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Tax Residency in Malta
 
In Malta, determining tax residency is primarily based on factual circumstances rather than nationality or civil status. Here are the key points regarding tax residency in Malta:
 
1. Definition of Tax Residence: An individual is considered tax resident in Malta if they spend more than 183 days in Malta in any given year. This applies regardless of the purpose of their stay.
 
2. Residency Upon Arrival: If an individual comes to Malta to establish their residence, they become tax resident from the date of arrival, regardless of the number of days spent.
 
3. Ordinary Residence: Individuals who live in Malta permanently or indefinitely are considered ordinarily resident. This status also applies to those who are in Malta for a temporary purpose but meet specific criteria, such as staying more than 183 days per year for three consecutive years or establishing significant personal and economic ties over a long period.
 
4. Taxation Basis:
- Worldwide Basis: Individuals who are both ordinarily resident and domiciled in Malta are taxed on their worldwide income.
- Remittance Basis: Individuals who are either not domiciled or not ordinarily resident in Malta are taxed on income remitted to Malta and certain local income.
 
5. Loss of Residency: Ordinary residency status can be lost if an individual leaves Malta permanently or indefinitely. Temporary absences may not affect residency status depending on the maintenance of personal and economic ties with Malta.
 
6. Tax Compliance: Residents are required to fulfill tax compliance obligations, including timely registration and submission of tax returns.
 
Domicile and Residence in Malta
 
Domicile refers to the permanent location known as your home. A person is entitled to only one domicile and is assigned automatically at your birth to the same place as your parents. Also known as your domicile of origin. Being aware of your domicile is essential for tax purposes. At the age of 18, one can change their domicile should they satisfy specific criteria and provide evidence. The following minimum requirements need to be met: Leaving the country in which you are, at the time of application, domiciled and settled in another country and provide strong evidence that you intend to live in your location permanently or indefinitely.
 
Residency gives an individual the right to work, live, travel, study and set up business in a particular country. Malta Residency and VISA Program (MRVP) and Global Residence Program (GRP) are two Residency programmes that grant non-European nationals and their families to settle in Malta. However, it is wise to note that there is a difference between being a resident and a tax resident in Malta. An ‘ordinary resident’ refers to an individual who spends the majority of 183 days or more each year in their home country. Individuals who spend a more significant period overseas than in Malta are not considered an ‘ordinary resident’. When being present in Malta for 183 days or more, you qualify for a Tax Residency.
 
Personal income tax in Malta can be complex, since it contemplates several exceptions, but as a general rule those who are considered as tax residents in Malta will be taxed. Under Maltese law, an individual is resident in Malta if he spends more than 6 months a year in Malta within a 12-month period (in Malta such period is computed from April to April) or has his center of economic and/or vital interests in Malta.
 
Maltese personal income tax
 
-Residents and domiciliaries: Resident domiciliaries are subject to personal income tax on their worldwide profits and capital gains.
-Non-domiciled residents: non-domiciled residents are subject to personal income tax on their income in Malta and foreign income remitted. They are not taxed on foreign source income.
-Taxable base: worldwide income for domiciled residents and local and remitted income for non-doms.
-Taxable income: Taxable income includes employment income, capital gains, real estate and personal income, and business income.
-In general terms, Malta taxes worldwide income (i.e. all income received) at a progressive rate of 0% to 35%. The brackets work as follows:
 
There is an exemption for the first €8,500
15% up to €14,500
25% up to €60,000
35% for amounts over 60.000€
 
Additionally, under exceptional circumstances of the non-dom regimes, a flat tax of 15% is applied only to foreign income remitted to Malta, with a minimum taxation of 5,000 euros.
 
It is worth mentioning that Malta, like many EU countries, has a high ordinary taxation on the individual, in this report we will only analyze those special regimes that are attractive, i.e. the Maltese non-dom.
 
Maltese non-dom
 
The non-dom (or non-domiciled) status in Malta is a specific tax regime designed for Maltese residents who lack a fixed or permanent domicile in Malta, even though they are considered Maltese tax residents.
 
Taxation of Non-Dom Residents:

- Ordinarily Resident but Not Domiciled: If you're ordinarily resident but not domiciled in Malta, you're taxable on local source income and certain capital gains. Additionally, all foreign source income remitted to Malta is subject to tax.
- Foreign Source Income Exemption: Foreign source income not received in Malta remains untaxed.
- Capital Gains: Foreign source capital gains are not taxed, whether received in Malta or not.
- Progressive Tax Rates: Resident individuals are taxed based on progressive rates (ranging from 0% to 35%) depending on their income bracket.
- Special Tax Status: Some residents may benefit from a Special Tax Status, allowing them to be taxed at a flat rate of 15% on remitted income in Malta.

- Programs Offering Special Tax Rate:

- Malta Retirement Programme
- Global Residence Programme

In summary, Malta's non-dom tax regime provides tax benefits for individuals who are ordinarily resident but not domiciled in the country. It's an attractive option for various incomes, especially due to the flat 15% tax rate on remitted income. Understanding these rules is crucial for individuals considering or maintaining tax residency in Malta. It's advisable to seek professional advice to ensure compliance with Maltese tax laws, especially given the potential significant tax implications of residency status.
 


 
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