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Expatriates who relocate their residence to the islands of Malta are subject to taxation on a remittance basis. This implies that they are subject to tax on income and capital gains arising in Malta, as well as any income which is received in Malta only. No further tax is due on other income which is not remitted to Malta or capital gains arising outside of Malta, whether remitted to Malta or not.
In general, personal income is taxed at progressive rates with 35 per cent being the highest bracket. However, specific programs such as the Global Residency Programme (GRP) encourages High Net Worth Individuals to relocate to Malta by offering a flat tax rate of 15 per cent on their income subject to a minimum annual tax contribution.
There are a number of routes to residency in Malta; it is imperative to note that the taking up of residence in one country does not exclude dual residency in other jurisdictions, nor sheds the previous residence of the applicant. Advice should, therefore, be sought in the outbound jurisdiction as well as in any other jurisdictions in which the client intends to spend the time to address the risk of adverse dual taxation.
EU citizens enjoy a Treaty of Rome right to move their residence to any EU member state including Malta. The process is straightforward and AE can handle the matter from beginning to end. The only requirement is an address in Malta. In this case, the tax will be payable on income arising in or remitted to Malta (if any), and the movement of capital is, as always, exempt from taxation in Malta. There is no minimum annual remittance.
Non-EU citizens do not have a right to settle or work in Malta and residency, therefore, depends on the provision of a work permit or special residency status.
Should non-EU citizens be interested in setting up residence within the EU, the aforementioned GRP is an interesting option for those wishing to benefit from Visa-free movement within the Schengen Area, while enjoying attractive tax benefits.
Persons who are resident but not domiciled in Malta are subject to taxation only on income arising in Malta, as well as any other income which they may bring to Malta. However, they are not subject to taxation for any capital gains arising outside Malta, whether remitted or not. Any other income which occurs outside of Malta but is not remitted here is also not subject to local taxation. GRP certificate holders are expected to pay tax on remitted income at a flat rate of 15 per cent. Any income arising in Malta will be taxed at 35 per cent if applicable.
It is important to note that in any one year, GRP certificate holders will be subject to a minimum of €15,000 tax contribution.
RESIDENCY IN MALTA
A GRP certificate entitles the holder to apply for, and obtain a residency permit in Malta on the basis of economic self-sufficiency. This certificate, in turn, gives the holder the right to limited visa-free travel (for three months every six months) within the Schengen Area.
- An Authorised Registered Mandatory (ARM) is appointed to represent the applicant in Malta.
- Qualifying Property Requirement: According to this program, the applicant must (a) either purchase a qualifying property for the sum of €275,000 in Malta’s more popular areas, or a €220,000 property in the south of Malta or the neighbouring island of Gozo. Alternatively, the applicant may choose to (b) rent a qualifying property for €9,600 annually, or €8,500 in less accessible areas or Gozo.
- Minimum Tax on Remitted Income: A minimum tax payment of €15,000 p.a. is necessary, irrespective of the amount actually remitted to Malta. Additionally, the applicant must also prove that s/he is financially capable of maintaining him/herself and any dependants included in the said application.
- Valid Travel Documentation: All applicants must be in possession of valid travel documentation.
- Health Insurance: All applicants must be covered by EU-wide international health insurance.
Fit and Proper: All applicants must undergo background checks related to bankruptcy as well as criminal records.
Fluency of Language: The client is expected to declare fluency in either English or Maltese.
Physical Presence: There is no day-counting minimum presence in Malta requirement; however, the applicant is not to spend over 183 days in any other jurisdiction during any calendar year.
APPLYING FOR A GLOBAL RESIDENCY PROGRAMME
All applications must be submitted via an ARM in Malta, and the registered mandatory may appear on behalf of an applicant during the application process, as well as upon applying for and collecting the Maltese residency permit . The application fee is set at €6000 at the application stage. Persons taking up residence in the South of Malta or Gozo may also qualify from a reduction of €500 from the aforementioned €6000 fee.
A GRP certificate can cover the applicant, his/her spouse, and any dependants. These include minor and/or incapacitated children, as well as children up to 25 years of age who are not economically active. Brothers, sisters or direct relatives who are also financially dependent on the applicant may also be covered as long as this is declared and approved by the Director of Inland Revenue. The certificate also includes a live-in carer who has been in the employment of the beneficiary for at least two years prior to arrival.
GRP certificate holders are expected to submit a yearly tax return accompanied by valid proof that all of the above requirements continue to be satisfied.
OVERVIEW OF COST
MINIMUM FIRST YEAR COST
Application Fee €5,500
Rental Cost €8,500
Minimum Tax €15,000
MINIMUM YEARLY COST THEREAFTER
Rental Cost €8,500
Minimum Tax €15,000