A Deep Dive into Malta’s Tax Structure for Independent Residents

The Maltese taxation system is characterized by efficiency and loyalty of conditions. It allows the optimization of tax payments.

The Malta tax system also implies the absence of double taxation in many countries of the world. There are already more than 70 such countries. Individuals are eligible for tax residency if they spend at least six months in the country within 365 days. It is also required to make an investment in real estate or pay rent of at least 9000 euros.

Understanding Malta Tax Residency Criteria

In Malta, taxes are paid by legal entities and individuals. These can be both residents and non-residents. The status determines the tax base, availability of benefits, and interest. Individuals become tax residents if they live in the country for 180 days or more during the year. Maltese citizenship is not necessary in this case. As for legal entities, a company is considered a tax resident if its head office is in the state’s territory. Non-residents must pay tax only on income earned directly in Malta.

Such a concept as domicile deserves special attention. It indicates the place of permanent residence. In the past, the status was granted by birth. Today, it is enough to confirm the intention of permanent residence, for example, by purchasing a real estate object. It is also essential to be of legal age for this purpose. Tax residents with this status pay taxes on all income, regardless of the country where it is received.

Key Features of Malta Tax Structure for Residents

The taxation system in Malta involves indirect and direct taxes. The former includes excise, stamp, import, and VAT duties. Accordingly, the second category comprises corporate, income, and property taxes.

Tax Benefits and Incentives for Foreign Residents

Malta has no tax on outgoing royalties, interest, and dividends. The exemption also applies to capital gains arising from non-residents’ transfer of shares in companies registered in Malta. A zero rate applies if an individual’s income does not exceed €9100. It is also worth noting that the country is one of the six countries on the European continent where the level of VAT is below 25%. Contributions to the insurance fund are equal to 10%, but the tax base is reduced by the same value.

Navigating Income Tax Obligations in Malta

For tax residents (individuals), income tax ranges from 0 to 35 percent. The interest rate is progressive, increasing with income. Married couples are entitled to make a joint tax calculation. A zero rate applies for a total income of €12,700. A corporate tax rate of 35% applies to legal entities.

Another exciting feature is the option of making a tax deduction. It can be used to refund up to 100 percent of the profit tax paid earlier. The amount of the refund is determined by the category under which the company falls:

• double taxation – 2/3;
• profit in the form of royalty or passive interest – 5/7;
• income from trading operations – 6/7.

To calculate the refund, all taxes in Malta for companies are allocated to special accounts. A 100% refund is due if the company is holding a share in a foreign legal entity. It is also a mandatory requirement to belong to the Participating Holding category. The application for a refund must be submitted after payment of all tax dues. The relevant service considers it within two weeks. If the application is approved, the shareholder can obtain a refund to his bank account. The payment is made in the currency in which the income was received. Thanks to this, there is no risk of losing part of the money due to exchange rate differences.

Property and Capital Gains Tax Considerations

In Malta, there is no need to pay tax on real estate on an annual basis. This makes it very attractive to obtain a Malta PR by investment. It is enough to pay 5 percent to the state budget at the purchase stage. If the investor wants to sell the object, in this case, the tax will be 8 percent.

Income from renting out real estate is taxed at standard rates, i.e., up to 35 percent. However, as Imin Malta agency specialist Albert Loffe noted, if one takes advantage of the special tax rate, the maximum tax will be only 15 percent of income.

Stamp duty applies to the acquisition of shares in a legal entity, bonds, or shares. Its amount varies from 3 to 7 percent. If a legal entity is engaged in international operations, it is exempt from stamp duty, allowing additional cost reduction.

Practical Tips for Tax Planning

The best way to plan to receive tax residency to optimize Maltese taxes for immigrants is to consult local lawyers. They know all the peculiarities of charging and paying fees and taxes and will help one choose the best option. Obtaining residence in Malta allows one to reside here on a permanent basis for any number of days per year. Legislation allows that all issues are handled by licensed agencies, not the applicant himself. This makes the process extremely fast and painless.

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