In today’s globalized sports industry, freedom of mobility has become a crucial aspect of the lifestyle of professional sportspersons. Athletes, coaches, and managers alike regularly travel across multiple jurisdictions to participate in international competitions and capitalize on the various opportunities available to them worldwide.
While mobility allows sportspersons to pursue the peak of their professional achievements, develop their skills, and expand their global presence, this constant movement also presents its challenges, most notably in navigating the varying residency requirements and tax laws. As the demand for international talent grows, the ability for sportspersons to seamlessly adapt to different jurisdictions is essential not only for career advancement but also for effectively managing their fiscal obligations.
Situated in the heart of the Mediterranean, Malta’s strategic location and competitive tax regime continue to establish its attractiveness as the jurisdiction-of-choice for sportspersons’ personal and professional positioning. Malta’s personal framework, combined with annual government initiatives complement sportsperson mobility, providing a range of opportunities for athletes, coaches, and managers alike to efficiently optimize their income.
Malta Tax of Resident Non-Dom Sportspersons
Sportspersons can enjoy the benefits of the tax system in Malta for individuals who will establish residence therein, due to the tax exemption on their foreign profits. Sportspersons who establish their residence but are not domiciled in Malta (‘Res Non-Doms’) benefit from the remittance basis of taxation in Malta. Through this concept, the only income subject to tax for a Res Non-Dom sportsperson would be any income derived from Malta, and only the portion of the foreign income which is remitted to Malta.
The residency status in Malta can be established either through physical presence, or on evidencing an intention to reside in Malta. It is therefore a question of fact and is not dependent on the sportsperson’s nationality or civil status. A sportsperson’s residence status is considered as a tacit authorization to reside in Malta. This is under the immigration options available to them depending on their citizenship, being EU or non-EU.
Alternatively, resident sportspersons who are members of a club or team which is registered with the Competent Authority in Malta may benefit from a special tax status following a government initiative recently extended to 2025 year. Through this incentive, eligible sportspersons in Malta benefit from a final tax rate of 7.5% on the gross amount of income earned from sports activity employment. This is particularly beneficial for sportspersons whose main income is sourced in Malta.
Tax System for Professional Sports People
Article 17 of The OECD Model Convention holds that a resident within a contracting state who earns income as an entertainer from his personal activities, which are exercised in another contracting state may be taxed in that other state. Therefore, professional sportsman who are not residents in Malta may benefit from the tax opportunities in Malta, if it is the case that the income of the sports professional is received in Malta or routed through Malta in the form of royalties.
Under Article 12(1)(c)(i) of the Income Tax Act, royalties derived by the sportsperson would be exempt from Maltese tax if the person is a non-resident and does not engage in any trade or business in Malta through a permanent establishment in the same basis year.
Although any income derived from a Maltese company is subject to a corporate tax rate of 35%, a double tax relief can be claimed, allowing a refund to be possible, depending on whether the royalty income is active or passive. If a non-resident profits from a Maltese Company, the tax rate would be 10% in the case of passive royalties. With regards to dividend distribution from a Maltese company, the shareholder can claim a tax refund of 5/7ths of the tax credited to the shareholder. Shareholders of IP holding companies with passive interest benefit from a refund of 25% of the 35% tax rate.
If on the other hand, an IP company was not incorporated under Maltese law, but has shifted its management to Malta, it is exempt from tax on royalties arising outside Malta, provided they are not received in Malta. Once they are remitted to Malta, the royalties are held to be taxable income.
Although Malta does not levy any withholding tax on outbound royalty payments and dividends, Malta has entered into various double tax treaties, reducing the rate of such tax on royalties paid to a Maltese IP Company. This is evident in the double tax treaties with Barbados, Croatia, Denmark, Iceland, Spain and Sweden, where 0% withholding tax for royalties is pay to a Maltese company. Special royalty payments from associated companies resident in EU Member States are not subject to withholding tax in Malta, provided the relevant conditions are fulfilled.
The normal tax rate will apply if a sportsman is resident in Malta. A high income earning individual is subject to the highest personal income tax, 35%. As part of Malta’s tax incentive in the sector, Article 56(26) of the Income Tax Act holds that an individual who derives his income from a full time/part time sports activity, either as a registered player/athlete or as a licensed coach shall be taxed at the income tax rate of €0.075 on every euro.
Implications for Sports Persons
Becoming a Maltese tax resident offers significant benefits for sportspersons seeking to efficiently manage and maximise their earnings. By establishing residency in Malta, sportspersons can take advantage of the country’s competitive tax system and comprehensive framework of international double taxation treaties, allowing them to fully capitalize on the opportunities provided by their success.
Our Sports Tax Advisory Services
Chetcuti Cauchi’s Sports Law team offers various services aimed at providing a multi-faceted approach when offering sports law advice to businesses which are interested in setting up an establishment in this sector in Malta. Our advisory services are also aimed at:
- drafting, revising and negotiating contracts;
- providing taxation advice; and,
- reaching agreements and negotiations with sports agents, managers and agencies.
Our team also deals specifically with sports personalities, handling issues related to reputation management, protection of privacy, taking up residence, personal tax advice, image rights, sponsorship rights, broadcasting issues and associated contract work.
