U.S.-Malta Tax Treaty: Eligibility and Provisions in 2026 Explained

While Malta is a popular relocation destination due to its favourable tax system, obtaining Maltese tax residency may not protect you from U.S. tax liability. 

American citizens are subject to tax in the U.S. on global income and gains, regardless of their tax residency, which often results in double taxation. This makes tax treaties, which prevent overlapping tax liabilities, an essential part of an effective tax planning strategy for all U.S. expats.

In this guide, we will explain everything you should know about the U.S.-Malta tax treaty, including:

• Eligibility criteria for claiming tax relief under the Malta-U.S. tax treaty
• Types of income covered in the U.S.-Malta double tax treaty
• Impact of the Saving Clause on the Malta tax treaty with the U.S.

Does Malta Have a Tax Treaty With the U.S.?

The double tax treaty, also known as a double taxation agreement (DTA), between Malta and the U.S. officially entered into force on November 23, 2010. 

The primary purpose of this document is to ensure the income earned by a tax resident of one contracting jurisdiction isn’t taxed in the other. To achieve this, the treaty allows U.S. citizens to claim a tax credit in the U.S. for income tax paid in Malta. Likewise, Malta provides a tax credit for U.S. taxes paid on income taxable in Malta.

Additionally, the treaty aims to:

• Facilitate economic collaboration between the two countries
• Support cross-border investment opportunities
• Define clear taxation rules to ensure fair treatment of international business operations 
• Reduce or eliminate the withholding tax rate on global income from dividends, interest, and royalties

Who Can Claim Tax Relief Under the Malta-U.S. Tax Treaty?

To determine whether you qualify for tax relief under the U.S.-Malta tax treaty, you must understand how each country applies tax.

The United States taxes its citizens on worldwide income and gains regardless of tax residency. As a result, U.S. citizens generally remain subject to U.S. taxation unless they formally renounce their citizenship.

Meanwhile, Maltese tax residents are subject to tax on global income, whereas its non-residents for tax purposes are only taxed on income sourced in Malta. 

Even though U.S. expats considered Maltese non-residents are taxed on Malta-sourced income by both jurisdictions, the provisions of the U.S.-Malta double tax treaty don’t apply to them. The treaty states that you aren’t treated as a resident of a contracting state if you are only subject to tax on income generated within that state.

As a result, tax relief is available to all U.S. expats who are tax residents of Malta and earn income taxable in both jurisdictions.

You are considered a tax resident in Malta if one of the following conditions apply:

1. You spend over 183 days in the country per calendar year
2. You demonstrate an intention to remain in the country permanently, regardless of the duration of your stay

The latter implies establishing a permanent home in Malta and proving that your family, center of personal interest, and economic ties are primarily in Malta.

Can You Be a Resident of Both Malta and the U.S.?

Once you become a Maltese tax resident, you will be a resident of both the United States and Malta, provided you retain your U.S. citizenship. In this case, the DTA relies on the tie-breaker rules to determine your country of residence for the purpose of applying the treaty provisions. This includes the following tests:

Tie-Breaker Tests	Overview
Permanent home test	You are a tax resident of a country where you hold a permanent home
Centre of vital interests test	If you have a permanent home in both countries, you are a tax resident in a jurisdiction where you hold closer personal and economic ties
Habitual abode test	In case your centre of vital interests can’t be determined, your tax residency is in a country where you live regularly or spend more time
Nationality test	If none of the above can be determined and you are a citizen of only one country, you are a tax resident of the country in which you are a citizen
Mutual agreement test	For those holding dual citizenship, the U.S. and Malta resolve the taxation issue through a mutual agreement

Which Types of Income Does the Malta Tax Treaty With the U.S. Cover?

The Malta-U.S. double tax treaty contains provisions that grant the primary taxing right on taxable income from specific sources to one of the contracting jurisdictions. It covers the following types of income:

1. Employment income
2. Capital gains
3. Interest, dividends, and royalties
4. Pensions and annuities

Employment Income

Salaries, wages, and other remuneration are taxable in the country in which you are a resident, unless you physically work in the other contracting jurisdiction. For instance, if you are a resident of Malta and work there, Malta has the right to tax your income. 

