Personal Tax Advantages

One of the reasons why Malta has become a top destination for wealthy individuals, investors and skilled workers is that Malta offers a very attractive fiscal regime for non-Maltese individuals.

Although personal income tax is charged at progressive rates up to a maximum of 35%, tax leakage is normally substantially reduced for non-Maltese individuals who receive income abroad but do not remit it to Malta. Furthermore, Malta offers special categories of non-Maltese reduced tax rates if they are high net worth individuals or are highly qualified persons in employment in certain industries which are knowledge based, such as gaming, engineering and technology development.

A favourable tax rate of 15% applies to individuals receiving income from employment exercised outside of Malta. For this tax rate to apply, the overseas employment cannot be derived from employment onboard a ship, aircraft or a road vehicle owned, chartered or leased by a Maltese company, and the overseas employment income cannot be derived from any service for the Maltese Government.

The reduced tax rate is subject to the condition that the contract of employment stipulates that the employment duties must be performed mainly outside Malta.

If the employment income arising abroad is also subject to foreign tax, the individual may also claim double taxation relief so that tax is not charged twice on the income so received.

Third country nationals (non-EU/EEA nationals) who wish to seek an alternative residence but do not become long term residents of Malta are eligible for a reduced tax rate of 15% on foreign-sourced income remitted to Malta. For this special tax rate to apply, a minimum amount of EUR 15,000 in tax per year has to be paid.

For third country nationals to be eligible to participate in the Global Residence Programme, they must prove to the satisfaction of the Commissioner for Revenue that they own a qualifying property of not less than EUR 220,000 or pay not less than EUR 8,750 annually in rent.

Under this programme, which applies to EU/EEA/Swiss nationals who seek an alternative residence in Malta but not to become long term residence, participants benefit from a special reduced tax rate of 15% on personal foreign source income remitted to Malta.

Similar to the Global Residence Programme, individuals participating in this programme must pay a minimum EUR 15,000 in tax per year and must own or rent a qualifying property.

Individuals who own a qualifying property of a minimum EUR 400,000 or pay not less than EUR 20,000 in rent annually may apply for a reduced tax rate of 15% on income that is received in Malta from foreign sources. A minimum amount of EUR 20,000 must be paid in tax each year.

Participation in this programme is conditional on the applicant not staying in any other jurisdiction for more than 183 days per calendar year (i.e. 6 months). It is important to note that individuals benefiting from this programme cannot become domiciled in Malta.

Individuals that are not domiciled Malta but derive employment income from eligible offices may apply for a special tax rate of 15% on all income derived from their employment in Malta.

This special tax rate is available to all individuals in employment with companies licenced and/or recognised by the Malta Financial Services Authority (MFSA), the Malta Gaming Authority (MGA), or hold senior positions with undertakings holding an air operator’s certificate, provided that they earn a minimum income of EUR 75,000 annually (as adjusted in line with the Retail Price Index).

Individuals benefiting from this programme must have a private health insurance policy in place and must reside in an accommodation that is regarded as normal for comparable individuals in Malta.

The tax rate of 15% is imposed on up to a maximum income of EUR 5 million. Any amount earned beyond this maximum amount is not subject to tax. It is important to note that the flat tax rate of 15% as aforesaid is available for a maximum of 8 years for third country nationals and 10 years for EU nationals.

Individuals born in Malta but who have been absent from Malta for at least an aggregate period of 20 years out of the last 25 years may benefit from a reduced tax rate of 15% on foreign income remitted to Malta. The first EUR 5,900 of foreign income remitted to Malta are not subject to tax.

This programme is conditional on the individual’s earning at least EUR 14,000 and an additional EUR 2,400 for every dependant.

Individuals in employment in special sectors may be eligible to benefit from special tax rates.

Individuals working in certain industries which are knowledge based (such as gaming, engineering and technology development) earning a minimum employment income of EUR 45,000 annually are eligible for a favourable tax rate of 15% on all income derived from their employment in Malta. It is important to note that this benefit does not apply if the individual in question controls 25% or more of the shares within the employing undertaking. Furthermore, tax reduction under this scheme is available for a maximum period of 3 years.

Individuals holding certain qualifying positions in  the aviation industry earning a minimum employment income of EUR 45,000 annually are eligible for a favourable tax rate of 15% on all income derived from their employment in Malta. Furthermore, tax reduction under this scheme is available for a maximum period of 4 years for third country nationals and 5 years for EU nationals.

Individuals in employment in maritime activities and the servicing of offshore oil and gas industry earning a minimum employment income of EUR 65,000 annually are eligible for a flat tax rate of 15% on all income derived from their employment in Malta. Income from employment exceeding EUR 6.5 million is not subject to tax. It is important to note that the tax reduction under this scheme is available for a maximum period of 4 years for third country nationals and 5 years for EU nationals (in both cases, subject to a one-time extension).

Individuals who are not ordinarily resident or domiciled in Malta who are employees, or provide services to, investment services companies or insurance companies in Malta are eligible to benefit from a tax exemption for a period of not more than 10 years.

The exemption applies to certain expenditure incurred in relation to the individual, such as removal costs in respect of relocation of such individual to or from Malta, accommodation expenses incurred in Malta, travel costs in respect of visits by the individual and his family to or from Malta, provision of a car for the use of the individual, a subvention of not more than EUR 600 per calendar year, medical expenses and insurance, and school fees in respect of the individual’s children.

EU/EEA/Swiss pensioners who are resident in Malta but not domiciled here and who own a qualifying property of not less than EUR 250,000 (or pay not less than EUR 8,750 annually in rent) and receive a pension income in Malta are taxed at 15% on any foreign sourced income remitted to Malta.

To benefit from this programme, the pension income received in Malta must constitute at least 75% of the individual’s chargeable income. Furthermore, the individual cannot be in employment (although it is permitted that one holds non-executive positions on Maltese boards of directors). It is important to note that this programme is conditional on the individual’s staying in Malta for more than 90 days per year and not staying in any other jurisdiction for more than 183 days.

Whether you are a European Union National or a Third Country National, as a leading law firm in the area of residency permits, Gonzi & Associates, Advocates, can assist you with a vast array of queries relating residency schemes. Our team of expert employment lawyers is well suited to assist with the following, among others: