The tax system in Malta

Malta's tax system

When moving abroad, one has to comply with the taxation and regulations of the host country. This article will explain to you the tax system in Malta.

In order to understand Maltese taxation, it is important to differentiate between "domiciled" and "non-domiciled resident" status.

Maltese law states that a person's domicile is acquired from the father at birth. In order to choose another domicile, one must show an intention to reside indefinitely in the host country and sever ties with the domicile of origin. This concept is particular to Malta, where domicile is not associated with residence. A person can only be domiciled in one country but can have two places of residence.

EU (European Union), EEA (European Economic Area) and Swiss nationals can establish residence in Malta with a scheme called Malta Ordinary Residence. Persons from other countries also have the option of establishing residence in Malta with the Global Residence scheme.

The rate of income tax may vary depending on the type of residence, but whether married or single and regardless of the residence scheme, if not domiciled in Malta, only Maltese source income is subject to income tax in Malta. Foreign income is not. For example, if you are a tax resident in Malta but are domiciled in the UK, you need to pay income tax to the Maltese government for your income earned in Malta. However, you must pay taxes to the British government regarding your non-Maltese income.

Malta's income tax is progressive and has a maximum rate of 35%. Income from foreign sources is only subject to tax if it is sent to Malta: this is the remittance basis. If not sent to Malta, income from other countries is not taxable in Malta.

Even if received in Malta, capital gains that are realized outside Malta are not subject to Maltese tax. Savings and capital remitted to Malta are also not subject to tax.

Is Malta a tax haven?

Sometimes, you may hear that Malta is a tax haven. Malta is not a tax haven as such because it is not a tax-free jurisdiction. Back in 2000, the OECD included Malta on the list of countries that have agreed to improve tax transparency. The country had to scale back on the tax allowances to better integrate with the European community and avoid censure from American authorities. After 2000, Malta has not been included on the blacklist again.

However, Malta has a very favorable tax regime. Here are some tax advantages in Malta:

• The maximum income tax rate for executives and high-net-worth expats is only 15%.
• Companies and tax experts can manage to reduce the effective tax on their income to 5%.
• No property tax or council tax.
• No tax on foreign capital invested in Malta.
• No tax on capital gains made abroad.
• No wealth tax, inheritance tax, or gift tax.

Income tax in Malta

Your tax residence can be determined according to your principal place of residence (183 days or more), the place where your family lives, your nationality, and the country where you receive your income.

Temporary residents in Malta do not have to pay taxes. Permanent residents pay tax according to a bracket system based on marital status and employment type.

If you are resident in Malta for 183 days in a calendar year, you are required to pay taxes there.

This system also applies to expats, regardless of their country of origin.

Whether an individual or a company, the income tax rate in Malta cannot exceed 35% in 2022. For a company, it is strongly advised to use an accountant or an expert to take full advantage of all the benefits offered by the Maltese tax system, which offers numerous deductions to investors.

In 2022, the breakdown was as follows:

Singles:

• €0 to €9,100 - 0% (no tax relief)
• €9,101 to €14,500 - 15% (€1,365 tax relief)
• €14,501 to €19,500 - 25% (€2,815 tax relief)
• €19,501 to €60,000 - 25% (€2,725 tax relief)
• €60,000 and over - 35% (€8,725 tax relief)

Married couples:

• €0 to €12,700 - 0% (no tax relief)
• €12,701 to €21,200 - 15% (€1,905 tax relief)
• €21,201 to €28,700 - 25% (€4,025 tax relief)
• €28,701 to €60,000 euros - 25% (€3,905 tax relief)
• €60,001 and over - 35% (€9,905 tax relief)

Parents:

• €0 to €10,500 - 0 % (no tax relief)
• €10,501 to €15,800 - 15% (€1,575 tax relief)
• €15,801 to €21,200 - 25% (€3,155 tax relief)
• €21,201 to €60,000 - 25% (€3,050 tax relief)
• €60,001 and over - 35% (€9,050 tax relief)

According to Malta's income tax act, spouses must file jointly. Nevertheless, married couples can choose to pay taxes at the single rate, and parents may benefit from the special parent rates.

Certain expenses are deductible, such as employee expenses, school fees, childcare, nursing home fees, alimony, and certain items relating to rental income.

Good to know:

The income tax applies to self-employed individuals as well. If you are self-employed on a part-time basis, you can qualify for a 10% tax rate under certain conditions.

Malta has a Double Tax Treaty with many countries, so be sure to check your home country's taxation rules to ensure you do not pay double when it is not necessary. For more details, see below in this article.

Read also Finding work in Malta

Registration as a taxpayer in Malta

Once you have received your work and resident permit for Malta, you are required to duly fill and sign the Expatriates Taxpayers Registration Form, which you then have to produce to the Office of the Commissioner for Revenue. Note that you have to apply for a Tax Identification Number (TIN) once you start working in Malta. If you are a foreigner residing in Malta, you need to register as a taxpayer even if you are not in employment.