Meanwhile, if you are a U.S. resident but physically work in Malta, the earnings are taxable in Malta, and vice versa.

However, the country in which you physically perform work can only tax your salary if the following applies:

1. You spend over 183 days in that country during a 12-month period
2. Your employer is a resident of that country
3. You receive a salary from a permanent establishment (an office or a branch) that your employer has in that country

Additionally, crew members on ships or aircraft operating internationally are always subject to tax in their country of residence.

Capital Gains

Capital gains from the sale of real property are taxable in the country in which the property is located. For these purposes, taxable property includes:

• Buildings and land
• Agricultural land
• Equipment used for agriculture
• Mineral deposits

In the U.S., capital gains are derived from real property interests, while in Malta, they can be generated from real estate, shares of a Maltese company, and interests in partnerships or trusts.

Besides property sales, expats are also taxed on income from real immovable property, and the tax applies in the country in which the income arises. 

Interest, Dividends, and Royalties

Interest, dividends, and royalties are taxable in your country of residence. For instance, if you are a Maltese tax resident and receive interest, dividends, or royalties from the U.S., Malta has the right to tax the income.

However, the source country can also impose withholding tax on the income as follows:

Income Type	Withholding Tax in Source State	Source State Rules
Interest	Maximum 15% of the gross amount	The source state is the country where the payer is a resident
Royalties	Maximum 10% of the gross amount	The source state is the state in which the property is used
Dividends	5% if the shareholder is a company that owns at least 10% of the voting stock or 15% of the gross amount in all other cases	The source state is the country in which the paying company is resident

The withholding tax on dividends applies in the U.S. While Malta can also charge withholding tax, the rate must not exceed the tax imposed on the profits from which the dividends are paid.

Pensions and Annuities

Under the U.S.-Malta tax treaty, private pensions and annuities are generally taxable in the country of residence of the recipient. Accordingly, if a U.S. individual becomes tax resident in Malta, Malta is granted the primary taxing right over distributions from private pension arrangements such as U.S. 401(k)s or IRAs.

Any interest, dividends, or gains generated within a pension fund are subject to tax once you receive a distribution.

Meanwhile, Social Security payments are subject to tax in the country where they are received.

How Does the Saving Clause Affect the U.S.-Malta Tax Treaty?

U.S. tax treaties, including the treaty with Malta, contain a Saving Clause, which allows each contracting state to tax its citizens under the tax rules that would apply in the absence of a double taxation agreement. This means that U.S. expats in Malta may not be able to avoid U.S. taxation by leveraging the treaty. 

However, the Saving Clause does not cover all types of income. For instance, regardless of the Clause, the benefits of the treaty still apply to:

• Pensions and pension funds
• Annuities
• Social Security

Additionally, the Saving Clause can’t prevent you from claiming a foreign tax credit (FTC). This is a tax relief mechanism that allows you to claim a dollar-for-dollar refund on taxes paid abroad against your U.S. tax liability. 

Still, navigating your tax residency and the available tax reduction mechanisms properly after moving abroad can be challenging. To fully understand and leverage the Malta-U.S. tax treaty, as well as discover other effective methods to reduce global tax obligations, partner with Nomad Capitalist.

Reduce Cross-Border Tax Liability Effectively With Nomad Capitalist

Nomad Capitalist has assisted over 1,500 high-net-worth clients in obtaining residence abroad. We create personalized strategies to streamline relocation overseas while minimizing global tax liability.

We understand that each client has specific relocation goals. For this reason, we design a 360-degree Action Plan to meet your unique financial and lifestyle needs, helping you with:

• Securing tax residency or citizenship abroad
• Leveraging tax treaties to minimize worldwide tax obligations
• Navigating offshore banking and tax structuring

To receive your own Action Plan, fill out a short application form to determine whether we’re a good fit, and we will:

1. Schedule and conduct a one-on-one onboarding call to better understand your relocation needs
2. Prepare and present a detailed Action Plan based on your personal and financial goals and circumstances
3. Implement the Plan over a 12-month period
4. Handle all the administrative work and provide ongoing support with updates and renewals

Get professional guidance in using double tax treaties in Malta or another overseas destination to protect your wealth from excessive taxation while living abroad—partner with Nomad Capitalist today!