Tax implications upon attainment of Maltese Citizenship
A common concern among persons obtaining Maltese citizenship is whether this will have an impact on their tax status in Malta. In this regard it is relevant to note that tax incidence in Malta depends on the residence and domicile status of the person, irrespective of the status of their citizenship.
Tax Incidence in Malta
The basis of taxation in Malta depends on the residence and domicile status of a person. The term resident refers to person who habitually resides in Malta and has business and family ties in Malta. Generally, a person who spends at least 183 days in Malta over a period of 12 months and who has a place of residence in Malta is considered as a resident of Malta for tax purposes. In some circumstances a person may also be considered as resident in Malta despite him/her not spending 183 days in Malta if they have strong ties with Malta and visit Malta on frequent visits.
A person may have only be domiciled in one place at a time and domicile typically refers to the place where a person is born. A person may acquire a domicile of choice if he/she establishes strong ties with a place with the intention of staying therein indefinitely.
A person who is resident and domiciled in Malta is subject to tax in Malta on his/her worldwide income, irrespective if such income is received in Malta or not. On the other hand, a person who is resident but not domiciled in Malta is subject to tax in Malta on the remittance basis of taxable i.e. on any income derived from Malta and any foreign sourced income received or remitted to Malta. Capital gains arising outside Malta, even if remitted to Malta are taxable in Malta. Persons subject to tax in Malta on the remittance basis of taxation and who earn more than €35,000 income from worldwide source are subject to a minimum tax in Malta of €5,000.
A person who is neither resident nor domiciled in Malta is subject to tax in Malta only on Malta source income, with the possibility of certain streams of income to be exempt from taxation in Malta.
The tax liability on income taxable in Malta is calculated at progressive rates, depending on the status of the person (i.e. whether he/she is single, married, or a parent) and whether he/she is resident in Malta or otherwise.
Property tax
Malta does not levy any wealth tax and thus the holding of real estate in Malta does not result in any tax payments in Malta. Upon the acquisition of immoveable property in Malta, a person is subject to the payment of stamp duty at the rate of 5% of the market value of the property acquired. Other rates may apply on a case by case basis.
Upon the sale of property in Malta, property transfer tax is levied on the transfer value of the property. Generally property transfers tax in levied at 8% but other rates may apply depending on a number of factors.
Capital Gains Tax
Malta levies tax only on capital gains involving the transfer of certain property in Malta, shares in local companies and transfers of businesses and business units. Other types of capital gains are not subject to tax in Malta. Capital gains taxable in Malta are aggregated with the person’s income and levied to tax at the applicable rates of taxation of the person.
Value Added tax
Maltese VAT legislation is in conformity with the EU VAT Directive. The general VAT rate in Malta is 18% but reduced rates of VAT of 5% and 7% apply in some circumstances.
Persons engaged in an economic activity are generally required to be registered for VAT in Malta. Different VAT registrations apply depending on the expected revenue from the activity and whether the taxable person is expected to make any Intra-Community trade.
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