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How to Pay Low Taxes in Malta as a Non-Dom

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Europe is not known for low taxes. However, certain countries provide regimes that can help alleviate your tax burden. Living in Europe is appealing, particularly if you come from a Western country and want to be in a familiar cultural environment. 

Malta is one of the best options when considering EU countries that offer a non-domicile tax regime. 

With its Mediterranean lifestyle and appealing tax regime, Malta is a unique and exciting prospect for high-net-worth individuals. In this article, we explore Malta’s lifestyle and taxation benefits and look at the advantages of its non-dom program. 

Nomad Capitalist is a turnkey solution for offshore tax planning, dual citizenship, asset protection, and global diversification. 

This article is not professional tax advice. You can find out more here if you need a detailed tax planning strategy based on your individual needs. 

Why Malta?

Malta, an island country in the Mediterranean Sea, lies in an archipelago between Italy and Libya, about 80 kilometres from Sicily. Thousands of tourists visit Malta yearly for its fabulous weather, stunning coastline, and delicious cuisine. 

A hospitable and friendly place, culturally, Malta and its people are a blend of North Africa, the Mediterranean, and other southern European countries. Once part of the British Empire, Malta retains commonwealth status but is an independent EU member state. 

English is widely spoken in Malta. Compared to its EU counterparts, its sunny weather, low crime rates, and high standard of living have afforded it a reputation as one of the best countries for expatriates.

Malta in Numbers

  • Population: 535,064.  
  • GDP US$17.77 billion in 2022.
  • 83% of the population are Roman Catholic. 
  • Non-Maltese residents are 22.3% of the population (115,449).
  • Expect at least 300 days of sunshine each year.

Malta’s Economy

Classified as an advanced economy by the IMF, Malta has a service-based, innovation-driven economy dependent on tourism, manufacturing, and foreign trade. It is known as a hub for both financial services and iGaming. 

Financial services in Malta, in particular asset management, insurance, and private wealth and corporate services, make up around 11% of its GDP. Malta’s innovation is widely recognized as a thought leader in fintech, e-payments, and cryptocurrency. It is also convenient for foreigners and offshore companies looking to open bank accounts

Known as “The Blockchain Island,” this pro-cryptocurrency enacted a regulatory framework known as the Virtual Financial Assets Act for crypto exchanges, digital wallets, and initial coin offerings. Its favourable environment, tax incentives, and grants for cryptocurrency businesses have created a vibrant crypto ecosystem, with many significant exchanges operating there. 

Malta is also a haven for iGaming companies, particularly those operating in gambling. It’s considered to be one of the most prominent global gambling jurisdictions. 

With no restrictions on granting licenses, Malta has embraced over 300 companies operating in the online gaming industry. The sector comprises up to 10% of the economy, employing 10,861 people in 2022.  

With tourism rebounding after a few troubled years –  in 2022, it grew by 1.3 million to reach 2,286,597 tourists – all these factors have contributed to an economic boom in Malta. In 2023, economic growth (3.9% to Q2) is up to seven times that of the Eurozone average. 

Malta’s Tax Advantages

With several advantages for individuals and businesses, Malta is renowned for its attractive tax system.

On the corporate side, there are no withholding taxes, stamp duty, and dividend tax in some circumstances. The corporate tax rate is a flat 35%, but foreign-owned Maltese companies can claim tax refunds that result in an effective rate as low as 5% – the lowest in Europe. If a company owner is not considered a tax resident in Malta, they can reclaim 30% of the tax. 

Suppose you want to move an existing company or form a new one in Malta, as well as low fees; foreign-owned Maltese holding companies are entirely tax-exempt. There are also generous reliefs, incentives, and grants for research and development companies. 

Dividend tax of zero-percent for registered holding companies means subsidiary profits can be paid out in dividends and incur no tax liability. Income tax ranging from 0% to 35% is paid at progressive rates, with the maximum due for income above €60,000. Other tax considerations in Malta include no inheritance tax, estate duty, or wealth tax.  Check out our article about Malta’s taxation system.