There are some cases where the registration for a Tax Identification Number is automatic:

• If you are an EU national (Cross Border) and got a social security number in Malta after registering with the Department of Social Security;
• If you are a Third-country national holding a single permit.

Important:

If you are not in one of the cases mentioned above, you must apply for the Tax Identification Number using the Expatriates Registration form​.

Deadlines and payment for taxes in Malta

The tax year for Malta follows the calendar year, so it ends on December 31st.

You are required to submit your previous year's tax return at the latest on the 30th of June of the current year. For example, the tax return for 2022 is due by 30th June 2023. Otherwise, penalties should apply.

If you are self-employed, you must pay the income tax by the end of April of the following year.

It is possible to pay your taxes online in Malta, but you will normally receive your tax form in your mailbox and have time to return it before the deadline.

Receiving your tax return by post is possible. You simply need to fill it out and produce it to the Office of the Commissioner for Revenue along with the payment check. You can also make online payments through the Office of the Commissioner for Revenue website. There are thorough FAQs should you have any trouble with the system.

The different tax regimes for foreigners in Malta

There are different tax regimes expats and foreigners can benefit from in Malta.

EU, EEA and Swiss nationals can establish residence in Malta with a scheme called Malta Ordinary Residence. When they benefit from this scheme, Maltese income tax rates apply to them. Those rates can be more advantageous than the rates in their country of origin.

Third-country nationals have the option of establishing residence in Malta with the Global Residence Programme (GRP) if they do not have Long-Term Residence. If you are in this situation, you can apply for the GRP through an Authorised Registered Mandatory. Here are the conditions to benefit from this tax status in Malta: you must invest in property valued at at least €275,000 (€220,000 in certain areas), or establish a rental contract for at least €9,600 (€8,750 in certain areas). You will benefit from a 15% flat taxation rate.

For individuals receiving a United Nations (UN) pension or a Widow's / Widower's benefit, there is the United Nations Pension Programme in Malta. There are several conditions to be met, such as not being a permanent resident or a long-term resident of Malta. Beneficiaries of this programme do not pay any income tax on the UN pension or the Widow's / Widower's benefit they receive. Tax rates on other sources of income are advantageous. The tax rate is 15% on other incomes (excluding the UN pension or Widow's / Widower's benefit) arising outside Malta and received in Malta. The tax rate is 35% for any other income.

The same tax rates (excluding the exemption for the pension) apply to the beneficiaries of the Malta Retirement Programme (MRP). It is open to EU, non-EU, EEA and Swiss nationals under some conditions.

The Residence Programme (TRP) is another tax regime for foreigners in Malta. It is open to EU, EEA and Swiss nationals who are not permanent residents of Malta. Thanks to this program, you can benefit from a tax rate of 15% on incomes received in Malta from foreign sources by you and your dependents (spouse and children). A tax rate of 35% applies to other sources of income.

Corporate tax in Malta

Malta is a very tax-friendly country regarding taxes and social contributions paid by companies.

In Malta, the tax rate for corporate income is 35%. The same tax rate applies to branches and subsidiaries of foreign companies. Some companies, such as trading companies and international holding companies, can benefit from reduced tax rates as low as 5%.

With tax exemptions for repatriating profits to parent companies, the government encourages businesses to invest in the research and development industry. Plus, companies that distribute dividends to local and foreign shareholders can get refunds on the taxes paid in Malta - a great incentive for businesses to set up there!

Read also Setting up a business in Malta

Other taxes in Malta

Besides the income tax, there are other taxes for individuals in Malta.

The main one is the maternity fund and social security contributions. For employed individuals, the social security contributions rate is 10% of the employee's basic weekly wage. It is payable by both the employee and the employer and is subject to a minimum and maximum contribution. For self-employed individuals, the rate is 15% of the annual net income.

There are also indirect taxes in Malta:

• The VAT, whose standard rate is 18%. There are two reduced rates of 7% and 5%.
• Import duty for products imported from outside of the EU.
• Excise duty.
• Stamp duty.
• Motor vehicle registration tax.
• Fuel bunkering tax.
• Eco tax contribution.

However, some well-known taxes in other countries do not exist in Malta, thus delighting expatriates. There are no taxes on property, inheritance, gift and capital, for example.

Double tax treaties in Malta

With Malta having signed more than 60 double tax treaties, nationals of most EU countries, the US, Canada and Australia are assured that they will never pay tax twice while living in Malta.

Here is the list of the double tax treaties in Malta: Albania, Australia, Austria, Bahrain, Barbados, Belgium, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Guernsey, Hong Kong, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Jordan, Korea, Kuwait, Latvia, Lebanon, Libya, Liechtenstein, Lithuania, Luxembourg, Malaysia, Mauritius, Montenegro, Morocco, Netherlands, Norway, Pakistan, Poland, Portugal, Qatar, Romania, Russia, San Marino, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Syria, Tunisia, Turkey, United Arab Emirates, United Kingdom, United States of America, Uruguay.

Useful link:

Office of the Commissioner for Revenue

International Taxation Unit – Office of the Commissioner for Revenue

Double taxation treaties of EU countries

Malta Income Tax Schedule (2022)

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