Malta – the little-known Mediterranean tax haven within the European Union

Malta – the little-known Mediterranean tax haven within the European Union

Malta is a little-known tax haven within the European Union. But before we talk about the tax benefits, some background information…

As Europe’s most populous country, Malta is best known for tourism, offering a Mediterranean haven for sun-hungry northern Europeans. It also boasts a fascinating history, as an island that has provided safe haven to everyone from pirates and crusaders to modern hospitals. Malta is an English-speaking country where cars drive on the left. It is one of the newer members of the European Union, and its currency is the euro.

In terms of the offshore financial sector, Malta is not particularly attractive for offshore banking or corporations. Although it is without currency controls, has a stable banking system and you can easily open accounts there in different currencies, you should not expect banking privacy in Malta.

However, many tax exiles are checking out Malta to see if they would like to call it home in the longer term. Like the European mountain tax haven, the Principality of Andorra, Malta is a relatively affordable European base for retirement and establishing official residence. You can probably afford to buy a nice house with a pool in Malta, even if you can’t afford a studio in Monaco! Unlike Andorra or Monaco, Malta is in the European Union. Also, unlike Andorra, Malta has no minimum stay requirements for official residents.

Although Malta is not tax-free, you can effectively limit your tax to just €4,192 per year. Those who apply under the Resident Scheme Regulations 2004 (the Maltese Pensioners Scheme) and meet the several conditions set out will receive a certificate issued by the Commissioner of Inland Revenue (Malta). This certificate has a dual purpose: Firstly, it acts as a permanent residence permit in Malta issued under Article 7 of the Immigration Act. Second, it grants the individual a special Maltese tax status that entitles him/her to these significant income tax reliefs.

Residents with this status must pay a flat rate of 15% on your domestic Maltese income (including capital gains) and on its foreign income remitted to Malta. There is a minimum tax of 4192 euros. Income from foreign sources that is not remitted to Malta – in other words, all your worldwide income, whether earned, unearned, capital gains or whatever – is not taxed at all.

It gets better. Persons holding this type of Maltese residence certificate may also claim relief from double taxation in respect of tax paid outside Malta on any income remitted to Malta which is taxable in Malta. This applicability of this advantage becomes more accessible given the very wide network of double taxation agreements that Malta already has in place.

Who is eligible?

Any non-Maltese citizen, whether an EU citizen or not, can apply for the above residence permit by providing documentary evidence that he/she:

1. can bring to Malta an annual income of not less than €13,950 for himself and a further €2,300 for each dependent; and

2. has an annual income of not less than €23,000 outside Malta or has capital of not less than €349,000

3. Will settle within one year of approval.

Within one year of residence approval, the person must purchase or rent a home in Malta. If an accommodation is purchased in Malta, it must cost at least €69,000 in the case of an apartment or at least €116,000 in the case of a house. If the applicant decides to rent instead of buying, the rent paid must be at least €4,150 per year.

All in all, if you are considering changing your residence to get out of heavy taxation, Malta is an interesting option to consider.

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