If you are thinking of buying a property in the Mediterranean where the sun shines 365 days a year, you have come to the right place. Not only because the Sun does shine throughout the year but because Malta offers a very advantageous tax advantage if you were to buy a property in Malta and become a resident. Read on to learn more…….Malta encourages foreigners to take up residence . The policy is supported by an attractive tax structure, amongst other advantages. Foreigners residing in Malta are not taxed on their worldwide income but only on Maltese source income and on foreign income received in Malta. Foreigners becoming resident under the Residents Permit Regulations are taxed at a flat rate of 15%. Other foreigners are subject to the normal rates of income tax. There are no net wealth or real estate taxes and whilst a tax on capital gains arising from the sale of real estate in Malta does exist, this does not apply to the sale of one’s main residence if the property is owned and occupied for at least three years.
Introduction to Malta
The Maltese archipelago consists of five islands of which the three larger islands — Malta, Gozo and Comino — are inhabited. The Maltese Islands are situated in the middle of the Mediterranean Sea about 100 kilometers south of Sicily and 300 kilometers east of Tunis. Malta is the main island and the capital city is Valletta which is a World Heritage site. Malta also has two other World Heritage sites and 7,000 years of history and culture. The climate of Malta is of the Mediterranean type – warm and healthy, with a prevailing wind from the north-west. There are no biting winds, fog, snow, or frost. Annual rainfall averages 550mm. The people of Malta have developed some distinctive characteristics over the centuries in spite of long periods of foreign domination. They are a peace-loving nation with a highly developed sense of hospitality and cheerful disposition. The language of Malta is basically of Semitic origin with a strong Arabic content. However, the language has been enhanced by assimilations from Italian and English. It is written in Latin script.
- Population: 410,290 (December 2007)
- Statehood: Independent since 1964
Republic since 1974 European Union member since 2004
- Area: 316 km2
- Capital: Valletta
- Languages: Maltese and English (both official) – English is also the main medium of official documentation in banking and commerce
- Currency: Euro
- Time Zone GMT +1
- International telephone code: +356
Source: National Statistics Office
- Excellent communication links and transport networks with Europe and beyond;
- Malta is an ideal hub for combining business and pleasure;
- A warm temperate climate;
- An enjoyable Mediterranean lifestyle with a diversity of restaurants, a good social life and quality cultural events.
Residents Scheme Regulations, 2004
One may take up residence in Malta by obtaining a certificate from the Inland Revenue Department, which certificate is issued for an indefinite period as long as certain conditions are satisfied on an annual basis. Holders may therefore reside indefinitely in Malta and may enter and leave Malta as and when required without the need of any other formalities. The following is a list of incentives and advantages applicable to holders of a certificate in terms of the Residents Scheme Regulations:
- A low flat rate of income tax of 15% with a minimum tax liability of €4,192 per annum after double taxation relief.
- Malta’s tax legislation provides for relief from double taxation, whether through negotiated double tax agreements with a substantial number of countries worldwide, or through unilateral provisions.
- There is no tax on real estate in Malta. Tax on capital gains arising from the sale of real estate in Malta does exist but residents are exempt if they have used the property as their main residence for three consecutive years and the property is disposed of not later than one year of vacating it.
- Duty, at 5%, is however chargeable when you buy a property in Malta.
Conditions For Application
One must own worldwide capital of at least €349,000 (or equivalent) or have an annual income of not less than €23,000 (or equivalent) arising outside Malta. The permit holder is also required to remit €13,950 per annum (plus €2,300 for each dependant, including the spouse) into Malta. The minimum remittances must not be repatriated out of Malta. Furthermore, a holder of a Residents Scheme certificate is required to purchase or lease property in Malta, having the following minimum values:
- Purchase of apartment: €69,000;
- Purchase of house: €1 16,000;
- Lease of residence: €4,150 per annum.
The application form has to be accompanied by the following documents:
- A copy of the applicant’s birth certificate or marriage certificate, as applicable;
- Three passport-size photographs in respect of the applicant and his or her spouse and dependants (where applicable);
- A police conduct certificate in respect of the applicant and his or her spouse (where applicable) from the police authorities nearest to the place of residence. (UK applicants must submit a “Subject Access Enquiry Certificate”);
- A copy of the personal details page in the applicant’s passport as well as that of his or her spouse;
- A financial certificate from the applicant’s bankers, accountants or a financial institution, stating that the applicant has an annual income in excess of €23,000 (or equivalent) or a minimum capital of €349,000, and is able to transfer €13,950 (or equivalent) per annum. The €13,950 must be increased by €2,300 for each dependant whose name appears on the application (e.g. for an applicant and spouse the amount required is €16,250);
- A self-declaration stating that the applicant shall remit to Malta the minimum amounts required.
- A copy of either the deed of purchase or the lease/rent agreement if the applicant already owns or rents/leases property in Malta. If the applicant does not already own/lease property in Malta a copy of such deed/agreement is required to be produced at the point in time when one actually takes up residence in Malta this being not later than 12 months after the date of issue of the residence permit.
All the above documents must be certified by a Notary and apostilled by the Ministry of Foreign Affairs in the country of nationality.
The issue of a certificate typically takes around three months from the date of the application. The minimum amount of tax shall be payable within thirty days of approval of the application and shall be credited against the tax due for the first year of residence. The holder of a permit must take up residence within 12 months from the issue of the said permit.
An individual may also take up residence in Malta by declaring his intention within three months of arrival in Malta and must complete and submit a form with the relevant authority. An individual who is economically self-sufficient must prove to the authorities that he or she is in receipt of an annual income of €23,000 if married and €14,000 if single. An individual may also become a resident of Malta as a consequence of taking up employment in Malta. A foreigner taking up such employment would require employment permission, which would be applied for by his employer.
For tax purposes an individual is normally regarded as being resident in Malta for a particular year if, in that year, his stay in Malta exceeds 183 days. The applicable income tax rates are, however, the normal rates of income tax applicable to residents, which are as follows:
Married couples may also opt for “single” rates individually on certain income.
EU Citizens may import their household effects (excluding a car) into Malta free of VAT and import duties. For non-EU citizens Customs may initially require either a deposit or a bank guarantee for the amount of VAT/duty in question. Upon the expiry of 200 cumulative days stay in Malta, any such deposits or bank guarantees are refunded or cancelled, provided that the duration of stay can be proved upon request.
Inheritance and capital transfer tax
There is no general inheritance tax system in Malta. However, upon the transfer or transmission (upon death) of:
- Real estate or shares in a company owning mainly real estate a duty of 5% is payable;
- Marketable securities (mainly shares in Maltese companies) a duty of 2% is payable.
Source: Income Tax Act
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