Malta’s Non-dom Program

So, what is a non-domicile tax regime? This means you are considered a non-domiciled tax resident in a particular country. As an individual, you can never be without a domicile. Generally, you are considered to have a domicile in the land of your nationality and the country where you have spent the more significant part of your life – known as a domicile of origin. 

Once you have reached 18 years, a domicile of origin can be abandoned, and a domicile of choice can be acquired. In this situation, factors of intention and physical presence are important.

The concept of domicile varies from country to country in some minor details, so it is essential to consider the law in the country you’re considering. 

In Malta, residence and domicile are two distinct legal concepts, which are defined differently and have different legal consequences. According to Maltese law, individuals who are living there full-time and consider it their permanent home are considered domiciled in Mata. 

However, home, in this context, can refer to the place a person belongs and implies stronger connections with a country than residence does. Domicile is truly where your vital interests are located. Therefore, according to Maltese law, domicile does not depend on nationality. 

It means that some could obtain Maltese citizenship by investment and still claim non-dom status and not pay full regular taxes there. 

Maltese law also established that a person who takes up residence in a  country for a long or indefinite period does not acquire domicile there if you intend to return to your country of origin someday. 

It also applies if you intend to settle in another country at a future date, as you can only have one domicile at a time. So that is generally the catch: you have to show solid proof that you’re not domiciled in the country and intend to avoid becoming domiciled. 

Why Do People Claim Non-dom Status?

If you qualify for Malta’s non-dom tax regime, the remittance basis of taxation applies. 

Under the remittance-based system:

  • All income arising in Malta is subject to tax, regardless of where it’s received. 
  • All income arising outside Malta is subject to Maltese tax only if, and to the extent, you remit it and receive it there.
  • However, there is one exemption: capital gains arising outside Malta are not subject to tax, even if received in Malta. 

This is a significant advantage that Malta offers. In addition to these tax obligations, there is a minimum tax liability for non-domiciled individuals, around €5000 per year, which must be paid annually. 

If appropriately structured, those who wish to live in the EU under a tax-friendly regime may only end up being liable for the fixed amount of €5,000. This is especially true for people who make most of their income through stocks, bonds, property commodities, or cryptocurrencies. 

What Does Non-dom Status Mean, And How Do You Claim It?

In taxing only income earned or remitted there, this scheme is particularly attractive for anyone considering moving to Malta. You must be a tax resident there but have no fixed or permanent domicile in Malta. You can apply for the non-dom tax regime if you demonstrate a substantial connection to another country.

If successful, you will only be taxed on local source income, capital gains, and the portion of your foreign source income remitted to Malta.

How Does The Remittance Basis Work?

It includes:

  • Remittance of dividends to a personal bank account in Malta
  • Remittance of interest or capital gains to that personal bank account. 
  • The use of the debit card or ATM withdrawals for daily use.

Anything you earn before establishing residency there can be remitted and not taxed. You are only subject to the minimum €5,000 charge if you don’t remit anything. 

Malta has several residency programs and High Net Worth Individuals Rules for those applying for special tax status, and it’s essential to know which option works best for your individual needs.

Conclusion

Non-dom programs are ideal for people who have built up substantial income and assets through business and investment activities and want to protect them by moving to a country where they will be treated best.

In our experience, they are usually seven-and eight-figure entrepreneurs and investors who want to grow their wealth and protect it for future generations. And they are usually people who want to live in countries that offer lifestyle and travel benefits. 

With a high standard of living, low tax advantages, and the availability of citizenship, Malta is a perfect option. With the best combination of tax planning, residence, and asset protection strategies, it can be taxed practically zero with Malta’s Non-dom program. 

Nomad Capitalist has helped 1,500+ high-net-worth clients from around the world. You can find out how here.

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