Malta Citizenship & Taxation

| 03 Jun 2014

company-formation

Maltese citizenship alone does not change the tax treatment of an individual or family unless they take up residence in Malta. Malta's connecting factors for tax jurisdiction are residence and domicile (not nationality) and therefore the link between Malta Citizenship & Taxation is not obvious.

Domicile of Origin / Choice

A person who is granted citizenship under the Malta Individual Investor Programme is not deemed to acquire a domicile of choice by virtue simply of being granted citizenship. A number of onerous steps need to be taken to shed one's domicile of origin  and it is safe for a client to assume that his domicile will not change 'by mistake' even by taking up residence as a citizen of Malta.

Non-Dom Tax Regime

Therefore the main variable and connecting factor is residence. By taking up residence, an individual (whether a citizen or not) enters into a non-dom regime akin to the regime applicable in the UK, even if without the complicated residence tests and rules applicable in the British tax system. Basically, a Maltese resident who is not Domiciled in Malta is chargeable to tax in Malta only on a source and remittance basis. Therefore he would be chargeable to tax only on income arising in Malta and on foreign source income if and to the he extent that it is remitted /received in Malta. Foreign source capital gains are out of scope of taxation even if remitted to Malta. The tax planning opportunity here is that foreign source income and foreign capital gains that is kept in bank accounts outside Malta remain out of scope of Malta tax.

Maltese Citizenship & Residence

Remember though that the Malta Citizenship by Investment Programme requires applicants to satisfy a one year residence requirement.  Though this does not strictly entail a minimum of 183 days of physical presence, it does imply fiscal residence at least during this first year. This establishes an indirect link between Malta Citizenship & Taxation.

Tax Planning for Non-Domiciled Malta Citizens

Other opportunities exist for the running of companies in Malta. If short yet in full:

  • company tax rate: 35%
  • personal tax on dividends received by a Malta company: none (imputation system applies)
  • tax refund to shareholders of a Malta company: 6/7 ths, i.e. 30 out of 35 paid by the company is refunded to shareholders.

Companies can bank anywhere in the world and can be owned by shareholders of any nationality.


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