Taxes in Malta

Advantages of the Maltese Taxation System

Malta used to be a British colony. Today, its laws still largely resemble their UK counterparts. When calculating the taxes, you should take into account not your capital but your income. Within such a system, the wealth tax becomes irrelevant (it's the tax that people in some states pay for the fact of having a lot of money in their bank accounts or in any other form).

Here are the key arguments why so many foreigners opt for this island state when choosing their second home:

• Malta tax rates are very affordable. The maximum rate for individuals and the corporate rate are 35% — but in fact, the rate becomes much lower thanks to deductions and refunds.
• There is no property tax, inheritance tax or gift tax.
• To enjoy the benefits that are available for tax residents, you don't need to live on the island for at least half a year each year. It will be enough to obtain domicile status.
• If you prefer to become a resident, you can get your initial permit in just two weeks. The shortest path to citizenship takes only one year and requires an investment of €750,000.
• The local VAT is 17%. Only one EU state has a lower VAT — Luxembourg with its 16%. The standard VAT across the EU is 21%.

Expats who come from outside the EU can apply for the Global Residence Programme (GPR) and become eligible for a special taxation regime. According to it, you'll need to pay at least €15,000 in taxes per annum. If you apply together with your dearest and nearest, this price won't increase depending on the number of your family members. In exchange, you'll become exempt from the tax on any income that you generate outside of the island and fail to transfer to its territory.

There are alternative programs for expats who'd love to become Maltese residents and citizens. However, none of them grants tax benefits comparable to those of GPR.

Taxation for Legal Entities

The corporate tax on the island is 35% flat and is charged for each calendar year. At first sight, it might seem like a high rate. However, thanks to the tax refund for shareholders, you can decrease this number by over 2/3. Probably, you'll even be able to drive it down to zero.

If a business pays out dividends or transfers some other type of income to its shareholders, it becomes exempt from the withholding tax. If the taxation rate for an organization is 35%, its dividends carry imputation credit on the tax that it pays.

Employers pay 10% of each of their staffer's weekly wages as social security contributions. Alternatively, they may contribute up to €50 per week. Plus, the employed professional themselves pays the same sum.

The standard value-added tax is 18%. For selected sectors, it's lower:

On the 15th day of the month, you should submit your VAT returns either online or at any Maltapost branch (it's the local postal services company).

The rate of excise duty can vary significantly from one product category to another. In particular, it's relevant for mineral oils, tobacco products and alcohol spirits. For instance, the maximum rate for beer is €0.75 per 100 liters.

The customs duty rate can also vary greatly. You won't need to pay it if you tick one of these boxes:

• Import things from the EU
• Import them into the Malta Freeport, regardless of their origin

When selling and buying insurance, security and properties, people are supposed to pay a stamp duty. Normally, its maximum amount is 5% of the purchase price.

Igaming Taxation

Malta differentiates itself from most other EU economies thanks to the fact that it actively supports the igaming industry. This sector has been thriving here for the last two decades. Many leading global operators get their licenses on the island to be able to work on the international level. They value Malta for its following merits:

• Stable political climate
• Established financial services institutions
• Cutting-edge telecommunications infrastructure
• Skilled workforce, able to speak various languages
• Straightforward and efficient licensing process
• Affordable expenses
• Legal framework that leaves operators room for innovation

The Malta Gaming Authority grants licenses to businesses that meet these criteria:

• Are registered in the EU / EEA
• Are entirely law-obedient
• Have sufficient funds and technical resources to provide the selected services
• Successfully passes the due diligence procedures

The MGA license is considered to be one of the most respected in the world. Its requirements are more demanding than those of Curacao, Antigua and Barbuda or other territories that issue international igaming licenses.

First, applicants submit a fee of €5,000. Then, they pay €25,000 for the issued license. Besides, there is an annual license fee whose amount can vary from €10,000 to €35,000.

Every month, igaming businesses pay the compliance contribution. Its rate depends on the type of services that the company provides:

Plus, there is a 5% monthly gaming tax.

In total, the expenses turn out to be rather acceptable — and they're worth every cent you'll invest.

Taxation for Individuals

Before expats relocate to the island, they should start by renting or buying property here. The average amount of the fees and taxes related to the deal is around 10% of the purchase price. The notary will help you pay them properly. Then, be ready for the following expenses:

• From €40 to €250 annually for the land tax (there is no tax for the fact of owning the property)
• 15% tax without any deductions if you'd love to rent out your property (plus, there will be an income tax — we'll focus on it in the next passage)
• 15% capital gains tax if you attempt to resell your purchase before having become its legal owner
• Up to 15% for selling non-residential real estate (the longer it belongs to you, the more you pay)

When you'll be reselling your residential property that you purchased less than 3 years ago, the buyer will be supposed to pay the 5% stamp duty. First, they will transfer you 1% of the purchase price after you sign the promise of sale. You'll receive the remaining 4% after finalizing the deal. If you owned this property for over 3 years, there will be no stamp duty.

