A report published in 2017 by the National Statistics Office shows that foreigners forming part of the population in Malta more than doubled over the last decade. Whereas in 2006 foreigners accounted for around 3% of the total population, ten years later foreigners account for more than 7% of the total population and the trend is increasing. There are several factors contributing to this increase one of which is the programmes under the remit of the International Tax Unit of the Inland Revenue Department. The current programmes are ‘The Residence Programme’ (TRP), the ‘Global Residence Programme’ (GRP) and the ‘Malta Retirement Programme’ (MRP).
The Residence Programme
The TRP is designed to attract individuals who are nationals of the EU, EEA or Switzerland and who are not permanent residents of Malta. Beneficiaries may also have household staff providing a service in their qualifying property, as long as all the requisite procedures are satisfied.
Global Residence Programme
The GRP is designed to attract individuals who are not EU, EEA or Swiss national and who are not long-term residents. Individuals benefitting from this Programme are not precluded from working in Malta, provided they satisfy the requisite conditions for obtaining a work permit.
Beneficiaries may also have household staff providing a service in their qualifying property, as long as all the requisite procedures are satisfied.
The Malta Retirement Programme
The MRP is designed to attract nationals of the EU, EEA and Switzerland who are not in an employment relationship and are in receipt of a pension as their regular and main source of income. Individuals benefitting from this Programme may hold a non-executive post on the board of a company resident in Malta. This implies that the beneficiary would be prohibited from being employed by the company in any capacity.
Such individuals may also partake in activities related to any institution, trust or foundation of a public character and any other similar organisation or body of persons, which are also of a public character, that is engaged in philanthropic, educational or research and development work in Malta.
The following is a list of incentives applicable under the programmes:
- A flat rate of tax at 15% on income remitted to Malta with a minimum annual tax liability of €15,000 under the TRP and GRP whilst the minimum tax under the MRP amounts to €7,500 plus €500 for every dependant;
- Remittance basis of taxation ensures that foreign source income which is not remitted to Malta is not subject to any tax in Malta;
- Foreign capital gains are not subject to any tax even if they are remitted to Malta;
- Access to Malta’s wide treaty network and double taxation relief. Certain income such as dividends, interest and royalties which are remitted to Malta qualify for a reduced withholding tax rate whereas other income such as pensions and capital gains may be exempt from foreign tax;
- No net worth or wealth taxes;
- No inheritance tax. However, it is pertinent to point out that upon transfer of real estate and shares in a property company a stamp duty of €5 on every €100 or part thereof is payable. Other shares and securities attract a stamp duty on documents of €2 on every €100 or part thereof;
- No real estate tax. Also, any capital gain realised upon the transfer of one’s own residence is exempt from tax if the property has been owned and occupied for at least three consecutive years and the property is transferred within one year of being vacated;
- No customs duties or VAT on household effects. Non-EU residents may be required to put a deposit or a bank guarantee for the VAT or duty in question. Upon the expiry of one year stay in Malta, such deposit or bank guarantee is either refunded or cancelled provided the duration of stay can be proved.
Any income arising in Malta is subject to tax at 35% and any household staff are precluded from benefitting from the 15% tax rate.
Who may apply?
An applicant must submit the application through an Authorised Registered Mandatory (ARM) provided the following conditions are met:
- The individual is not a beneficiary in terms of any other Maltese tax programmes;
- The individual must own or rent a qualifying property which the individual occupies as his principal place of residence;
- The individual is in receipt of stable and regular sources of income that are sufficient to maintain himself / herself and his/her dependants without recourse to social assistance in Malta;
- The individual must be in possession of a valid travel document;
- The individual is in possession of sickness insurance which covers himself / herself and his / her dependants in respect of all risks across the whole of the EU normally covered for Maltese nationals. The health insurance cover must be procured by a company licensed in Malta or by an international reputable health insurance company;
- The individual can adequately communicate in Maltese or English;
- The individual is a fit and proper person.
What constitutes a qualifying property? A qualifying property is:
- An immovable property situated in the north of Malta owned and having a value of at least €275,000. If the property is situated in Gozo then the value is lowered to €250,000 (€220,000 under the TRP and MRP) and if the property is in the south of the island, then the minimum value is lowered to €220,000; or
- An immovable property whose rental value is €9,600 per annum or €8,750 per annum depending on whether the property is in the north or else in Gozo or the south.
The property must be used solely by the beneficiary and his / her dependents and may not be let or sub-let.
Documentation and Administrative fee
The application form must be accompanied by the following documents:
- A curriculum vitae;
- A certified copy of the photographic page of the passport;
- A certified copy of a full driving licence or other official document bearing the residential name and current address;
- Certified copies of two recent (preceding three months) utility bills for the applicant’s principal residential address (a mobile phone bill is not sufficient);
- A statement of good standing from the applicant’s principal personal bank (i.e. the bank through which the majority of domestic financial affairs are carried out);
- Documentation showing qualifying property has been bought or rented in Malta;
- A certified copy of the sickness Insurance policy;
- A police conduct certificate (accompanied with the Apostille Certificate), issued not earlier than six months prior to the date of submission of the application;
- Any other document requested as deemed fit by the Inland Revenue Department to assess declarations made by the applicant.
The administrative fee payable to the authorities is paid with the application form. The fee for TRP and GRP amounts to €6,000 with the fee reduced to €5,500 if the qualifying property is situated in the south. The fee for the MRP is of €2,500.
Any document executed outside Malta that will be filed with the application must be accompanied by an Apostille Certificate. If the documents are not in English, a certified English translation of the documents is to be produced.
The ARM will also have to make certain declarations to the authorities on the prescribed form.
An individual may also take up residence in Malta without the need to go through the formalities of the programmes provided he obtains a residence permit and registers with the Inland Revenue Department. This may be particularly appealing to citizens who enjoy free movement within the EU.
For income tax purposes an individual is considered to be resident in Malta if his / her stay in Malta exceeds six months in a calendar year. Foreigners residing in Malta are taxed on income and capital gains arising in Malta (unless exempt) and on income remitted to Malta. Foreign source income which is not remitted to Malta is subject to Malta tax and capital gains are not taxable even if they are remitted to Malta.
The tax rates applicable to foreign residents are the rates applicable to residents depending on their status:
Rates Chargeable Income From Chargeable Income To wdt_ID Rate Subtract Single Rates