At first glance, Malta appears to have a tax system that is very similar to what you’d find in Western Europe, North America or other developed countries.
There are tax brackets in Malta and the top bracket pays 35% of their above-threshold income.
For our purposes, the most interesting aspect of the tax system are Malta’s tax rates on foreign residents of Malta.
In a nutshell, if you qualify for this status, you will only pay Maltese tax on the income you generate in Malta or on money you remit to Malta. That probably means you pay a lot less than 35%.
There are exceptions and other points to keep in mind. And there are situations where you might want to become a Maltese citizen and therefore become subject to Malta’s entire tax system.
This guide will lead you through the finer points of all those eventualities. We’ll cover everything Malta’s capital gains taxes to the tax rates in Malta for corporations
Tax Rates in Malta for Resident Foreigners
Let’s deal first with the most interesting and attractive characteristic of the Maltese tax system.
Like several other former British colonies, Malta has a remittance-based tax system for foreigners. That means you only pay Maltese tax on:
- Income you generate in Malta.
- Capital gains derived in Malta (e.g., on the sale of Maltese property).
- Income generated abroad that is remit to a Maltese bank account.
Do note that Malta’s tax rate for expats is different under several special residence schemes including the Global Residence Programme, High Net Worth Individuals Rules, Highly Qualified Persons Rules, Individual Investor Programme and the Permanent Residence Programme.
In other words, it is only EU nationals who are granted Ordinary Residence status who are subject to Malta’s progressive tax rates.
What is the Tax Rate for All Other Expats?
Participants in all of the other programs listed above pay a flat 15% on income made in Malta or remitted to Malta.
In some cases, there is a minimum amount of income tax payable, generally €5,000 – €15,000, depending on the residence scheme.
Important Tax Rate Information for Foreign Retirees to Malta
These rules apply to everyone but are mostly used by retirees as making living in Malta an even more attractive option. Specifically:
- Capital gains realized abroad (e.g., from selling shares held in a stock portfolio in another country) are tax exempt even if the proceeds are remitted to Malta.
- Pension income from private pension schemes is tax exempt.
- There are favourable tax rates in Malta for dividend and interest income earned abroad and remitted to Malta.
Special Tax Rules on What You Can Bring With You When You Relocate to Malta
EU nationals do not pay tax or duty on their personal and household effects when they move to Malta.
The rules about bringing a car to Malta from the EU are a bit tricky. You must be able to prove that you’ve owned your car for at least two years and you must import your car to Malta within your first year after establishing residence here.
Personal Income Tax Rates in Malta
Malta has three sets of personal income tax rates — one for individuals, one for parents and one for married couples.
All married couples in Malta must nominate one spouse who is responsible for filing the couple’s tax return(s). That person may elect to either have the couple’s incomes pooled and taxes calculated on the scale for couples or separately, either on the individual scale or the one for parents, depending on whether they have children.
Tax Brackets in Malta
Malta uses a progressive system of tax brackets for calculating how much income tax to levy. The bracket you fall into depends on whether you’re filing as an individual, couple or parent.
The rates listed before are for the 2018 tax year. At this point, the rates will stay the same for the 2019 tax year.
Malta’s Personal Tax Rates for Individuals
Individuals in Malta pay income tax on the following scale:
- €0 – €9,100 at 0% with no subtraction
- €9,101 – €14,500 at 15% with a €1,365 subtraction
- €14,501 – €19,500 at 25% with a €2,815 subtraction
- €14,501 – €60,000 at 25% with a €2,725 subtraction
- €60,001 – at 35% with a €8,725 subtraction
Malta’s Income Tax Rates for Married Couples
Couples in Malta who elect to have their income pooled pay tax on the following scale:
- €0 – €12,700 at 0% with no subtraction
- €12,701 – €21,200 at 15% with a €1,905 subtraction
- €21,201 – €28,700 at 25% with a €4,025 subtraction
- €28,701 – €60,000 at 25% with a €3,905 subtraction
- €60,001 – at 35% with a €9,905 subtraction
If both partners work and make a relatively similar income, it is usually advantageous to elect for the individuals’ scale. That’s mainly because the top tax bracket for married couples and individuals kicks in at the same threshold.
Non-employment income, such as rental income from an asset the couple owns together, is assigned entirely to the partner with a higher income.
Malta’s Income Tax Rates for Parents
Parents in Malta, who have their income tax individually calculated use these tax brackets and rates.
- €0 – €12,700 at 0% with no subtraction
- €12,701 – €21,200 at 15% with a €1,575 subtraction
- €21,201 – €28,700 at 25% with a €3,155 subtraction
- €28,701 – €60,000 at 25% with a €3,050 subtraction
- €60,001 – at 35% with a €9,050 subtraction
To qualify for the parent rates, you must have custody of a child under age 19. (Or a child enrolled in tertiary education in Malta who is under 22.)
This rate can be used by single, widowed, separated, divorced parents and also married couples with children who are calculating their tax as individuals.
If a divorced couple does not share custody of their child(ren), the parent without custody may not use this scale.
What Deductions Are Available to Individuals?
Various deductions are allowed when calculating the personal income tax you owe. These include:
- Alimony paid is deductible.
- If you use a loan to buy assets that generate income, you can deduct the interest on that loan from that income.
- School fees and tuition, childcare and children’s sports are all deductible to some extent.
Malta’s Withholding Taxes
For non-residents who have economic interests in Malta there are no deductions at source. That favorable rule applies to dividends, interest and royalties that are earned in Malta.
How Are Capital Gains Taxed in Malta?
Generally, capital gains are pooled with all other income and taxed in the usual way. Immovable property (discussed below) is the major exception to this.
Taxes on Property in Malta
Capital gains taxes are dealt with above but there is a slightly different system for selling a home or commercial building (also known as immovable property).
The buyer of a property pays up to 5% stamp duty on the purchase price. The seller pays 8% of the purchase price as part of their income tax filing.
Note that there are some rare exceptions for immovable property that the seller has owned for a very long time or that was acquired in an unusual manner.
One fairly common exception is for inherited properties. When immovable property is acquired as part of an estate a deed of causa mortis is registered to, in part, declare the property’s value at that point.
Heirs pay only 12% of the gain versus the declared value. (This rate is reduced to 7% if the property was inherited before November 25, 1992.)
Rental income from investment properties is taxed as part of your regular income or you may elect to pay a flat 15% on your gross rental income in a particular year. (No deductions for expenses are allowed from this.) Important notes include:
- This option applies to both residential and commercial properties.
- Residents, non-residents and companies all have the option paying the flat rate.
- Every year you have the option of paying the flat rate or having the rental income counted as part of your regular income.
Other Tax Rate Advantages of Malta’s System
Compared to other European jurisdictions Malta has favorable tax rates on a few counts. These are:
- There is no wealth tax in Malta.
- No inheritance tax is levied in Malta. (But a stamp duty may apply if an estate includes shares in a partnership or certain marketable securities.)
Malta’s Tax Rates Explained
Malta has a very advantageous system of tax rates. Expats thinking of relocating to Malta should pay special attention to the:
- Source and remittance system of determining taxable income from worldwide activity.
- The rates available under Malta’s various residence schemes.
- The total lack of tax on wealth, inheritance and many types of investment income that foreigners might want to remit abroad.
Malta’s tax rates are fair and progressive but there are a few complexities to them that might need further explanation.
Let me know if you have any questions; I’d love to hear from you!
Otherwise don’t forget to check out some of our other articles on taxation in Malta: