The Malta Nomad Residence Permit (Income Tax) Rules in a Nutshell
Malta has recently introduced the Nomad Residence Permits (Income Tax) Rules, 2023, aimed at providing a favorable tax regime for digital nomads residing and working in Malta, subject to the applicable anti-abuse provisions. This article delves into the key provisions of these rules, highlighting the benefits for eligible individuals.
Key Legal Issues- Tax Exemption period on qualifying income.
- Reduced Tax Rate on income of authorized work.
- Application of Double Taxation Relief mechanisms.
- International Tax Law and application of Double Tax Relief.
- Temporary Residence.
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Tax Rate in Malta for Authorised Work
An eligible main applicant engaged in authorized work will be subject to a reduced income tax rate of 10% on their chargeable income. This rate applies to only to the income derived from authorized work and is subject to any relief of double taxation as per Malta's tax treaties.
The Law defines ''Authorized Work'' as :
(i) services provided by an eligible main applicant in accordance with a contract of employment with an employer who is not resident in Malta and who does not carry on business in Malta through a fixed place of business, or
(ii) services performed by an eligible main applicant in a self-employed capacity for clients who do not reside in Malta and who do not carry on business in Malta through a fixed place of business, which services, in either case, are provided remotely by means of telecommunications technology as may be approved by Residency Malta Agency "
Twelve-Month Tax Exemption Period
The Nomad Residence Permits (Income Tax) Rules grant a unique tax exemption for the first twelve months for eligible applicants. During this period, individuals won't be obligated to pay income tax in Malta on the income derived from authorized work. The exemption period begins either from the date the nomad residence permit is issued or January 1st, 2024, whichever comes later.
To qualify for this tax break, applicants must inform the Authority in writing, notifying the Agency about their intention to establish residence rather than merely passing through.
Taxation of Other Income
Any income, other than that derived from authorized work, will be governed by the applicable provisions of the Income Tax Act, ensuring a comprehensive approach to taxation. The employment income derived from Authorized work should not be subject to the Final Settlement System (FSS) Rules.
Exemptions for Renewed Permits
Where an individual does not renew his Nomad permit immediately after its expiry date, but applies for a new permit within a period of 2 years, the 12-month exemption period shall not apply. However, should the new permit is acquired after a period of 2 years from the date of cessation of validity of the prior Nomad Permit, the 12-month exemption period shall apply, as per the General Rule.
Personal tax compliance obligations
Nomad beneficiaries who derive income chargeable to tax in Malta are required to register for tax purposes in Malta, submit their tax return and settle the tax due, if any. This requirement applies to all Nomad beneficiaries who have acquired their Nomad status post 1st January 2024.
Non-Attribution of the employer’s or client’s income to Malta.
The fact that a Nomad residence permit holder who is employed or self-employed and carries out authorized work from Malta, does not ipso facto confer attribution of the employer's or clients' earnings to Malta.
Relief for Foreign Tax Payment
Nomad Residence Permit holders may qualify for relief from double taxation. Consequently, individuals can leverage the array of double tax treaties that Malta has established with other states. As a result, the potential burden of taxation on the same income by both Malta and another jurisdiction is alleviated.
What this means for you
For those considering Malta as their temporary base, the Nomad Residence Permits (Income Tax) Rules provide an advantageous option. By acquiring the Nomad status, individuals could benefit from a reduced income tax rate on the qualifying income whilst working remotely in Malta.
Furthermore, the Nomad Residence Permit holders enjoy the privilege of accessing the Schengen Area. This enables them to traverse freely within the Schengen Zone for the duration of their permit validity. Moreover, holders of the permit can extend this benefit to include their dependents, facilitating their relocation alongside the primary permit holder.
How we can help
Our team specialises in expert guidance on eligibility assessment, requirements and comprehensive assistance throughout the entire application process, including procedures for renewal. Feel free to establish contact with us for further details.
In this regard our service includes:
- Assistance in determining eligibility under this Programme.
- Filling in the Nomad Residence Permit Application Forms and review all supporting documentation.
- Reviewing the health insurance policy provided by the applicant. If not adequate, we assist in sourcing a standard health insurance policy that fulfils the requirements under the Nomad Residence Permit Rules.
- Submission of the full application form and supporting documents to the Residency Malta Agency and handling all communication with the Agency. We will also accompany you to the offices of the Agency when required.
- Upon issue of the residence permit, we will assist with the collection of the residence cards including accompanying you to collect them.
