Living luxury in the Mediterranean

  • 31.July 2009
  • Like us on Facebook

Have you ever dreamt of moving abroad to an English speaking Island in the middle of Mediterranean where crime is practically non-existent, the climate is pleasant throughout the year, the standard of living is high and the cost of living is reasonably low? You can stop dreaming now and start packing your bags.

Malta has been the ideal destination for several Nationalities that have head to the Mediterranean Island of Malta to take up residency and live a lifestyle that they have only ever day dreamed about. One of the great things about Malta is that the people are very hospitable and that, I must say, is in English which is rare to find. It is easy to get to know people and to understand the system in Malta. There is a sizable expatriate community made up of foreigners that are in Malta on work assignments, permanent residence holders, retiree’s as well as casual business travelers.

Malta enjoys several double taxation agreements. There are two types of Residence status that one may take up in Malta. In both cases, one must buy a property in Malta or you must rent a property Malta and reside in Malta for a minimum of 183 days.   Purchasing a property in Malta is fairly easy and being that the property market has not been as affected by the global financial crisis it is still interesting to investigate although the opportunity to rent a property in Malta is also appealing due to the very high standards of furnishing and finishings of property.

Individuals residing in Malta are taxable only on income arising and/or remitted to Malta at the applicable rates depending on the residence status one has opted for.

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:

  1. A low flat rate of income tax of 15% with a minimum tax liability of €4,192 per annum after double taxation relief.
  2. 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. In the case of South Africa the following double taxation rates apply.

 

  1. Dividends

    Interest

    Royalties

    Minority

    Minority

    % required

    Non Treaty

    Rates

    Non Treaty

    Rates

    Non Treaty

    Shareholding

    Shareholding

    to qualify for

    rates

    rates

    Majority

    Shareholding

    5%

    5%

    N/a

    0

    10%

    0

    10%

    12q

     

    1. There is no real estate tax 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.
    2. Duty, at 5%, is however chargeable on the purchase of real estate 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:

    1. Buy an apartment in Malta: €69,000;
    2. Buy a house in Malta: €1 16,000;
    3. Lease of residence in Malta: €4,150 per annum.

    Application Process

    1. The application form has to be accompanied by the following documents:
    2. A copy of the applicant’s birth certificate or marriage certificate, as applicable;
    3. Three passport-size photographs in respect of the applicant and his or her spouse and dependants (where applicable);
    4. 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.
    5. A copy of the personal details page in the applicant’s passport as well as that of his or her spouse;
    6. 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);
    7. A self-declaration stating that the applicant shall remit to Malta the minimum amounts required.
    8. 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.
    9. A fee of €115 is payable upon application to the Inland Revenue Department.

    All the above documents must be certified by a Notary and apostilled by the Ministry of Foreign Affairs in the country of nationality.

    Timing

    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.

    Endorsement of Passport

    Non EU citizens are required to have their passport endorsed with the residence stamp. This is obtained by filing an application with a separate department, which stamp is valid for a period of one year and may be renewed on an annual basis as long as the annual conditions on the residence permit certificate have been fulfilled. A fee of €23.29 is payable to the respective department on submission of the application.

    Other Residents

    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.

    Taxation

    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’ Rates

    ‘Single’ Rates

    First

    € 11,900

    Nil

    First

    € 8,500

    Nil

    Next

    € 9,300

    15%

    Next

    € 6,000

    15%

    Next

    € 7,500

    25%

    Next

    € 5,000

    25%

    Over

    € 28,700

    35%

    Over

    € 19,500

    35%



    Non EU citizens are required to have their passport endorsed with the residence or employment permit stamp depending on the purpose of residence. This stamp is obtained by filing an application and is valid for a period of one year and may be renewed on an annual basis. A fee of €23.29 is payable to the respective department on submission of the application.

    Non Residents

    An individual who is in receipt of income arising and/or remitted to Malta however does not reside in Malta is subject to such income at the nonresident rates as follows:








    First

    € 700

    Nil

    Next

    € 2,400

    20%

    Next

    € 4,700

    30%

    Over

    € 7,800

    35%



    Non EU Citizens may import their household effects 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:

    1. Real estate or shares in a company owning mainly real estate in Malta a duty of 5% is payable;
    2. Marketable securities (mainly shares in Maltese companies) a duty of 2% is payable.

    Identity Cards

    Non EU residents in Malta may apply for an identity card only once they have obtained the stamp on their passport. A Maltese identity card is obtained by completing an application with the relevant authority. A Maltese identity card is not a travelling document for foreigners, however it may be found useful for applying for various services in Malta such as television, telephone, banking and other services.

    If your interested in seeking further advise contact one of our RE/MAX office’s and we will be able to assist you in purchasing a property in Malta and will also provide you with a list of recommended tax consultants for you to choose from.

    Household Effects Married couples may also opt for “single” rates individually on certain income.



Comments