Wealth Management In The 21st Century – Expatriates in Malta

The investment, tax and general wealth management landscape has changed considerably over the last decade or two. Here in Malta, a new tax residence scheme was announced last year fo

The investment, tax and general wealth management landscape has changed considerably over the last decade or two. Here in Malta, a new tax residence scheme was announced last year for foreign nationals living here.

In the 1990s stockmarkets appeared to be heading ever upwards. The Bank of England Sterling base rate ranged between 5% and 14%. Banks were considered a safe place for your money. It was easy to hide money away offshore and escape having to pay any tax on it.

Since then of course we have endured bear markets, the credit crunch and ensuing economic downturn. Bank interest rates plummeted to record lows. Long established banks collapsed. We had some high profile financial frauds. Now we have the Euro crisis and austerity measures to contend with.

All this brought renewed emphasis on wealth preservation, and an increasing understanding of the need for diversification within your investment portfolio. Many investors today are mainly concerned with maintaining the value of their money over the long term. It is important to devise a strategy across your portfolio that employs asset allocation and diversification to lower risk. It should be based on your specific circumstances and investment objectives and income requirements.

If the changes in the investment landscape were not enough to contend with, we have also been faced with the global crackdown on offshore banking. Banking secrecy is fast being consigned to history.

In 2005 the EU Savings Tax Directive shook up the offshore tax planning world. The Organisation for Economic Co-Operation and Development (OECD) initiatives, backed by the G20, have made it possible for authorities to investigate tax fraud across country borders. With governments now in more need of tax revenue we will see more of this. Last year the Isle of Man and Guernsey began automatically providing information on the interest earnings of EU residents. Switzerland has signed landmark tax deals with the UK and Germany to ensure the comprehensive taxation of their taxpayers with assets in Swiss banks and financial institutions.

To make matters worse, taxes are on the rise across Europe as governments try to repair their deficits, though so far Malta has not seen similar tax rises to those imposed in some other countries.

It is important to consider the impact of taxation on your savings income and investment growth. What matters, after all, are after-tax returns. Your wealth management strategies therefore require both investment expertise and tax expertise.

Malta offers a special tax residence scheme for foreign nationals living here, but there have been changes here too for newer arrivals. The previous Residence Scheme was suspended for new applicants in December 2010. In September 2011 the new High Net Worth Individuals Scheme was announced. It is not as favourable for many retired foreigners living here (for example, a British person would need to have a pension income of more than ?100,000 for Malta?s taxation to start to look attractive). While the scheme offers a 15% tax rate for overseas earnings remitted to Malta, you need to pay a minimum ?20,000 tax a year, more if you have dependants, and there are many conditions.

The standard non domicile tax rules under Maltese general law do not impose any conditions and it can be more effective to pay tax this way. This would depend on your circumstances so you would need to explore both rules to establish which works best for you.

In view of all these investment and tax changes and the complex world we find ourselves in today, holistic wealth management advice is more important than ever. Ask a wealth manager to review your financial planning and advise you on how to protect and grow your wealth; legitimately mitigate the amount of tax that you pay and control when and where you pay it; protect your investments from institutional failure and advise on estate planning and succession issues, including lowering your UK inheritance tax liability if you are a UK national.

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.