IN502 - Proposed Change to the Remittance Basis of Taxation in Malta

The Maltese Budget speech of October 2017 proposed a number of changes, including modifications to the remittance basis of taxation in Malta.

Background

Malta offers an extremely attractive remittance basis, whereby a non-domiciled individual is only taxed on foreign income if this income is received in Malta or is earned or arises in Malta.

Resident Non-Domiciled Individuals and Tax Changes

Individuals who are ordinarily resident in Malta but not domiciled there, may be subject to a minimum annual tax of €5,000 in Malta.

The minimum tax is payable if the non-domiciled individual:

  1. is not participating in a scheme such as ‘The Residence Programme’, ‘Global Residence Programme’ and/or ‘Malta Retirement Programme’, which specify a minimum tax payable; and
  2. derives income arising outside Malta of at least €35,000, or its equivalent in another currency. In the case of a married couple, the combined income will be considered.

Calculation of the Minimum Tax to be Paid

To calculate the minimum amount of tax payable, personal tax paid in Malta, including withholding tax, will be taken into account. Capital gains tax, however, will not be included.

If the income of a non-domiciled individual in any single tax year results in a tax liability of less than €5,000, the minimum tax of €5,000 will be payable. For example, if an individual is liable to pay €3,000 on income arising or received in Malta, they will be required to ‘top up’ that tax by an additional €2,000.

An exception to the above rule exists if a non-domiciled or non-resident individual can prove that tax on foreign income or capital arising outside of Malta would be less than €5,000. The tax liability may then be capped, at the discretion of the Commissioner of Tax.

Zero Tax on Capital Gains Arising Outside of Malta

No changes are proposed regarding tax payable on capital gains arising outside of Malta. Irrespective of whether this income is brought into Malta or not, no tax is payable.

When will the Changes Take Place?

It is anticipated that these changes will be effective from 1 January 2018 and will be introduced mid-2018.

Summary

The Maltese remittance basis of taxation is being revised and may result in a minimum annual tax of €5,000. The remittance basis of taxation in Malta remains very attractive for individuals who are resident but not domiciled in Malta.  

Additional Information

For more information please contact Sean Dowden at the Dixcart office in Malta or email: advice.malta@dixcart.com

 

Categories: Malta, 2017