How to Pay Low Taxes with Non-Dom Status in Malta
November 1, 2024
Europe is not known for low taxes.
However, certain countries provide regimes that can help alleviate your tax burden. Malta is one of the best options when considering EU countries that offer a non-domicile tax regime.
Does the ability to get non-dom status in Malta make Malta a tax haven? Not necessarily.
There is a lot to consider and more than few steps to take before you get to that point.
However, with its Mediterranean lifestyle and appealing tax regime, Malta is a unique and exciting prospect for high-net-worth individuals.
This article will explore Malta’s lifestyle and taxation benefits and look at the advantages of its non-dom program for those eager to learn more about Malta taxation as part of a broader strategy to reduce their personal and corporate taxes.
What makes us the experts on Malta taxation and non-domicile tax regimes? Nomad Capitalist is a turnkey solution for offshore tax planning, dual citizenship, asset protection and global diversification.
We have helped thousands of others build their dream life that allows them to protect and expand their wealth. So while 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?
The better question is, ‘Why not Malta’?
The island country in the Mediterranean Sea lies in an archipelago between Italy and Libya, about 80km 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, meaning that if you move to Malta with the hopes of obtaining citizenship.
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 Taxation
We will explore the ins and outs of non-dom status in Malta below, but to understand how that works, it’s helpful to have some broad knowledge of Malta’s taxation system, too.
Malta’s taxation system presents a strategic advantage for individuals and businesses seeking tax efficiency.
The corporate tax rate stands at 35%, but through the imputation system, companies often effectively pay as low as 5% after refunds, particularly on distributed dividends.
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.
For individuals, the non-dom regime is a key feature, allowing those residing in Malta to only be taxed on income and gains brought into the country, leaving foreign income untouched.
Additionally, Malta’s VAT rate is among the lowest in the EU at 18%. Other tax considerations in Malta include:
- 0% inheritance tax
- 0% wealth tax
- 0% gift tax
Check out our article about Malta’s taxation system for a full breakdown of benefits.
While there’s more to the benefits of getting non-dom status, you can see how this combination of favourable corporate tax conditions, low VAT and advantageous personal tax regimes makes Malta a compelling destination for tax planning.
Malta’s Economy
Now, what about the economy you’d be living and doing business in? It’s quite attractive, too.
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 recognised 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 more than a tenth of the economy, employing 10,861 people in 2022.
With tourism rebounding after a few troubled years – in 2023, it outpaced 2022 numbers to reach just under three million tourists – all these factors have contributed to an economic boom in Malta.
Economic growth continued throughout 2024 (GDP up 4.6% year-over-year), the labour market continues to exceed expectations and inflation is expected to decline to 2.3% by the end of 2025.
Malta’s Non-Dom Program
A non-domicile tax regime is when 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 Malta.
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 is a distinct legal concept that doesn’t depend on nationality.
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 must 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.
How Do You Claim Malta Non-Dom Tax Status?
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?
Malta tax remittance 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 rules for those applying for special tax status, including non-dom status, meaning it’s essential to know which option works best for your individual needs.
Potential Drawbacks to Taxation in Malta
While Malta offers attractive tax benefits, there are a few factors to consider before exploring non-dom status here (or elsewhere, for that matter).
Obtaining tax refunds in Malta can be a lengthy process, often taking up to six months, which may delay financial planning and cash flow for businesses.
Additionally, the refunds are deposited into a designated account rather than directly to the company, which can lead to taxation issues if the funds enter a personal account, especially for those residing in high-tax jurisdictions like Germany or France.
To navigate these challenges, many businesses establish a dual-company structure.
The first company operates in Malta, while a second holding company receives dividends and tax refunds, leveraging exemptions on dividend income.
This setup can reduce tax liabilities but requires careful planning and adherence to specific requirements.
How to Pay Low Taxes with Non-Dom Status in Malta: FAQs
Non-dom status in Malta allows individuals to reside in the country without being taxed on foreign income, unless it is remitted to Malta. This status is ideal for those who have stronger ties to another country and do not regard Malta as their permanent home.
Benefits of being a non-dom in Malta include not being taxed on foreign income unless brought into Malta, exemption on foreign capital gains and the ability to enjoy Malta’s low VAT and other tax incentives without global income tax liability.
Non-residents in Malta are taxed only on income and capital gains arising in Malta. Foreign income is not subject to Maltese tax unless it is remitted to the country.
Creating a holding company in Malta isn’t necessarily, but it can be advantageous for optimising certain tax incentives, especially for receiving dividends and managing tax refunds efficiently under the Maltese corporate tax system.
You are considered domiciled in Malta if you reside there permanently or consider it your permanent home. Factors include long-term presence and the intention to remain.
Should You Apply for Non-Dom Status in Malta?
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.
Want to learn more or see what a personalised strategy could look like for you? Nomad Capitalist has helped 1,500+ high-net-worth clients from around the world. Find out how to become one of them here.
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