When talking about the advantages of the Malta taxes, we said this island lacks inheritance tax. It's true in two cases:

• You inherit your mom's or dad's residence
• You inherit the part of the property that you owned together with your deceased spouse and you lack any other place to live

Those who fail to meet any of these criteria pay a stamp duty of up to 5%.

If you own shares of some legal entities, you can be eligible for a refund when paying taxes for your dividends. If you already pay your taxes at a maximum rate of 35%, you might be exempt from the taxes on your dividends at all. Each case is individual and the conditions can vary greatly.

Income Tax in Malta for Foreigners

You'll need to obtain a local tax identification number if you tick at least one of these boxes:

• Become a tax resident on this island
• Generate income here

If you generate profit on the island, you should pay a tax on it here, regardless of whether you're a local resident or not. Residents pay taxes on the island for all their income, regardless of its place of origin. The exact rate can differ depending on your individual circumstances. Plus, many expats are eligible for benefits.

The income tax in Malta should be paid on one's salary or pension and all investment income. It doesn't matter whether you're employed or self-employed. Here are the key facts to remember:

• Single individuals are exempt from this tax if they earn less than €9,100 per annum. For married couples, this limit is set at €12,700 per annum. For parents who raise underage kids, it's €10,500. A kid officially remains in their mom's or dad's custody until they turn 18 — or 22 if they attend a full-time program at a higher education establishment in Malta and can't sustain themselves without their parents' assistance.
• The highest rate is 35% for everyone. You'll reach it when your annual income begins to exceed €60,000.
• The maximum possible tax deduction is €8,725 for single individuals, €9,905 for married ones and €9,050 for parents.

If a resident is non-domiciled on the island, they're supposed to pay a tax of at least €5,000 in case they meet at least one of these criteria:

• Have earned over €35,000 elsewhere on the planet in the previous year and failed to transfer these funds to the island
• Fail to face any other threshold for paying their taxes

For non-residents, the marital status doesn't impact the tax rate. They don't pay anything if they fail to make at least €700 per annum. But if they earn as little as €7,801 per annum or more, they're subject to the highest rate of 35%.

Self-employed professionals pay a tax of up to 15% on their income.

Selected categories of taxpayers have the right to benefits and deductions. For instance, retirees can apply for a 15% rebate. Highly qualified expats might pay a maximum flat tax of 15%.

All individuals should submit their tax declarations for the previous year by the end of June of the current year.

How to Obtain Malta Tax Residency

To qualify as a local tax resident, a foreigner needs to:

• Receive income on the island
• Spend here at least half a year each year

Alternatively, you can obtain domicile status — we'll discuss it in the next passage.

The fact of having a Maltese passport doesn't automatically make you a resident.

You'd fail to become a local tax resident if you simply open an account in one of the island's banks but don't receive income in it. If you relocate your business headquarters to the island or buy assets here, you'll qualify as a resident.

Essence of the Domicile Status

A foreigner becomes domiciled if they spend most of their time elsewhere but consider Malta their homeland. In particular, this option comes in handy for foreigners who currently run international businesses but are planning to retire on the island.

To obtain domicile status, it's necessary to be aged 18+ and prove that you indeed would like to relocate permanently to the island as soon as you get a chance. Besides, you shouldn't live for a long time in any other country. It's ok if you're a digital nomad who travels around the world.

Who Is Exempt from Taxes

In the previous passages of this article, we've mentioned under which conditions individuals can enjoy a tax free status. Let's sum it up:

• Expats don't need to pay taxes on the income that they generate abroad unless they're domiciled tax residents of this island
• Non-domiciled non-residents avoid paying taxes on the income that they generate elsewhere in the world
• Individuals are exempt from the income tax if they earn less per annum than the established limit for their category of population (€9,100 for singles, €12,700 for married couples and €10,500 for parents of underage or financially dependent kids)
• Shareholders of legal entities have a right to return up to 100% of the corporate tax

Depending on your circumstances, you might be eligible for more benefits and reductions. Please consult a tax expert to find out the details.

Now, let's focus on another important topic. Is Malta tax free for crypto owners? The answer depends on what you do with your digital assets:

• If you act as an investor (this means you hold your assets for a long time before selling them), your deals won't involve paying any taxes
• Crypto traders who sell and buy assets regularly pay an income tax of up to 35%

The good news is that, depending on your residency and the amounts of your deals, you might be able to significantly reduce your expenses as a trader. Please ask for legal advice to find out the details.

In 2018, Malta became one of the first territories on the planet to start regulating cryptocurrencies. The national government quickly realized the importance and perspectives of blockchain technology and began to support it. Today, the island's legislation remains one of the most advanced in the world in this aspect. It recognizes four categories of digital assets, for each of which specific rules were drafted.

Dual Taxation

If the country where you come from signed a dual taxation treaty with Malta, you won't have to pay taxes in both territories. This island state has signed around 80 treaties of this type with foreign governments. People from the EU states, Australia, Canada, China, India, Israel, Russia, the US, the USA and many other territories are exempt from the double tax.