The Malta Nomad Residence Permit (Income Tax) Rules in a Nutshell
Malta has recently introduced the Nomad Residence Permits (Income Tax) Rules, 2023, aimed at providing a favorable tax regime for digital nomads residing and working in Malta, subject to the applicable anti-abuse provisions. This article delves into the key provisions of these rules, highlighting the benefits for eligible individuals.
Key Legal Issues- Tax Exemption period on qualifying income.
- Reduced Tax Rate on income of authorized work.
- Application of Double Taxation Relief mechanisms.
- International Tax Law and application of Double Tax Relief.
- Temporary Residence.
|
Tax Rate in Malta for Authorised Work
An eligible main applicant engaged in authorized work will be subject to a reduced income tax rate of 10% on their chargeable income. This rate applies to only to the income derived from authorized work and is subject to any relief of double taxation as per Malta's tax treaties.
The Law defines ''Authorized Work'' as :
(i) services provided by an eligible main applicant in accordance with a contract of employment with an employer who is not resident in Malta and who does not carry on business in Malta through a fixed place of business, or
(ii) services performed by an eligible main applicant in a self-employed capacity for clients who do not reside in Malta and who do not carry on business in Malta through a fixed place of business, which services, in either case, are provided remotely by means of telecommunications technology as may be approved by Residency Malta Agency "
Twelve-Month Tax Exemption Period
The Nomad Residence Permits (Income Tax) Rules grant a unique tax exemption for the first twelve months for eligible applicants. During this period, individuals won't be obligated to pay income tax in Malta on the income derived from authorized work. The exemption period begins either from the date the nomad residence permit is issued or January 1st, 2024, whichever comes later.
To qualify for this tax break, applicants must inform the Authority in writing, notifying the Agency about their intention to establish residence rather than merely passing through.
Taxation of Other Income
Any income, other than that derived from authorized work, will be governed by the applicable provisions of the Income Tax Act, ensuring a comprehensive approach to taxation. The employment income derived from Authorized work should not be subject to the Final Settlement System (FSS) Rules.
Exemptions for Renewed Permits
Where an individual does not renew his Nomad permit immediately after its expiry date, but applies for a new permit within a period of 2 years, the 12-month exemption period shall not apply. However, should the new permit is acquired after a period of 2 years from the date of cessation of validity of the prior Nomad Permit, the 12-month exemption period shall apply, as per the General Rule.
Personal tax compliance obligations
Nomad beneficiaries who derive income chargeable to tax in Malta are required to register for tax purposes in Malta, submit their tax return and settle the tax due, if any. This requirement applies to all Nomad beneficiaries who have acquired their Nomad status post 1st January 2024.
Non-Attribution of the employer’s or client’s income to Malta.
The fact that a Nomad residence permit holder who is employed or self-employed and carries out authorized work from Malta, does not ipso facto confer attribution of the employer's or clients' earnings to Malta.
Relief for Foreign Tax Payment
Nomad Residence Permit holders may qualify for relief from double taxation. Consequently, individuals can leverage the array of double tax treaties that Malta has established with other states. As a result, the potential burden of taxation on the same income by both Malta and another jurisdiction is alleviated.
What this means for you
For those considering Malta as their temporary base, the Nomad Residence Permits (Income Tax) Rules provide an advantageous option. By acquiring the Nomad status, individuals could benefit from a reduced income tax rate on the qualifying income whilst working remotely in Malta.
Furthermore, the Nomad Residence Permit holders enjoy the privilege of accessing the Schengen Area. This enables them to traverse freely within the Schengen Zone for the duration of their permit validity. Moreover, holders of the permit can extend this benefit to include their dependents, facilitating their relocation alongside the primary permit holder.
How we can help
Our team specialises in expert guidance on eligibility assessment, requirements and comprehensive assistance throughout the entire application process, including procedures for renewal. Feel free to establish contact with us for further details.
In this regard our service includes:
- Assistance in determining eligibility under this Programme.
- Filling in the Nomad Residence Permit Application Forms and review all supporting documentation.
- Reviewing the health insurance policy provided by the applicant. If not adequate, we assist in sourcing a standard health insurance policy that fulfils the requirements under the Nomad Residence Permit Rules.
- Submission of the full application form and supporting documents to the Residency Malta Agency and handling all communication with the Agency. We will also accompany you to the offices of the Agency when required.
- Upon issue of the residence permit, we will assist with the collection of the residence cards including accompanying you to collect them.