This article discusses if Malta is a tax haven and what characteristics a jurisdiction must possess to be termed a tax haven. We will also briefly discuss Malta’s tax system and how investors and entrepreneurs can move to Malta to reduce their taxes.
Malta is an EU member state famous for its stunning landscapes and architecture, diverse history, and Mediterranean climate.
In the RCBI world, however, the country is known for its citizenship-by-investment program, favorable business climate, and tax-friendly regulations.
A fair share of CBI countries are tax-free. Probably that’s why people think all CBI countries are tax havens – however, that’s not true.
A tax haven or not, Malta can be an excellent jurisdiction to establish tax residency, thanks to its EU status and tax-friendly climate.
Interested in establishing a residency or citizenship in a thriving EU state? Nomad Capitalist can make that possible for you. We’ve helped over 1,000 clients create their holistic Plan, grow their wealth, legally reduce taxes, and increase their peace of mind. We can do the same for you. All you have to do is reach out to us.
Malta – Country Overview
Malta is a Southern Europe island nation in the Mediterranean Sea between Italy and Libya. Its three main islands are Comino, Gozo, and Malta. A gateway between Africa and Europe, Malta provides easy access to both these markets.
Malta is an EU Schengen country, and its currency is the euro. The official languages are Maltese and English, making the country one of the most suitable for English-speaking foreigners who don’t want to face a huge language barrier.
Malta is a small country with a population of 444,947. It’s also one of the most densely populated European countries.
Malta – Passport
Nomad Passport Index currently ranks the Maltese passport 12th globally owing to its excellent perception, positive stance on dual citizenship, and immense travel freedom.
Maltese passport holders can travel visa-free or visa-on-arrival to 171 countries, making it an excellent tool for anyone looking to add a strong EU passport to their passport portfolio.
What is a Tax Haven?
A tax haven is a jurisdiction where foreign individuals or companies may receive or own assets and income without paying high taxes on them.
Generally, tax havens feature the following characteristics:
- Zero or low taxes
- Minimal or non-existent reporting requirements
- Lack of transparency obligations
- Lack of local residence (physical presence) requirements
In the past, dealing with a tax haven was almost synonymous with tax evasion and money laundering. People used such jurisdictions for tax avoidance by hiding money from tax authorities back home.
That’s why, now, most tax-friendly countries consider the title of a tax haven as derogatory and do their best to stay away from it (through proper compliance with international financial organizations).
Malta – Tax Haven or Not?
No comprehensively defined standard for classifying a tax haven country exists yet. However, several international regulatory bodies, such as the Council of the European Union and the Organization of Economic Cooperation and Development (OECD), monitor tax havens.
To answer whether Malta is a tax haven, we’ll refer to the OECD’s list of uncooperative tax havens and the EU’s list of non-cooperative jurisdictions for tax purposes.
No jurisdiction is currently listed on the OECD’s list of uncooperative tax havens. However, the EU lists 16 countries as non-cooperative jurisdictions for tax purposes. BVI, Russia, the Marshall Islands, and Costa Rica are the latest additions.
Hence, for all intents and purposes, Malta is not a tax haven.
Why Do People Categorize Malta as a Tax Haven?
Many people count Malta among tax haven countries. There could be several reasons for it. They could simply be uninformed and may think every tax-free or tax-friendly country is a tax haven, or may consider Malta a tax haven because of its citizenship by investment program (since several CBI countries are tax-free).
They may also consider it a tax haven owing to several benefits it provides to foreign companies and shareholders.
Following its accession to the EU, Malta had to restructure its offshore financial services sector to conform to EU legislation.
However, the country has successfully maintained its appeal attracting foreign companies and investments due to its excellent reputation, low tax and rebate policies, corporate legislation, and stable banking system.
No matter the reason, they’re wrong. Malta is neither a tax haven nor tax-free – Personal income tax there is progressive and can go up to 35%, while the corporate tax stands at a flat 35%.
Malta’s Taxation System
Malta taxes an individual on their worldwide income if they’re domiciled and resident in Malta.
A Maltese resident not domiciled in Malta is taxable only on Malta-sourced income and any foreign income remitted to Malta. Moreover, there’s no capital gains tax on foreign-sourced capital gains for such individuals.
Malta has a full imputation corporate tax system where corporate profits are taxed at 35%. However, when dividends are distributed to shareholders out of taxed profits, the dividend carries an imputation credit of the tax paid by the company on the distributed profits. After the tax refund, a shareholder’s tax burden decreases to 0%-5%.
