Residence in Malta
Permanent Residence in Malta
RESIDENCE IN MALTA
Maltese immigration law provides two main residence schemes for taking up residence in Malta, namely the Permanent Residence Scheme (PRS) and the Ordinary Residence permit. Persons may decide to move their residence status to Malta for various reasons, such as offshore living, international business travel, tax reasons and retirement.
Permanent Residence Scheme
The 1988 Malta Permanent Residence Scheme, still in force today, is designed to attract high net worth individuals to take up permanent resident status in Malta. The said scheme is probably the most attractive residence scheme currently available to individuals seeking to transfer their tax residence overseas to more attractive jurisdictions that are warmer in climate, enjoy a high standard of living, provide a safe environment for younger and older members of the family and at the same time provide a scheme for permanent residence that is selective, affordable and tax friendly.
Physical residence in Malta is not required as persons holding a Permanent Residence Permit have freedom to come and go as they please without the need to apply for VISA or extension of stay in Malta. There are various reasons why an increasing number of foreigners are purchasing a home and taking up permanent residency in the Maltese Islands, such as:
- A pleasant climate and a hospitable English-speaking people;
- A rich cultural and historical heritage;
- A peaceful and safe way of life and high standard of living
- Freedom of movement into and out of Malta;
- Tax benefits;
- Easy repatriation of capital and income out of Malta;
- Favourable tax-friendly procedure for moving your possessions to Malta;
- Favourable double-taxation agreements with key countries;
- A highly respected jurisdiction for incorporating low-tax companies;
- Excellent banking centre with the presence of major international banks;
- Excellent access by sea and the Malta international airport.
Apart from the above-mentioned benefits associated with living in Malta, it must be added that financial qualifications are easy to satisfy and permanent residents are entitled to the following benefits:
- No minimum stay requirements;
- A low annual tax liability of a mere EUR4,192;
- No world-wide income/wealth tax – tax only paid on income remitted to and kept in Malta;
- No need to purchase property – only a minimum annual rent of EUR4,150;
- No minimum investment requirements;
- No inheritance/wealth taxes.
Taxation for permanent residents
- Low flat tax rate &minimum tax
- Remittance only basis of tax
- Capital Gains
- Double taxation relief
The Residence Scheme Regulations issued under the Income Tax Act entitles holders of a Residence Permit to avail themselves of a tax rate of 15% chargeable on all income (less personal allowances) received in, or remitted to Malta from either local or foreign sources. This is subject to a minimum payment of EUR4,192 per annum.
Non-domiciled foreign holders of a PR permit in Malta are taxable on a remittance basis only on income and not foreign source capital remitted to Malta and on income and capital gains arising in Malta.
Income not remitted to the PR‘s Malta bank account and capital gains (whether remitted or otherwise) fall outside the scope of Maltese tax. Capital or savings remitted to Malta also fall outside the scope of Malta tax.
Malta enjoys 43 double tax treaties; persons who take up residence in Malta can receive their pensions in Malta free of tax at source and subject to a mere 15%. Overseas capital funds invested locally are only taxed on any interest or dividends generated thereon, again at a 15% flat rate. Permanent residents also benefit from double taxation agreements existing between Malta, most European countries, Canada, Australia and the USA, ensuring that tax is never paid twice upon the same income.
Other Benefits of Maltese Residence
- Exemption from Customs Duty/VAT Used household and personal effects, furniture and other domestic articles (excluding all kinds of weapons and firearms) may be imported free of import duty if imported within six months of your arrival in Malta to take up residence. In such cases import licenses are not required.
- Complete Freedom of Movement There are no annual minimum stay requirements. A Malta permanent resident may travel to and from Malta freely without the need of applying for a visa or extensions of stay.
- Registration of Imported Vehicles Malta Permanent Residents are allowed to register their imported vehicles at preferential rates.
- Repatriation of one‘s capital and income Proceeds from the sale of property, encashment of investments, local income and excess income brought into Malta may be freely repatriated by permanent residents, provided that any tax due has been settled.
- Rental of Property Owners of properties with swimming pools or properties enjoying the use of swimming pools are allowed to rent them out, provided that such properties are licensed as holiday accommodation by the Hotels and Catering Establishments Board. All income thereon, is subject to the 15% tax rate mentioned above and may be repatriated as in (4) above. Furthermore, leased property may not be sub-let.
- Death duties No death and donation duties are payable in Malta. If a property is purchased in one name, the heirs of the deceased have to pay 7% provisional tax on the value of the property declared. This value will in turn be verified by an appointed architect. If a property is bought jointly and one of the parties passes away, provisional tax of 7% is only paid on half the estate. Though no death duties are payable in Malta, transfer duty (according to the Duty of Documents and Transfers Act, 1993) is charged on immovable property and on any shares in a Maltese company, excluding shares in those companies listed on the Malta Stock Exchange.
Conditions for Residence
Any foreigner, of whatever nationality, may submit an application for a permanent residence permit provided the specific conditions listed below are satisfied. This permit is issued on an indefinite basis.
- 1. Acquisition of Property An applicant for Maltese permanent residency must purchase an apartment in Malta for not less than EUR69,000 or a house for not less than €116,000. Alternatively, the applicant may opt to lease or rent a property in Malta of which the minimum rental is EUR4,150 per year. Twelve months after taking up residence in Malta, a permanent resident is required to produce evidence that he/she has complied with this condition. In Malta, no property taxes, council taxes, rates or other official costs are due on property owned freehold. Ground rent may be payable when a property is not purchased freehold, but this usually amounts to a negligible annual payment.
- Annual income remitted to Malta The minimum annual income to be brought into the country is EUR13,950 per applicant, with an additional EUR2,300 for each dependent. (In terms of the Permanent Residence Scheme ‘dependent‘ means the spouse, a child under twenty-one (21) years of age and a parent or grandparent who is financially dependent on applicant).
- Wealth Test: Capital/ Income Qualifications Applicants must produce evidence of an annual income of EUR23,000 or over, OR a capital equivalent to EUR349,000 or over. In either case, the whole amount is not required to be brought into the country, and the value of the property purchased locally is also taken into account as part of the capital requirement.
- Employment/Engagement in Business No employment or engagement in business may be undertaken by applicants for permanent residency unless authorized by the competent authorities. Interestingly, however, official Government policy welcomes the introduction of overseas expertise and ideas in the tourism, manufacturing and catering sectors.
- Post-Issue Conditions Once in possession of the permit:
- One will be required to take up residence by not later than one year from the date of issue of the permit.
- One must not exercise any occupation or profession, hold any appointment, seek enjoyment, or engage in any form of business in Malta;
- One should not participate in political activities; however should one be interested in local council activities, one should contact the Local Councils Department.