Malta Taxation & Citizenship in a Nutshell
Maltese citizenship alone does not change the tax treatment of an individual or family acquiring citizenship unless they take up tax residence in Malta. Malta's connecting factors for tax jurisdiction are residence and domicile (not nationality) and therefore the tax implications of Malta Citizenship & Taxation result from the programme's residency requirement and not citizenship itself.
Prudently, as a consequence of meeting the residency requirements of Malta's Citizenship program, it is safe to presume that one is to be consider tax resident at least during the one to two years over which the required residency period extends. This should not alarm prospective citizenship applicants. We have assisted hundreds of citizenship and residency applicants under the Maltese investor programmes. Our experience advising on the tax implications of Maltese citizenship and residency ensure you experience only the benefits Malta's res non-dom tax system and you will suffer no avoidable taxation in Malta.
Key Legal Issues
- Citizenship alone does create tax residence or tax consequences.
- Tax residency arises from a genuine link with Malta established for Malta Citizenship purposes.
- Tax residency does not necessarily result in taxation.
- Tax is only due for resident foreigners on:
- income / capital gains arising in Malta, and
- foreign income (not capital / capital gains) only if received in Malta.
Domicile of Origin / Choice
A person who is granted citizenship under the Malta Individual Investor Programme or any other routes to Maltese citizenship is not deemed to acquire a domicile of choice by virtue simply of being granted citizenship. A number of onerous steps need to be taken to shed one's domicile of origin and it is safe for a client to assume that his domicile will not change 'by mistake' even by taking up residence as a citizen of Malta.
Malta's Non-Dom Tax System
Therefore the main variable and connecting factor is Residence. By taking up residence in Malta, an individual (whether a citizen or not) enters a non-dom tax regime akin to the tax regime applicable in the UK, even if without the complicated statutory residence tests and deemed domicile rules applicable in the current British tax system. A Maltese tax resident who is not Domiciled in Malta is chargeable to tax in Malta only on a source and remittance basis.
Accordingly, a Maltese res non-dom is chargeable to tax only on income arising in Malta and on foreign source income if and to the extent that it is remitted /received in Malta. Foreign source capital gains are out of scope of taxation even if remitted to Malta. The tax planning opportunity here is that foreign source income that is kept in bank accounts outside Malta remains out of scope of Malta tax as do foreign capital gains even if remitted to Malta.
Tax Planning for Non-Domiciled Malta Citizens
Other opportunities exist for the running of companies in Malta. If short yet in full:
- company tax rate: 35%
- personal tax on dividends received by a Malta company: none (imputation system applies)
- tax refund to shareholders of a Malta company: 6/7ths, i.e. 30 out of 35 paid by the company is refunded to shareholders.
Companies can bank anywhere in the world and can be owned by shareholders of any nationality. Our tax partners and tax advisors have a long-standing experience using Malta in the planning of international business, wealth structuring and wealth preservation. We are well positioned to ensure you benefit from the full legal extent of Malta's tax friendly and pro-business environment.
Citizenship-based Taxation
Unlike Malta, the USA and Canada tax their citizens on a worldwide basis, irrespective of their tax status in Malta as the new country of citizenship. We are happy to recommend tax advisors who are able to advise of full compliance with tax obligations of the country of origin and on the feasibility of compliant expatriation if desired.
What this means for you
Remember though that the Malta Citizenship by Investment Programme requires applicants to satisfy a three year residence period (that may be reduced to one year). Though this does not entail a minimum of 183 days of physical presence, it may imply fiscal residence at least during the residence period. This establishes an indirect link between Malta Citizenship & Taxation and makes pre-immigration tax planning a must if as much as €350,000 or more in avoidable taxes are to be avoided.
How we can help
Under the Citizenship by Investment Programme, applicants are often bringing into Malta significant sums of money to cover the contribution, the investment in Government bonds as well as property and other investments they may choose to make. All funds transferred to Malta, even for the payment of taxes, rent, investments, fees, or other expenses, maybe be subject to taxation in Malta if the funds used are considered taxable income at the source. Our pre-immigration tax planning service compliments our Malta Citizenship by Investment application handling and ensures that our clients not only enjoy the highest chances of success in applying for citizenship but also in avoiding undue taxes.
