Malta is a quiet archipelago in the middle Mediterranean within Sicily and the North African Coast. The Mediterranean sea consists of the sunny holiday islands which are Malta, Gozo, Comino and the Uninhabited Islands Filfla, Cominotto and St. Paul’s Island. It is a best known in the world for historic sites related to a succession of rulers including the Moors, Romans, Knights of Saint John, British and French. It was last ruled by Britishers, who occupied the Maltese archipelago for almost 2 centuries and as a result, English is considered as one of the two official languages besides Maltese. Other languages which are widely spoken are French and Italian.
Malta is considered as the central island of the archipelago because it is charming, attractive and sunny holiday island. It consists of alluring and fascinating past with rich and varied cultural and architectural heritage. The island beautifies itself by the unique landscape of rugged coastlines and beautiful bays. There are various wonderful and cultural buildings with centuries-old history. There are various options for opting for one of the small beaches in the bays of Malta or you will get many options the beautiful white beaches of the neighbouring island Gozo. Why don’t you choose to live there? You can also choose to live there for one or more years. Things are quite easy there because Malta is a member of the EU for example, non-EU nationals who should decide to become resident of Malta can enjoy visa-free access to the Schengen area.
Starting up a company in Malta
Malta is unique in many terms like it is one of few states in the world with an imputation system for corporate taxes. This makes Malta a high corporate tax on companies but most of it ends up being reimbursed later. Malta’s Corporate tax rate is 35%. However, the Maltese tax authority reimbursement includes 85% of this 35% tax rates within two weeks. The actual tax rate actually prevails at 5%, which is among the lowest in the whole EU. Within the system, you also can not avoid CFC rules.
The greatest hurdle in reimbursement is money isn’t transferred back to the company, instead 30% is put into another account that you choose. It can bring lots of problems which will be far beyond the imagination.
So, reimbursement isn’t received in the form of dividends but rather as income. In case you are paying high taxes, your reimbursement will be assessed (when the money is transferred to a private account) and in case of progressive income tax, often exceeding 26.8% withholding tax.
If you are running a business as a non-dom living in Malta your tax reimbursement is considered national income and is taxed entirely according to a progressive system. In both these cases, you can only able to avoid this by creating a holding structure that channels the reimbursement into earnings. With this, you can receive earnings with a considerably lower corporate tax or depending on the holding company, completely tax-free.
If we look deeper into this, in any case, it is important to give attention to the credibility of the holding company, for this it is necessary that at least when you are registered in a country with its CFC rules. If your company is from the EU and has real assets, then it can be more expensive. The business owners in Malta living in countries with CFC rules are considered to be double structured with a worth of starting at very high-income levels (anything over 250000 euro.
If you are thinking to live in Malta as a non-dom, you do not need to pay attention to the credibility of this company as a foreign company. So before taking any decision make sure that you really need this type of double structure.
Starting a business in Malta as a non-dom
The lawyers always know it but they make much money from helping business-owners getting the non-dom status (because this only involves one payment). So they take advantage of this and instead of leaving it there, they sell these very experience Maltese companies in global packages, they extend it further by accounting including, which brings in an annual income that may be in thousands of euros.
Various law firms try to sell the double structure between the company in Malta and the foreign company to obtain the status of non-doms for every individual migrate rates to Malta. Notwithstanding, there are only a few future non-doms who are aware that to get tax reimbursement, neither a Maltese company nor an additional foreign company is required.
It is quite genuine that a non-dom can find the solution works in Malta and paying off for it can be a clumsy and time-consuming process. The better option for this is you can simply complete the registration process yourself and establish a foreign company in any part of the world. You can easily work with this without any complications in Malta as a non-dom, and because there are no strict CFC rules, you can operate in an offshore country completely tax-free.
In comparison to the system in Cyprus, emigrating to Malta doesn’t require you to establish a company there.
Under Maltese law, The Domicile Of the origin of any individual is that acquired at birth from the father and this will change when the father obtaining a different domicile of choice and showing an intention to reside fully in the new domicile while severing ties with his domicile of origin. At the time of attaining the age of majority that is eighteen (18), the individual his own domicile of choice in the same way. Malta is not deemed with domiciling rules as having been developed in the United Kingdom.
Resident Non-Dom Status
To live in Malta the individuals need the most appropriate residence rules applicable to them. The non-EU/EEA nationals, individuals and families may take up residence under the Global Residence Programme. If the EU nationals want to live in Malta than they take up residence in Malta under the Malta Ordinary Residence system or benefit from The Residence Programme Rules.
Source & Remittance Basis of Taxation
The non-domiciled residents of Malta are taxable on a remittance basis only on foreign-source income and not the foreign source capital. They are remitted to Malta only to the extent remitted. The income and capital gains arising in Malta are always subject to tax in Malta at the applicable personal income tax rates.
Double Taxation relief
Malta owns more than 60 double treaties. Persons who take their way to live in Malta can receive their pensions in Malta free of tax at source and subject to a mere 15% under the Global Residence Programme or the Retirement Programme.
With this, Malta also offers the Overseas capital funds invested locally and they are only taxed on any interest or dividends generated thereon, with only 15% flat rate. The benefits for the permanent residents include double taxation agreements existing between Malta, many countries like Canada, Australia, and the USA ensures that the tax charged by them is never relying twice on the same income.
The used household stuff and personal effects like furniture and other domestic articles (excluding firearms and weapons of all kinds) are imported free from import duty if you import them in six months before your arrival in Malta to take up residence. In these cases, import licenses are not required.
Other Tax Considerations
- No inheritance tax
- No estate tax
- No wealth tax
- No municipal tax
- No rates
There is a stamp duty which the acquirer needs to pay on the transfer of immovable property situated in Malta and transfers of shares in any Maltese company. (including transfers on death). If any company is listed on the Malta Stock Exchange or if the vast majority of business interests are outside Malta then the exemptions from stamp duty are available on the transfer of shares in any Maltese company.
How to get tax residence in Malta for EU citizens
You have to open a company in Cyprus to earn the non-dom status and in case of Malta, any foreigner can become a non-dom without even having to apply for it. All these are possible because of the freedom of establishment within the EU, there are the following minimum requirements.
- You have spent at least six months of the year in Malta
- You have to pay the rent of all year or own a house
- You need to have a valid health insurance
- You need to be independent means you need to make 14000 euro a year or 84.95 euro a week.
The Maltese HNWI program as an alternative for wealthy people
In the year 2014, the Malta Individual Investor Programme (IIP) was introduced which offers high and ultra-high net worth individuals and families worldwide citizenship in a highly respected EU Member Country. Becoming a member of the European Union since 2004 Malta enjoys a stable political climate, bi-partisan political scene, growing economy, and has some of the soundest banks in the world. The European Commission has recognised Malta IIP the first investment citizenship program, the executive body of the European Union has formally acknowledged the legality of the program paving the way to success.
A certificate of Naturalization is granted to the successful candidates, it can be extended for the family members of individuals. Once a candidate is awarded Malta citizenship including EU citizenship, they have the right of establishment in all 28 EU countries and Switzerland. They are also free to set their business in Malta and also they can get a Malta Passport which enables them to enjoy visa-free travel to more than 160 countries across the world including the United States.
More than 1000 Malta passport applications are distributed for more than 40 countries until 2019 under the Individual Investor Program. As of date, the IIP Malta is accepting new applications yet.
Eligibility for Individual Investor Programme Malta
The Malta government passed an amendment in 2013 to chapter 188 of the Maltese Citizenship Act, as well as the enactment of Legal Notice LN47 in 2014, according to these it legally grants eligible persons EU citizenship by Investment via the Malta Individual Investor Program. To apply for the Malta citizenship scheme 18 years of age is mandatory and the applicant needs to meet all the Malta Immigration requirements, which are listed below:
Fit and Proper Test
The Malta citizenship by investment program has some of the strictest diligence standards for any immigrant investor in the world, for this, only deserving and reputed applicants are granted Maltese citizenship. There is a four-tier diligence process carried out directly by the government to assess candidates as a part of the Malta Individual Investor Programme.
The applicants need a clean cut record from any type of crimes, to check the criminal record the Malta government conducts extensive criminal checks with INTERPOL, the International Criminal Court, and various other sources and authorities. The applicants must have to provide a Police certificate before they get approved for European citizenship.
