In this article, the author highlights the personal tax system applicable to persons being granted Maltese citizenship under any route, particularly under the investor route.
Malta Tax Highlights- Acquiring Citizenship without changes in tax residence or domicile has no tax consequences.
- Tax residency may arise from a genuine link with Malta established in the course of naturalisation as a Malta Citizen.
- Tax residency may not create a tax liability.
- Tax is only due for resident foreigners on:
- income/capital gains arising in Malta, and
- foreign income (not capital/capital gains) only if received in Malta.
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Non-Dom Tax Regime
Therefore the main variable and connecting factor is Residence. By taking up residence in Malta, an individual (whether a citizen or not) enters into a non-dom tax regime akin to the tax regime applicable in the UK, even if without the complicated residence tests and rules applicable in the current British tax system. A Maltese resident who is not Domiciled in Malta is chargeable to tax in Malta only on a source and remittance basis. Therefore he would be chargeable to tax only on income arising in Malta and on foreign source income if and to the extent that it is remitted /received in Malta. Foreign source capital gains are out of scope of taxation even if remitted to Malta. The tax planning opportunity here is that foreign source income that is kept in bank accounts outside Malta remains out of scope of Malta tax as do foreign capital gains even if remitted to Malta.
Domicile of Origin, Domicile of Choice Choice
A person who is granted citizenship under the Malta Individual Investor Programme is not deemed to acquire a domicile of choice by virtue simply of being granted citizenship. A number of onerous steps need to be taken to shed one's domicile of origin and it is safe for a client to assume that his domicile will not change 'by mistake' even by taking up residence as a citizen of Malta.
Maltese Citizenship & Taxation
Maltese citizenship alone does not change the tax treatment of an individual or family acquiring citizenship unless they take up tax residence in Malta. Malta's connecting factors for tax jurisdiction are residence and domicile (not nationality) and therefore the tax implications of Malta Citizenship & Taxation result from the programme's residency requirement and not citizenship itself. Prudently, as a consequence of meeting the residency requirements of Malta's Citizenship program, it is safe to presume that one is to be considered tax resident at least during the two years over which the 12 month timeline extends. This should not alarm prospective citizenship applicants. We have assisted hundreds of citizenship and residency applicants under the Malta (and Cypriot) programs. Our experience advising on the tax implications of Maltese citizenship and residency ensures you experience only the benefits of Malta's res-non-dom tax regime and you will suffer no avoidable taxation in Malta.
However, some routes to acquiring Maltese citizenship require a minimum residence period for eligibility. For instance the Malta Individual Investor Program, or Malta Citizenship by Investment Programme, required applicants to satisfy a one year residence requirement. The 2021 Maltese Citizenship for Direct Investment Rules increased the minimum residence to three years, with a possibility of reducing the minimum residence to one year in exceptional circumstances. Though this does not strictly entail a minimum of 183 days of physical presence, it does imply fiscal residence at least during this first year which could span two fiscal years. This establishes an indirect link between Maltese personal tax and Maltese citizenship and makes pre-immigration tax planning a must if as much as €350,000 or more in avoidable taxes are to be avoided.
Pre-Immigration Tax Planning
Under the Citizenship by Investment Programme, applicants are often bringing into Malta significant sums of money to cover the contribution, the investment in Government bonds as well as property and other investments they may choose to make. All funds transferred to Malta, even for the payment of taxes, rent, investments, fees or other expenses, maybe be subject to taxation in Malta if the funds used are considered taxable income at the source. Our pre-immigration tax planning service compliments our Malta Citizenship by Investment application handling and ensures that our clients not only enjoy the highest chances of success in applying for citizenship but also in avoiding undue taxes.
Tax Planning Opportunities for Non-Domiciled Individuals
Other opportunities exist for the running of companies in Malta. If short yet in full:
- company tax rate: 35%
- personal tax on dividends received by a Malta company: none (imputation system applies)
- tax refund to shareholders of a Malta company: 6/7 ths, i.e. 30 out of 35 paid by the company is refunded to shareholders.
Companies can bank anywhere in the world and can be owned by shareholders of any nationality. Our tax partners and tax advisors have a long-standing experience using Malta in the planning of international business, wealth structuring and wealth preservation. We are well positioned to ensure you benefit from the full legal extent of Malta's tax friendly and pro-business environment.
