Malta Residence & Citizenship Options

Joanna Spiteri | 23 Jun 2015

The Malta Residence  Citizenship Programmes  A comparison

Malta’s strategic Mediterranean location, at the crossroads of Europe, North Africa and the Middle East, has ensured that the Island has an enviable role in history as an international trading and shipping centre. Even today, this strategic location grants an otherwise inconsequential island a high-profile Euro-Mediterranean lifestyle. As a result, Malta continues to top international living indexes, with high ratings mainly attributable to the Island’s quality of life, climate, value for money, safety and stability.

Maltese islanders have succeeded in finding a balance between enjoying a tranquil Mediterranean lifestyle and meeting the hectic demands of the international finance and business community that has grown to rely on the Maltese for sophisticated, outward-looking services.

Why Malta

Malta offers significant advantages to foreign entrepreneurs, high-net-worth individuals and investors seeking a safe yet attractive business environment. A full member of the EU, Malta acts as a gateway to Europe, providing visa-free access to the European Schengen Area to non-EU nationals taking up residence.

Retirement

The soundness of its banking system and the resilience of Malta in the face of a prolonged international financial storm have positioned this European financial centre favourably as a top destination for retirees seeking a safe home for their hard-earned pension. Malta’s extensive network of double tax treaties, a remittance basis of taxation, the UK HMRC’s approval of Malta as a qualifying recognised overseas pension scheme (QROPS) jurisdiction and the ability to elect for a 15 per cent flat personal income tax rate have also strengthened Malta’s place as a preferred choice of retirement location.

Property investment

Malta’s property market provides many options to the discerning foreign property investor or second-home buyer. A foreigner can buy an apartment, converted farm house, terraced house or villa for personal use as a primary residence, or even as a second home. Certain developments are located in special designated areas (SDAs), which are free from any restrictions on the number of properties acquired or on the right to let such properties. Land availability for development is limited. Likewise, there is a finite number of properties enjoying an exceptional location including 360-degree island and sea views, bastion views, grand harbour views, or a combination of these sought-after highlights. Competition for ownership of such properties is both local and international, and this promises a ready-market for any investor seeking to liquidate their property investment. As a result, careful buyers are likely to enjoy an exceptional property while sitting on an appreciating asset, even in these unsettled financial times.

Remittance basis of taxation

Malta owes the origins of its tax system to its historical roots as a UK colony between 1800 and 1964. The Maltese Income Tax Act retained the British notion of the distinction between income and capital gains, taxing only the former and the latter only in specific circumstances. In the absence of a definition of “ordinary residence” and “domicile” under Maltese law, Malta relies on the meaning assigned to the terms under UK Common Law.

A welcome legacy of Malta’s British colonial past is the remittance-based tax system. Non- domiciled persons resident in Malta, whether individuals or legal persons, are taxable in Malta on Maltese-source income and capital gains. Foreign-source income is subject to tax only to the extent that it is remitted to Malta, while foreign-source capital gains are outside the scope of Maltese taxation altogether.

Accordingly, income arising outside Malta that is not remitted to a Maltese bank account is not subject to Maltese taxation, nor are any funds of a capital nature that may be remitted to Malta. The latter category includes savings and capital gains arising from the assignment of assets outside Malta, which are not subject to tax in Malta, regardless of their remittance to Malta or otherwise. 

Importantly, this basis of taxation, subject to any applicable flat tax rates, applies to all forms of residence discussed below, subject to flat tax rates.

Global Residence Programme Rules

The Global Residence Programme Rules, 2013 ("GRP") are designed to attract non-EU nationals to take up residence in Malta. The GRP is especially attractive to retirees, authors, intellectuals and international consultants or simply persons seeking to establish an alternative residence that suits their lifestyle and tax profile. 

Repatriation of Capital

Proceeds from the sale of property, encashment of investments, other income and excess income brought into Malta may be freely repatriated by residents, provided that any tax due has been settled.

Flat Tax Rate

A flat rate of 15% is chargeable on all income (less personal allowances) remitted to Malta from foreign sources. This is subject to a minimum annual tax payment of €15,000 covering the main applicant and dependents included on the same application.

Beneficiaries of the GRP are taxable in Malta on a ‘remittance basis’ only, i.e. on foreign source income remitted to Malta only and not on foreign source capital gains, irrespective of whether these are received in Malta.

Capital Gains

Income not remitted (transferred) to the resident’s bank account and capital gains (whether remitted or otherwise) fall outside the scope of Maltese tax.

Double Taxation Relief

Malta enjoys 68 double tax treaties. GRP residents may also benefit from double taxation agreements existing between Malta, most European countries, Canada, Australia and the USA, ensuring that tax is never paid twice upon the same income.

Exemption from Customs Duty/ VAT

Your used household and personal effects, furniture and other domestic articles (excluding firearms and weapons of all kinds) may be imported free of import duty if imported within six months of your arrival in Malta to take up residence. In such cases import licenses are not required.

Duty on Documents and Transfers

Duty on documents and transfers is payable by the acquirer on the transfer of immovable property situated in Malta and transfers of shares in Maltese companies (including transfers on death).

Exemptions from duty may be available on the transfer of shares in certain Maltese companies, e.g. if the company is listed on the Malta Stock Exchange or if the vast majority (at least 90%) of its business interests are outside Malta.


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Key Contacts

Dr Jean-Philippe Chetcuti

Senior Partner, Tax & Immigration

+356 22056411

Dr Antoine Saliba Haig

Senior Lawyer

+356 22056446

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