Tax Planning in Malta

In planning your move to Malta, it is important to be aware of the different tax treatment there compared with the UK and have an advisor you can turn to who understands the differences, and the interaction (via Double Tax Treaties), between the two regimes.

Whilst there is no specific legislation defining ‘tax residence’ in Malta, you are normally only likely to be considered tax resident if you spend more than 183 days physically present in Malta during a calendar year. The Maltese tax authorities do define the concept of ‘ordinary residence’, which indicates regular presence with some degree of continuity, even if you spend less than six months per tax year in Malta.

The first €9,100 (€12,700 if married) of income is exempt, with rates then commencing at 15% and rising to 35%. Since January 2019, non-domiciled residents are subject to a minimum tax liability of €5,000 annually. This minimum tax is applicable to individuals and married couples whose worldwide income exceeds €35,000.

Certain residents are exempt from this minimum tax, broadly those tax resident under the Permanent Residence Programme (PRP), the Global Residence Programme (GRP), the Malta Retirement Programme (MRP) and the Residents Scheme Regulations.

Following Brexit, UK nationals have no regular means of long-term visa entry to Malta.  The only routes now available to UK nationals who want to live in Malta are via the first three residency programmes mentioned above.

Two of these have their own minimum tax payment (GRP €15,000 per annum, MRP €7,500 per annum), whilst the PRP requires you pay a significant application fee, purchase or rent a property and have evidence of substantial financial wealth.

The Maltese non-domicile tax regime can be very attractive to those people who have significant income and gains arising outside of Malta and who do not need to remit some or all of this to Malta to satisfy their living expenses.

In particular those people with financial investment portfolios held outside Malta, which give rise to interest, dividends and capital gains can arrange their financial affairs to significantly reduce their exposure to taxation in Malta  

Malta and pensions

The UK/Malta Double Tax Treaty follows the normal OECD model, where pensions and annuities are taxable where the pension holder resides, except for government service pensions, which are usually taxable in the state in which they are paid.

However, a small clause in the UK/Malta Double Tax Treaty has a big effect on pensions that are technically taxable only in Malta. If a resident of Malta does not remit the full amount of their UK pension income to Malta, that income remains taxable in the UK.

The UK tax authorities (HM Revenue & Customs) will check whether you are remitting the full amount to Malta and will not allow your UK pension to be paid free from UK tax unless you can prove it is remitted and taxed in Malta.

A Qualifying Recognised Overseas Pension Scheme (QROPS) could overcome this issue, as a pension transferred out of the UK into a QROPS is not liable to any personal UK income tax if the conditions of QROPS are satisfied. It should be noted, this is a specialist area, and you should take advice specific to your personal situation.

There is a lot to take in and be aware of and these are really only examples. Good planning can ensure you minimise the tax that impacts you and it helps to do so with specialists in this area. 

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.