Malta: Personal Taxation
Residence and Liability for Taxation
It is necessary to consider both domicile and residence to establish the exact tax situation of individuals in Malta.
Maltese domicile is established on the basis of UK case law principles. Broadly speaking, an individual's domicile of origin (where he was born) can be changed if he establishes a permanent home elsewhere. He can only have one domicile.
Residence is defined as habitual presence in the country; ordinary residence means that an individual is present in Malta in the ordinary or regular course of his life.
Individuals who are domiciled and ordinarily resident in Malta pay income tax on their world-wide income.
Individuals who are domiciled elsewhere, and who are resident but not ordinarily resident in Malta pay tax on their income arising in Malta, or remitted there (but not capital gains, whether remitted or not). The six-month test is likely to be definitive in establishing residence.
Non-resident individuals pay tax on their Malta-source income only; but local interest and royalty income are exempt from tax, as are capital gains on holdings in collective investment schemes or on securities as long as the underlying asset is not Maltese immovable property.
'Returned migrants' are offered a special tax regime: a person born in Malta who returns can elect to pay 15% income tax on local income only; there are various conditions.
Highly qualified expatriate employees working in the financial services or i-gaming industry are subject to a flat tax of 15%.
The 15% flat tax incentive was extended in the 2012 budget to include highly skilled and qualified expatriates who are required for certain industrial sectors; individuals who carry out research or market an invention or technology in Malta; and digital gaming professionals, such as game directors and game designers.
Holders of Permanent Residence Permits issued under the Immigration Act 1970 can pay tax at a reduced rate on income arising in Malta plus remittances of foreign income. Such individuals are considered to be non-resident as regards investments in offshore and non-resident companies.