies, these are subject to stamp duty at the rate of 2% of the market value of the shares transferred. When the shares are in property companies, a 5% stamp duty applies. Where the shares in a Malta company (non-property holding), are owned by non-resident shareholders, an exemption from duty may also be available.
Malta Residency Programmes Featuring Attractive Incentives
Malta offers a selection of Residency schemes and the tax implications of each programme are detailed below.
- Malta Permanent Residence Programme (MPRP)
The main tax advantages include no taxation on worldwide income unless it is remitted to Malta. Taxes are based only on Maltese sourced income and foreign income received in Malta.
The Malta Permanent Residency Programme (MPRP) is designed to attract non-EU/EEA/Swiss nationals, as it allows successful applicants to reside in Malta and to travel visa-free to 26 Schengen countries.
Foreigners may take up residence in Malta and be subject to the normal income tax rates, with no minimum tax or remittance requirements.
There is no net wealth or real estate taxes levied in Malta. However, in the case of the sale of immovable property and other listed capital assets, these may be subject to capital gains tax. The sale of immovable property which serves as an individual's main residence is not subject to tax, provided that certain criteria have been met.
- The Malta Global Residence Programme
This programme is not Intended for individuals who are neither nationals of the EU, EEA or Switzerland nor long-term residents of Malta. Beneficiaries under the Malta Global Residence Programme benefit from a beneficial flat rate of taxation on foreign income remitted to Malta of 15%, with an annual minimum tax payment of €15,000.
Read more about the Malta Global Residence Programme (GRP).
Double Taxation Treaty Agreements
Malta has double taxation treaties with over 81 different countries.
There are a number of positive provisions, the criteria for which varies from country to country. These attractive provisions affect individuals who are:
- Tax residents of and Malta and non-residents in another country, but receive dividends or interest from that specific country and who qualify for the relevant double tax treaty.
- Tax residents of another country, under the 183-day rule, and have a Maltese holding company and financial companies in their structure.
Summary and Additional Information
The jurisdiction of Malta offers a number of personal tax advantages to individuals, depending on their circumstances.
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.