Expat taxes in Malta

Posted: June 16th, 2014 Popeye Village Anchor Bay MaltaPopeye Village Anchor Bay Malta

It is necessary to consider both domicile and residence to establish the exact tax situation of individuals in Malta.

Maltese domicile is established on the basis of UK case law principles. Broadly speaking, an individual's domicile of origin (where he was born) can be changed if he establishes a permanent home elsewhere. He can only have one domicile.

Residence is defined as habitual presence in the country; ordinary residence means that an individual is present in Malta in the ordinary or regular course of his life.

Individuals who are domiciled and ordinarily resident in Malta pay income tax on their world-wide income.

Individuals who are domiciled elsewhere, and who are resident but not ordinarily resident in Malta pay tax on their income arising in Malta, or remitted there (but not capital gains, whether remitted or not). The six-month test is likely to be definitive in establishing residence.

Non-resident individuals pay tax on their Malta-source income only; but local interest and royalty income are exempt from tax, as are capital gains on holdings in collective investment schemes or on securities as long as the underlying asset is not Maltese immovable property.

'Returned migrants' are offered a special tax regime: a person born in Malta who returns can elect to pay 15% income tax on local income only; there are various conditions.

In April 2011, the Maltese government published the Highly Qualified Persons Rules, 2011, bringing into force tax incentives that were introduced to encourage non-resident highly-skilled workers to the island, and clarifying the parameters of the scheme.

Announced on April 19, 2011, the government said Legal Notice 106 - Highly Qualified Persons Rules, 2011, would serve to create a scheme to attract highly qualified persons to occupy 'eligible office' with companies licensed and/or recognized by the Malta Financial Services Authority.

'Eligible office' comprises employment in one of the following positions:

Actuarial Professional;

Chief Executive Officer;

Chief Financial Officer;

Chief Insurance Technical Officer;

Chief Investment Officer;

Chief Operations Officer;

Chief Risk Officer;

Chief Technology Officer;

Chief Underwriting Officer;

Head of Investor Relations;

Head of Marketing;

Portfolio Manager;

Senior Analyst (including Structuring Professional); and,

Senior Trader/Trader.

The rules for the scheme came into force with effect from January 1, 2010, and apply to income which is brought to charge in year of assessment 2011 (basis year 2010) and apply to individuals not domiciled in Malta.

Under the scheme, individual income from a qualifying contract of employment in an “eligible office” with a company licensed and/or recognised by the Malta Financial Services Authority is subject to tax at a flat rate of 15% provided that the income amounts to at least EUR75,000, adjusted annually in line with the Retail Price Index. The 15% flat rate is imposed up to a maximum income of EUR5m; the excess is exempt from tax. The 15% tax rate applies for a consecutive period of five years for the European Economic Area (ie EU countries plus Norway, Iceland and Liechtenstein) and Swiss nationals and for a consecutive period of four years for third country nationals. Individuals who already have a qualifying contract of employment in an “eligible office” two years before the entry into force of the scheme may benefit from the 15% tax rate for the remaining years of the scheme. This means that a national of the EEA and Switzerland who has a qualifying contract of employment in an “eligible office” starting in 2008 (basis year) will benefit for three years from the scheme, ie basis years 2010, 2011 and 2012, while a third country national will benefit from one fewer.

Valletta the capital of MaltaValletta, the capital of Malta