Tax Incentives in Malta


Up till September 2011, one was able to take up residence in Malta in terms of the Residents Scheme Regulations, 2004 by obtaining a certificate from the Inland Revenue Department, which certificate was issued for an indefinite period as long as certain conditions are satisfied on an annual basis. Holders could therefore reside indefinitely in Malta and could enter and leave Malta as and when required without the need of any other formalities. 

In September 2011, this scheme has been replaced with a new one, referred to as the High Net Worth Individuals Rule (HNWI). The following is a list of incentives and advantages applicable to beneficiaries recognised as High Net Worth Individuals:

  • A Low flat rate of income tax of 15% with a minimum tax liability of € 20,000 after double taxation relief per annum, plus an additional €2,500 per dependent. The tax is calculated on foreign income (excluding capital gains) remitted to Malta;
  • High Net Worth Individuals are not subject to tax on worldwide income. Foreign source income is taxed in Malta to the extent that it is received in or remitted to Malta;
  • There is no real estate tax in Malta. Tax on capital gains arising from the sale of real estate in Malta does exist but residents are exempt if they have used the property as their main residence for three consecutive years and the property is disposed of not later than one year of vacating it. 
  • Malta’s tax legislation provides for relief from double taxation, whether through negotiated double tax agreements with a substantial number of countries worldwide, or through unilateral provisions. Certain foreign income remitted to Malta qualifies for a reduced withholding rate of foreign tax (this applies typically to individuals, interest and royalties), or is exempt from foreign tax (this applies typically to private pensions and to certain capital gains). The provisions of each particular treaty entered into by Malta must, however, be consulted to determine the treatment of each item of income in each particular case.

Double taxation treaties in force as at end-June 2011:

AlbaniaFinlandLebanonSan Marino
AustraliaFranceLibyaSingapore
AustriaGeorgiaLithuaniaSlovakia
BarbadosGreeceLuxembourgSlovenia
BelgiumGermanyMoroccoSouth Africa
BulgariaHungaryMontenegroSweden
CanadaIcelandMalaysiaSpain
ChinaIndiaNetherlandsSwitzerland
CroatiaIrelandNorwaySyria
CyprusIsle of ManPakistanTunisia
Czech Rep.ItalyPolandU.A.E.
DenmarkRep. of KoreaPortugalU.K.
EgyptRep. KuwaitQatarU.S.A.
EstoniaLatviaRomania 

Taxation

For tax purposes an individual is normally regarded as being resident in Malta for a particular year if, in that year, his stay in Malta exceeds 183 days. As already noted, however, foreigners residing in Malta are not taxed on their worldwide income, but only on Maltese source income and capital gains and on foreign source income remitted to Malta. Foreign source capital gains are not taxed even if remitted to Malta. The applicable income tax rates are, however, the normal rates of income tax applicable to residents, which are as follows:

“Married” Rates

First € 11,900Nil
Next€ 9,29915%
Next€ 7,49925%
Remainder over € 28,70135%

“Single” Rates 

First€ 8,500Nil
Next€ 5,99915%
Next€ 4,99925%
Remainder over € 19,50135%

 

Inheritance Tax

There is no inheritance tax in Malta. However, in the event of death, the beneficiary is liable to 5% transfer tax on the value of the immovable property, as at time of death. If the property is jointly owned and one of the spouses passes away, the 5% is levied on half the value of the property.

This tax is not payable upon the transfer of the residential home to the surviving spouse, provided that the surviving spouse does not sell the home during his/her lifetime.

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