Understanding Malta Tax for Foreigners: A Comprehensive Guide to Taxation for Expats in 2025

Overview of Malta Tax System for Foreigners

Key Features of Malta's Tax Regime

Malta's tax system is unique, especially for foreigners. It's based on residence and remittance. That means you're taxed on income if you're living in Malta or if you bring foreign income into the country. The tax rates are progressive, ranging from 0% to 35%, depending on your income level.

For those not domiciled in Malta, only income generated within Malta or brought into the country is taxed.

Understanding Tax Residency in Malta

To be considered a tax resident in Malta, you generally need to spend more than 183 days in the country during a calendar year. However, it's not just about counting days. Malta looks at your "durable connection" to the country—like where your permanent home is, your main interests, and where you usually live.

If you're a tax resident, Malta taxes your worldwide income. If not, only your Malta-sourced income is taxed.

Differences Between Residents and Non-Residents

The main difference here is what income gets taxed. Residents are taxed on everything they earn globally, while non-residents are only taxed on what they earn in Malta. For non-residents, this can mean a lighter tax burden if most of their income is from abroad.

But remember, if you bring that foreign income into Malta, it might get taxed.

Income Taxation for Expats in Malta

Tax Rates and Brackets for Foreigners

In Malta, the tax system for expats is structured progressively, meaning the more you earn, the higher the tax rate you pay. The tax rates range from 0% to 35% depending on your income level:

Your filing status (whether single, married, or parent) can also influence which bracket applies to you.

Income Sources Subject to Tax

In Malta, expats are taxed on income sourced from within the country and any foreign income that is brought into Malta. This includes:

• Salaries and wages: Your regular paycheck and any bonuses
• Fringe benefits: Perks like company cars or housing allowances
• Investment income: Dividends, interest, and rental income

Deductions and Allowances Available

To reduce your taxable income, Malta offers several deductions and allowances. You can deduct expenses such as:

• Fees for private education and childcare
• Costs associated with elder care or disability services
• Approved sports or cultural activities
• Business expenses related to generating income (utilities, employee salaries)

Special Tax Schemes for Non-Domiciled Individuals

Non-Dom Status Explained

In Malta, non-domiciled individuals, often referred to as "non-doms," enjoy a unique tax status that can be quite advantageous. This status applies to those who reside in Malta but do not have the intention to make it their permanent home.

As a non-dom, you're only taxed on income generated within Malta or foreign income that's brought into the country. This means that if you're earning money abroad and don't bring it into Malta, it's not subject to Maltese tax.

Tax Benefits for Non-Doms

Non-doms in Malta can benefit from several tax exemptions:

• Foreign income is only taxed if it's remitted to Malta
• Capital gains from abroad are exempt from Maltese tax, even if they're brought into the country
• There's a fixed 15% tax rate on foreign income received in Malta, with a minimum annual tax of €7,500

How to Qualify for Non-Dom Status

Qualifying for non-dom status in Malta involves meeting specific criteria:

• Residency: You must spend at least 90 days a year in Malta, averaged over five years, and not exceed 183 days in any other country per year
• Property: Own or rent a property that serves as your main residence. The minimum value for a property purchase is €275,000 in Malta, or €250,000 in the south of Malta and Gozo. Alternatively, renting costs should be at least €9,600 annually
• Health Insurance: You need to have health insurance covering you in Malta

there's a government fee of €2,500, and the application must be submitted through an authorized representative.

Property and Capital Gains Tax in Malta

Real Estate Taxation Rules

Owning property in Malta can be a rewarding venture, but it's crucial to understand the tax implications. Malta imposes a property transfer tax at a flat rate of 5% on the sale of immovable property. This tax is applicable to both residents and non-residents.

However, if the property is your primary residence and you've lived there for at least three years, you might be exempt from this tax upon selling.

Capital Gains Tax on Foreign Investments

Capital gains tax in Malta applies to the profit made from selling capital assets like stocks and bonds. For foreign investors, only capital gains realized within Malta are taxable. Interestingly, Malta provides a participation exemption for companies involved in foreign investments.