For becoming a citizen of Malta you must need to show that they are healthy and not suffering from any contagious diseases. All the applicants must need to be covered by an international health insurance policy.
A non-refundable contribution is important for all the individuals applying to the Malta Individual Investor Program, it is necessary for the National Development and Social Fund set up by the government of Malta and it is run by a board of trustees. The fund which is of the same level as the central bank, finances projects in the country linked to public health, education, job creation, social improvement, and innovation. The below contributions are necessary to make within four months of being issued a Malta IIP Letter of Approval in Principle:
- Main applicant- €650000 each
- Spouse- €25000 each
- Minor children €25000 each
- Children 18-26 (unmarried) €50000 each
- Dependent parents & grandparents €50000 each
- Adult children (physically or mentally challenged) €50000 each
Real Estate Purchase or Rental
To get citizenship in Malta the Applicants must commit to live as an immovable residence in Malta for a minimum time period of five years. For doing this they must have to buy a property in Malta for at least € 350000 and maintain ownership for 5+ years, or by leasing property for five years or more with a minimum annual rent of € 16000. They need to provide evidence of owning or leasing a property on the islands within four months of receiving a citizenship Malta Letter Of Approval in principle.
An investment of € 150000 in government approved financial instruments is mandatory for applicants to become a Maltese Citizen by investment. They must commit to keeping the investment for at least five years.
If you are purchasing a real estate or entering into a property lease to live in Malta, then being an investor candidate you will get a Malta identity document called an eResidence card. This represents the starting of their residency in Malta and it also explains the candidate’s genuine link with the country. After 12 months of living and getting residency in Malta applicants will be granted citizenship to be known as a Maltese. As now if you are thinking you need to spend all 365 days in Malta before citizenship is granted, then make sure that you will not have to live a complete year in Malta because according to Maltese law “an intention to reside in Malta for any fiscal year, usually evidenced by a stay of a minimum of 183 days or by the buying or selling of property together with a visit to Malta”. Therefore upon purchasing or leasing an apartment or villa in the Mediterranean island nation and procuring a Malta residence card, applicants are not required to spend any time in Europe. Candidates who have been a resident of the country for at least one year before the I.I.P approval already satisfy this residency requirement and can subsequently become a citizen of Malta much faster than any other.
What are the things which people don’t understand about the non-dom system?
The non-dom status signifies that the foreign income is exempt from taxes as long as it doesn’t enter the country. The foreign income that stays in a foreign account will be tax-free in all senses. Many non-doms does not know the meaning of repatriating foreign income, thus it doesn’t make any use for them.
Bringing money in the country implies on all types of transactions like transfer to a bank account, withdrawing money from ATMs within the country, making payments there with credit cards, bringing cash from other countries (although this is hard to detect), etc.
All the types of money you are using in Malta are really “repatriated” money, as it has been introduced from other countries to Malta. All the costs that are arising in situ in Malta, therefore, have to be taxed completely. Malta owns more permissive non-dom system in comparison to Ireland and Great Britain.
In other countries, you need to outline everything earned by you from non-dom taxes on your return, Maltese non-doms can able use the transfer law. There are various countries in which you have to register all your international income although only repatriated foreign income is taxed. Living in Malta you only have to legally hide your foreign income, because only repatriated data needs to be declared. Malta is different and best place to live because it does not put the burden of the high tax on your shoulders just like many European countries, they have a progressive tax system with tax-exemption up to€ 8500 and three tax brackets of 15%, 25% and 35%.
Unmarried people have to pay 15% up to € 14500, then 25% up to € 60000, and after that pay 35% (married people or people with children have more generous brackets). If you think that tax exemption will help you in any manner then you are doing a mistake because this exemption does not apply to non-doms. This means that every type of money spend in Malta is progressively taxed.
With all these, You just need to add the necessary social security contributions, which are calculated taking into account many factors, but in case of freelancers and business owners, it comes to a maximum of €53.08 per week, starting at an annual income of €18500. This puts an additional tax burden of €2700 a year. For income less than €18400, there is a 15% tax on net income, or 0.15x €1020= €153 of additional monthly costs, which comes out at almost €1850 a year. The legally safe non-dom structure determines that you will contribute to the tax system and social security in Malta.