Malta Tax Update: Remittance Basis of Taxation

Joanna Spiteri | 29 Aug 2014

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On 8 August 2014, the Minister of Finance has introduced amendments to the Global Residence Programme ("GRP") Rules which seem to prejudice the seamless application of the remittance basis of taxation. As a general rule, individuals who are resident but not domiciled in Malta are subject to the remittance basis of taxation. However, the new rule incorporated in the GRP Rules provide that:

 

 “(4) Notwithstanding any provision in the Act, an individual who falls under paragraphs (a) or

(b) of the definition of "long-term resident of Malta" in rule 2, shall be taxable on any income

accruing in or derived from Malta or elsewhere, and whether received in Malta or not in

respect of income mentioned in article 4 of the Act and subject to tax at the rates mentioned

in article 56 of the Act.”

"Long-term resident" means:

" (a) a person who has long-term resident status in terms of the Status of Long-term Residents (Third Country Nationals) Regulations;

 (b) a person who applies for long-term resident status under the Status of Long-term Residents (Third Country Nationals) Regulations;"

 

Also, Article 5(4) of the recently introduced Residence Programme ("TRP") provide that:

 

‘Notwithstanding any provision in the Act, an individual who falls under the definition of "permanent

resident of Malta" in rule 2, will be taxable on any income accruing in or derived from Malta or

elsewhere, and whether received in Malta or not in respect of income mentioned in article 4 of the

Act and subject to tax at the rates mentioned in article 56 of the Act.’

 

The term "permanent resident of Malta" is defined as meaning:

"a) a person who has right of permanent residence in terms of article 6 and is in possession of a

permanent residence certificate issued in terms of article 7 of the Free Movement of European

Union Nationals and their Family Members Order; or

b) a person who applies for right of permanent residence in terms of article 6 of the Free

Movement of European Union Nationals and their Family Members Order;"

 

This implies that individuals who fall within the definition of "long-term resident of Malta" and of "permanent resident of Malta" are being excluded from the remit of the remittance basis of taxation. 



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