Exemptions and Reliefs Available

Malta offers several exemptions and reliefs to mitigate tax burdens:

• No capital gains tax on the transfer of certain securities by non-residents
• Double taxation agreements with numerous countries allow foreign investors to avoid being taxed twice on the same income

Navigating Double Taxation Agreements

Understanding Malta's DTA Network

Malta has a solid network of Double Taxation Agreements (DTAs) with various countries. These agreements are designed to prevent individuals from being taxed on the same income in both Malta and their home country.

These treaties clarify which country has the right to tax specific types of income, such as employment earnings, business profits, and dividends.

How DTAs Benefit Foreign Workers

Foreign workers in Malta can leverage DTAs to reduce their tax liabilities:

• Tax Credits: You may be eligible for tax credits in your home country for taxes paid in Malta
• Exemptions: Certain types of income might be exempt from taxation in one of the countries
• Reduced Withholding Taxes: DTAs often reduce the withholding tax rates on dividends, interest, and royalties

Steps to Avoid Double Taxation

Avoiding double taxation involves a few key steps:

1. Identify Applicable DTAs: Check if your home country has a DTA with Malta
2. Understand Tax Obligations: Know which types of income are covered under the DTA
3. File Necessary Paperwork: Ensure you file the appropriate forms to claim tax credits or exemptions

Inheritance and Estate Tax Considerations

Inheritance Tax Rules in Malta

If you're planning to settle in Malta, here's some good news: Malta doesn't impose inheritance or estate taxes. However, be aware of the duty on documents and transfers. This means if you inherit property or securities in Malta, you might have to pay a duty.

The rate is typically 5% for real estate and 2% for securities. But, there are exceptions, especially for shareholders in companies with interests outside Malta.

Estate Planning for Expats

Estate planning in Malta can be straightforward due to the absence of inheritance tax, but planning is still crucial. Consider these steps:

• Draft a will to ensure your assets are distributed according to your wishes
• Explore setting up trusts or foundations if you're dealing with complex assets
• Consult with a local expert to navigate any potential duties on property transfers

Document Duty and Transfer Tax

While Malta is favorable regarding inheritance tax, it does impose a document duty on certain transfers:

• Real Estate: A 5% duty is applied to the market value of the property
• Securities: Generally, a 2% duty applies unless exemptions are met

Tax Implications for Digital Nomads in Malta

Residency Requirements for Digital Nomads

Malta offers a Nomad Residence Permit designed for digital nomads who wish to reside temporarily on the island while working remotely. This permit is available to non-EU citizens and is valid for one year, with the possibility of renewal up to three times, allowing for a stay of up to four years.

To qualify, applicants must have a valid travel document, prove they have a remote job or business activity with a company located abroad, and meet a minimum income threshold of €42,000 annually. they need to secure accommodation in Malta and have health insurance coverage.

Tax Obligations for Remote Workers

Digital nomads in Malta enjoy a significant tax advantage. Their income, derived from their remote work, is taxed in their home country, not in Malta. This means that as long as they maintain their tax residency in their country of origin, they are exempt from personal income tax in Malta.

However, it's crucial for nomads to understand their tax obligations in their home country to avoid any legal issues.

Benefits of Malta's Digital Nomad Visa

Malta's digital nomad visa offers several perks:

• A legal framework for remote workers to reside in Malta
• Favorable climate, lively international community, and English as an official language
• Streamlined bureaucratic process and lower taxation rates compared to many other countries
• Access to Malta's non-dom tax regime for optimizing tax situation

Wrapping It Up

So, there you have it, folks. Navigating Malta's tax system as a foreigner might seem like a maze at first, but once you get the hang of it, it's pretty straightforward. Whether you're planning to move for work, retirement, or just a change of scenery, understanding the tax implications is key.

Remember, it's all about knowing what applies to you and making sure you're on the right side of the law. If you're ever in doubt, don't hesitate to reach out to a professional who can guide you through the nitty-gritty details. Malta's got a lot to offer, and with the right information, you can make the most of your time here without any tax surprises.

Frequently Asked Questions