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News / The Maltese Tax Residency Rules For Foreign Nationals

The Maltese Tax Residency Rules For Foreign Nationals

06.12.11

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

Maltese-domiciled residents are liable to Maltese taxes on their worldwide income and gains. In many countries, foreign nationals living there also have to pay tax on their worldwide

Maltese-domiciled residents are liable to Maltese taxes on their worldwide income and gains. In many countries, foreign nationals living there also have to pay tax on their worldwide income and gains, but Malta offers a favourable tax regime for non-domiciled resident individuals, depending on the manner in which residence is taken up.

High Net Worth Individuals Scheme (HNWI) for EU Citizens

The HNWI scheme was introduced on 14th September 2011. It is a replacement for the old Residence Scheme which was suspended early this year, but unfortunately it is not as favourable for most retired folk.

The tax rate for overseas earnings remitted to Malta is fixed at 15%.

You need to pay a minimum ?20,000 in tax per annum, plus ?2,500 for each dependent, including your spouse. It was ?4,200 minimum under the old scheme.

You must either own a property worth at least ?400,000 if purchased after 14th September 2011 or ?116,000 if purchased before, or rent a property for minimum of ?20,000 per annum. The property must be your principal place of residence and only yourself and your family can reside in it. Under the old scheme it was ?69,000 for a flat, ?116,000 for a house or annual rental of ?4,150.

You must reside in Malta a minimum of 90 days each calendar year, and cannot spend more than 182 days a year in any other single jurisdiction.

You will have to pay a non-returnable application fee of ?6,000, and complete an annual declaration of compliance. Previously there was no fee.

I?ve looked at the tax calculations. A retired married man from the UK would pay more tax in Malta if his pension income was under UK?75,000 than if he stayed put. Only if his pension exceeded say UK?100,000 would Malta?s tax start to look sufficiently attractive to encourage him to move over here. So the scheme is not attractive for most retirees, but could be worthwhile for very wealthy people (though there are other countries vying for their business).

UK HMRC will only exempt your UK pension from UK PAYE if you can demonstrate that it has been remitted to Malta and taxed. If however the fund is transferred to a QROPS in the right jurisdiction, it is outside of the UK PAYE system and only that portion remitted to Malta would be taxable.

The Maltese government have said that they are looking at different schemes in addition to the new HNWI one. A scheme for the retirees who are not necessarily wealthy could rejuvenate Malta as a destination.

Non EU Citizens

Non-EU/EEA nationals either have to deposit at least ?500,000 or apply for a visa under the immigration rules. Their minimum amount of tax is ?25,000 p.a. plus ?5,000 per dependant.

Standard non domicile tax rules under Maltese general tax law

There is an attractive alternative, often overlooked, which is simply paying tax under general tax law without needing any scheme. This is similar to the UK?s non UK domicile rules. As a non Maltese domicile, you pay tax on income arising in Malta, on any overseas income that is remitted to Malta, and on any capital gains arising in Malta. The highest tax rate is 35%, though if you work in the financial services industry you may qualify for a 15% rate on your Maltese earnings, subject to other conditions (under the Highly Qualified Employed Persons? tax rules).

Income arising overseas is not taxable, provided it is not remitted to Malta. Overseas capital and overseas capital gains are not taxable even if remitted. You may work in Malta under this method.

There are no minimum taxes to pay, nor any property requirements. Indeed there are no requirements and for most EU nationals (who have the right to reside in Malta anyway if they are economically self-sufficient) it may prove simpler and more effective to pay tax under general tax law rather than apply for the HNWI scheme.

Each situation is different, however, so you would need to seek advice to determine which method works best for you.

By David Franks, Chief Executive, Blevins Franks

7th November 2011

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual must take personalised advice.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.
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