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Personal Fiscal Residence
Thinking of moving to Malta?
Malta is an ideal jurisdiction for your personal fiscal residence
Characterized by a pleasant climate, intriguing history, low crime rate and obviously a unique tax system, Malta is becoming a natural choice for many people. Malta offers a wide range of opportunities through which an individual may be taxed as a Maltese fiscal resident. When coming to Malta with the intention to settle residence therein, it is essential to declare oneself to the Maltese tax authorities, and consider the best option to be taxed under.
Option 1: General tax law
Taxation of individuals in Malta depends on three fundamental concepts: source, ordinary residence and domicile. When income is sourced in Malta (arises in Malta), Maltese tax would be levied regardless of where the person deriving such income is resident or domiciled. In addition, persons who are ordinarily resident and domiciled in Malta are subject to income tax in Malta on their worldwide income and qualifying capital gains.
Foreign individuals living in Malta are generally considered ordinarily resident in Malta but are not usually regarded as being domiciled in Malta. In this case one is only taxed on foreign income which is received in Malta together with any Malta sourced income. This means that no Maltese tax will be levied on income derived by a Maltese resident non-domiciled person outside Malta and which is not remitted to Malta. In addition, such persons would also not incur any Maltese tax in respect of capital gains arising outside Malta even if remitted to Malta.
Option 2: The High Net Worth Individuals (HNWI) Scheme
This scheme provides non-domiciled persons a more beneficial tax treatment in addition to the remittance basis of taxation outlined above. In brief, individuals satisfying the conditions set out in the Rules and in possession of a HNWI status are taxable at the rate of 15% on the receipt of foreign source income in Malta and also have the possibility of claiming double tax relief on such income. The scheme involves a minimum tax liability of €4,200.
Obtaining a HNWI status requires the satisfaction of a number of conditions, primarily the applicant must either have assets outside Malta worth at least €349,000, or is entitled to an annual income of at least €23,000 arising outside Malta. In addition, the applicant must either:
• acquire property in Malta with a minimum value of €400,000 (5% duty is payable on such purchase); or
• rent property in Malta at not less than €20,000 per annum (no duty is payable).
Such property must be solely occupied by the applicant and his family members and must not be rented out for profit. Further conditions include:
• the applicant must be in receipt of stable and regular resources which are sufficient to maintain him and his dependents without recourse to Malta’s social assistance system;
• the applicant must be in possession of a valid travel document;
• the applicant and his dependents must be in possession of a EU wide sickness insurance covering all risks normally covered for Maltese nationals;
Although the HNWI rules still apply to non-EU/EEA/Swiss nationals, they do not provide such persons with a free unlimited access to Maltese residence. In this respect, the following options are possible for third country nationals:
• either rely on the regular VISA which must be renewed regularly; or
• enter into a qualifying contract with the Maltese government which requires the payment to the Government of Malta of €500,000 and €150,000 for every dependent.
Option 3: The Highly Qualified Persons Rules
last updated on: 18th February, 2014
This new scheme offers the possibility to foreign individuals entering into a qualifying contract (from which at least €75,000 income per annum is derived) to occupy a senior position within a company either regulated by the Malta Financial Services Authority (MFSA) or the Lotteries and Gaming Authority (LGA). Such persons may benefit from a flat rate of tax of 15% for a determined number of years, subject to the fulfillment of certain conditions.
Qualifying Recognised Overseas Pension Scheme (QROPS)
Malta’s continuously thriving financial services sector has been extended to
cater for new retirement schemes and funds. Such has Malta’s financial services reputation excelled that certain retirement schemes established in Malta are being recognised by Her Majesty’s Revenue and Customs in the U.K. (the HMRC) as Qualifying Recognised Overseas Pension Schemes (QROPS).
This means that persons who have UK pensions which are being deferred may transfer them into a new pension scheme based in Malta and hence be taxed more favorably in Malta. In addition to the fiscal benefit, such a scheme ensures that:
• your pension income is always paid to you gross
• currency conversion needs are eliminated which in turn removes the exchange rate risk and exchange rate costs on your pension