In this article, the author highlights the personal tax system applicable to persons being granted Maltese citizenship under any route, particularly under the investor route.
Malta Tax Highlights- Acquiring Citizenship without changes in tax residence or domicile has no tax consequences.
- Tax residency may arise from a genuine link with Malta established in the course of naturalisation as a Malta Citizen.
- Tax residency may not create a tax liability.
- Tax is only due for resident foreigners on:
- income/capital gains arising in Malta, and
- foreign income (not capital/capital gains) only if received in Malta.
|
Non-Dom Tax Regime
Therefore the main variable and connecting factor is Residence. By taking up residence in Malta, an individual (whether a citizen or not) enters into a non-dom tax regime akin to the tax regime applicable in the UK, even if without the complicated residence tests and rules applicable in the current British tax system. A Maltese resident who is not Domiciled in Malta is chargeable to tax in Malta only on a source and remittance basis. Therefore he would be chargeable to tax only on income arising in Malta and on foreign source income if and to the extent that it is remitted /received in Malta. Foreign source capital gains are out of scope of taxation even if remitted to Malta. The tax planning opportunity here is that foreign source income that is kept in bank accounts outside Malta remains out of scope of Malta tax as do foreign capital gains even if remitted to Malta.
Domicile of Origin, Domicile of Choice Choice
A person who is granted citizenship under the Malta Individual Investor Programme is not deemed to acquire a domicile of choice by virtue simply of being granted citizenship. A number of onerous steps need to be taken to shed one's domicile of origin and it is safe for a client to assume that his domicile will not change 'by mistake' even by taking up residence as a citizen of Malta.
Maltese Citizenship & Taxation
Maltese citizenship alone does not change the tax treatment of an individual or family acquiring citizenship unless they take up tax residence in Malta. Malta's connecting factors for tax jurisdiction are residence and domicile (not nationality) and therefore the tax implications of Malta Citizenship & Taxation result from the programme's residency requirement and not citizenship itself. Prudently, as a consequence of meeting the residency requirements of Malta's Citizenship program, it is safe to presume that one is to be considered tax resident at least during the two years over which the 12 month timeline extends. This should not alarm prospective citizenship applicants. We have assisted hundreds of citizenship and residency applicants under the Malta (and Cypriot) programs. Our experience advising on the tax implications of Maltese citizenship and residency ensures you experience only the benefits of Malta's res-non-dom tax regime and you will suffer no avoidable taxation in Malta.
However, some routes to acquiring Maltese citizenship require a minimum residence period for eligibility. For instance the Malta Individual Investor Program, or Malta Citizenship by Investment Programme, required applicants to satisfy a one year residence requirement. The 2021 Maltese Citizenship for Direct Investment Rules increased the minimum residence to three years, with a possibility of reducing the minimum residence to one year in exceptional circumstances. Though this does not strictly entail a minimum of 183 days of physical presence, it does imply fiscal residence at least during this first year which could span two fiscal years. This establishes an indirect link between Maltese personal tax and Maltese citizenship and makes pre-immigration tax planning a must if as much as €350,000 or more in avoidable taxes are to be avoided.
Pre-Immigration Tax Planning
Under the Citizenship by Investment Programme, applicants are often bringing into Malta significant sums of money to cover the contribution, the investment in Government bonds as well as property and other investments they may choose to make. All funds transferred to Malta, even for the payment of taxes, rent, investments, fees or other expenses, maybe be subject to taxation in Malta if the funds used are considered taxable income at the source. Our pre-immigration tax planning service compliments our Malta Citizenship by Investment application handling and ensures that our clients not only enjoy the highest chances of success in applying for citizenship but also in avoiding undue taxes.
Tax Planning Opportunities for Non-Domiciled Individuals
Other opportunities exist for the running of companies in Malta. If short yet in full:
- company tax rate: 35%
- personal tax on dividends received by a Malta company: none (imputation system applies)
- tax refund to shareholders of a Malta company: 6/7 ths, i.e. 30 out of 35 paid by the company is refunded to shareholders.
Companies can bank anywhere in the world and can be owned by shareholders of any nationality. Our tax partners and tax advisors have a long-standing experience using Malta in the planning of international business, wealth structuring and wealth preservation. We are well positioned to ensure you benefit from the full legal extent of Malta's tax friendly and pro-business environment.