Malta is one of the few EU countries that continues to offer a 'golden visa' scheme, inviting foreign nationals to invest in the economy, purchase or rent a property and qualify for citizenship and a Maltese passport.

While these initiatives are controversial and the subject of disputes between national governments and the European Commission, they remain an attractive opportunity for expats to relocate overseas, gain permanent citizenship, and benefit from favourable tax treatments.

The Chase Buchanan Wealth Management for expats independent financial advisers explain the tax incentives on offer for both foreign national residents and citizenship applicants and why they are proving so popular with British expats.

Qualifying as a Maltese tax resident

Tax residency can be more complex than it may appear. Living in Malta for six months of the year may not mean you automatically qualify as a tax resident and can apply deductions, exemptions, or lower tax rates to your income.

Residency tests consider several factors, including:

• Income sources
• Familial ties
• Business connections
• Property ownership

Generally, if your primary residence and income are based in Malta, you will be considered a tax resident. Still, it is important to seek professional advice without assuming this is the case.

Many expats become dual citizens where they have interests or ties to two countries simultaneously, where double tax treaties come into effect, offsetting one tax liability against the other. Failing to file a tax return, or pay taxes owing, can be a serious offence, even if unintentional, so it is highly advisable you seek clarity if you have any doubts about your tax position.

Citizenship by Investment visas

If you have relocated to Malta through the Maltese Citizenship by Naturalisation for Exceptional Services by Direct Investment Programme, you will not normally need to prove your eligibility for tax residency, although the process can take from one to three years. 

Applicants initially become permanent residents and can apply for citizenship after 36 months or 12 months if they invest a higher value.

There are three stages of investment, each of which an applicant must meet before they will be granted permanent residency: 

• A government contribution of €600,000, with a three-year residency period before the applicant becomes eligible for citizenship. Donors who contribute €750,000 qualify for citizenship after one year
• A property purchase worth €700,000 or above or a five-year rental agreement valued at €16,000 a year or more
• A charitable or non-profit donation of €10,000 to an organisation registered with the Maltese government. This donation can be made to any approved voluntary or charitable entity of the investor’s choice

Note that the property investment or rental thresholds are lower for lower-density regions and must be maintained for at least five years. Successful citizenship applicants must also retain the property for a further five years from the date of their citizenship certification.

Tax advantages available to Maltese taxpayers 

Why is Maltese permanent residency and citizenship worth this level of investment? For many foreign nationals, there are personal objectives such as being allowed to live, work and study in Europe, access to high-quality education for their families, or the travel freedoms associated with an EU passport.

For others, the attraction is the Maltese tax regime – wealthy investors, businesspeople and expats can reduce their overall tax exposure by locating assets and income in Malta, taking advantage of the tax allowances and rates.

Maltese tax residents are not taxed on foreign income if that income is not transferred to Malta. They may be exposed to overseas tax obligations, but Maltese citizens with global business interests may be able to legally reduce their tax burden by a substantial margin.

Foreign income transferred to Malta attracts a flat 15% tax rate, which could be particularly welcome for additional rate UK taxpayers, or those who earn the majority of their income from overseas. A minimum tax levy of €10,000 applies.

Resident taxpayers and citizens do not pay taxes on the following:

• Property ownership
• Inheritances
• Royalties
• Gifts
• Luxury items

Although tax regimes vary across the EU, many countries levy annual property taxes, wealth taxes and an average 10% minimum tax rate on royalty earnings. These zero-rate taxes make Malta an enticing destination for those who would otherwise be exposed to steep tax charges on their worldwide income.

Tax rates for Maltese residents and citizens

Income tax rates in Malta vary, depending on whether the taxpayer is married or has children. The bands for 2023 are as follows.

2023 income tax bands

Maltese taxpayers do not pay an annual property tax, although they pay a 5% stamp duty rate when purchasing a property.

Taxpayers that own rental properties can apply for a special tax status where they pay a 15% flat rate tax on all income rather than paying tax according to the progressive tax bands for other income sources. However, they cannot deduct expenses before declaring the taxable value.

Most dividend income and interest earnings are also taxed at a flat 15% rate.

Changes to the Maltese tax system 

The Maltese government has introduced several changes and updates in the 2022 and 2023 tax years.

Non-taxable pension income allowances have increased from €14,318 to €14,968, and married pensioners can claim an additional €3,600 tax allowance against other income sources, applied as a tax rebate.

Pensioners can also claim an exemption against taxable income from January 1, 2022 for five years, which in 2023 is 40% of pension income, up to a maximum of €5,727.

For more information about Maltese tax efficiencies and how these might impact your tax obligations, contact Chase Buchanan Private Wealth Management for further guidance.

Chase Buchanan Ltd is authorised and regulated by the Cyprus Securities and Exchange Commission with CIF Licence 287/15.

Disclaimer: The information provided in this article is being provided solely for informational and promotional purposes and should not be construed as investment, tax or legal advice.