The following are the most common taxes and their rates in Malta:
- Personal Income tax Rate: 0-35%
- Corporate Income tax Rate: 35%
- VAT: 18%
- No wealth tax
- No gift tax
- No estate tax
- No inheritance tax
- No annual property tax
- No tax on interest
- No tax on dividends
- No withholding on dividends
Benefits of Malta as a Low-Tax Offshore Jurisdiction
The following significant benefits make Malta an attractive offshore fund destination.
Strategic Geographical Location: Owing to its central Mediterranean location, Malta has easy access to EU ports and trade treaties, making it an appealing base for businesses looking to grow into European and North African markets.
EU Member State: One of the most significant advantages of moving your business to Malta is its EU member status. Corporations can enjoy a stable regulatory framework, access the world’s largest single market, and not worry about dealing with any tax-haven-related extra paperwork.
Good Reputation: Malta doesn’t have a shady past like Belize or the Bahamas. Maltese companies enjoy a good reputation and find it far easier to bank than traditional tax haven companies.
Progressive Personal Income Tax Regime: Malta’s personal income tax is progressive, ranging from 0% to 35%. Moreover, the country offers several tax advantages, exclusions, and credits for certain types of income.
Low Corporate Income Tax Rate: Malta’s corporate tax rate of 35% can be lowered to as little as 5% through several tax advantages and credits available.
Double Taxation Treaties: Malta has entered into double taxation treaties with over 70 countries, allowing companies and individuals to avoid paying double taxes. The country also provides companies access to EU ports and favorable trade treaties.
No Exchange Control: Malta’s currency has been Euro since 2008, and the country has had no exchange controls since its accession into the EU in 2004.
Diverse Community: Malta has always been favored by EU nationals and digital nomads owing to its warm climate, stable infrastructure, and breath-taking landscape. The country has also done a tremendous job of attracting foreign investors, entrepreneurs, and a highly skilled workforce. All that makes up for a mostly bilingual, highly educated, skilled community.
Business-Friendly Environment: Forbes has described Malta as one of the most business-friendly countries in the world. Malta offers a versatile corporate structure with detailed regulations to form business entities, such as LLCs, trusts, partnerships, and more. Malta also allows single-member company ownership, making it pretty convenient to form and run a Maltese company. Business owners can also utilize nominee services in Malta to hide their real identities from public records.
Foreigner-Friendly Regulations: Malta boasts contemporary corporate legislation with considerable flexibility for foreign enterprises. For example, the country allows international corporations to re-domicile, streamlining the establishment of an offshore presence in Malta. Non-resident companies can enjoy many of the same benefits as resident Maltese companies, such as reduced taxes and access to other EU countries and markets.
Moving to Malta to Reduce Your Taxes
Is Malta a tax haven in the most traditional sense of the term? No.
Is Malta on the OECD or EU’s list of non-cooperative jurisdictions for tax purposes? No.
Does Malta have a low-tax environment and business-friendly regulations? Yes.
Can you move to Malta to considerably reduce your taxes? Absolutely.
You see, tax haven or not, Malta is an excellent jurisdiction to set up a business, establish residency or gain second citizenship thanks to its central Mediterranean location, stable regulatory framework, favorable tax regime, and foreigner-friendly regulations.
In today’s era, it may be counter-productive to associate yourself or your business with traditional tax havens. You may be able to enjoy zero taxes there, but good luck finding a credible bank willing to deal with you. Moreover, the lack of reporting requirements is a one-way ticket to tons of paperwork at any financial institution you will ever go to.
In contrast, moving to offshore jurisdictions like Malta may be more beneficial in the long term. You will have to pay taxes (a small amount), but no one will ever make you fill out ten extra forms just because you’re running a business out of a tax haven. You will also have the advantage of an EU business and all the perks that come along with it, like a stable political and economic landscape.
Sounds like something you’re looking for? We’ve helped many clients establish a business, second residency, or citizenship in Malta. We can help you do the same. Set up a call with us today, and let us help you go where you’re treated best.
Is Malta a Tax Haven? Everything You Need to Know in 2023 FAQ
Malta is a Southern Europe island nation in the Mediterranean Sea between Italy and Libya. It lies 80 km (50 mi) south of Sicily (Italy), 284 km (176 mi) east of Tunisia, and 333 km (207 mi) north of Libya.
Russia and other tax havens like BVI, the Marshall Islands, Fiji, Samoa, Bahamas, etc., are part of the EU’s list of non-cooperative jurisdictions for tax purposes.
