Expat Talk: 183 days in Malta – what does this mean for your tax residence?

Malta is an attractive relocation destination for South Africans, and for many great reasons. Considered one of the safest countries in the world, Malta has a lot going for it, including the fact that it’s one of the warmest places to be in Europe in the winter months. It has a fantastic lifestyle offering, and while it’s not one of the cheapest places to live, as a member of the European Union, Malta is high on the list of best countries for non-European nationals looking to acquire a second residency. But what do you need to know about Malta from a tax perspective as a South African expat?

How does tax residence work in Malta?

Generally speaking, tax is unavoidable no matter where you go. That’s why it’s a good idea to make sure you know exactly what you’re doing and what the tax rules are, no matter where you travel. In Malta, tax residence is not linked to nationality or any other civil status. Tax residence in Malta is a factual inquiry that depends on the amount of time you spend with your feet on Maltese soil. As such, you can be considered a tax resident in Malta even if you qualify as a tax resident in another country. Essentially this amounts to dual residence for tax purposes, which can have major tax implications.

Facts about tax residency in Malta:

• If you meet the requirements of ordinary residence and you dwell in Malta, you will be subjected to tax on a worldwide basis.
• If you do not dwell in Malta, or you don’t meet the requirements to be considered ordinarily resident, you will only be taxable on a remittance basis.
• Where you are present in Malta for longer than 183 days (in any particular year) you will be considered a tax resident for that year, regardless of the purpose and the nature of your stay.
• If your intention is to come to Malta to establish your residence, you become resident from the date of your arrival, no matter how long your stay in any particular year.

What does ‘ordinarily resident’ in Malta mean?

• A person who lives in Malta permanently or indefinitely is considered ordinarily resident in Malta.
• However, a person who is in Malta for a temporary purpose can still become ordinarily resident. This would happen if you were in Malta for more than 183 days in each year for an extended period, such as over three consecutive years.
• Becoming ordinarily resident is still possible even if you do not spend more than 183 days in a year over a long period, such as if you happen to visit regularly and establish personal and economic ties with Malta.
• On the other hand, an ordinary resident may also lose residence status if you leave Malta permanently or indefinitely.

If you are seeking to gain tax residence in Malta, it is important to ensure that you fulfill all your tax compliance obligations, such as timely registration and filing of returns.

Hot question: Is Malta tax free for expats?

No, but generally, income tax in Malta is considered low with a maximum rate of 35%. However, expats who fulfill certain conditions (such as owning or renting a property of a certain value) or expats who work within certain sectors such as aviation, finance or gaming can reduce their tax liability and will only pay 15% tax on their income.

How do I pay less tax as an expat in Malta?

There are a number of investment and visa programmes with associated tax benefits. For most expats (particularly South Africans who have a progressive tax rate meaning the more you earn the more you’re taxed) tax obligations in Malta are significantly lower than in their home country, particularly without annual property taxes, inheritance or wealth tax.

The two very popular visa schemes for expats looking to move  to Malta are the Global Residence Programme and the Citizenship by Direct Investment initiative.

Malta Citizenship by investment

Non-EU citizens can invest in the economy and receive a residency permit for their families with the option to advance to full citizenship. Your options are to live in Malta for three years and then apply for a second passport or after one year of residency you can make a higher financial contribution to become eligible. Applicants must make a significant economic contribution, donate to an eligible cause, and own/rent a residential home.

The tax benefits in Malta for expats include:

• No tax on income that is derived from outside of Malta as long as it is not brought into the country.
• No tax on capital gains, even if the capital is transferred to Malta.
• Local tax rates on Maltese sourced income

Malta’s Global Residence Programme

Another popular route to residence in Malta is the Global Residence Programme, which has the result of giving non-EU foreign nationals a special tax status.

While there is an investment requirement, the difference is that there is no minimum physical stay requirement, although if successful in your application, you will not be permitted to live in another country for more than six months of the year.

The tax benefits for Malta’s Global Residence Programme:

• A flat rate of 15% tax is applied to foreign income sent to Malta.
• Minimum tax contribution of €15,000 a year.
• Flat rate 35% tax charged on income arising in Malta.
• No tax on foreign-source income not brought into the country.

What happens where you qualify as a tax resident in both Malta and South Africa?

Double taxation relief applies, which means that if you’re living in Malta and paying tax there already, you will not be taxed twice on the same income. This is particularly important for expats who retain South African assets or income sources, such as rental property income. However, this does not mean you are relieved of your tax obligation in South Africa and you will still need to submit a tax return in your home country, declare your foreign income and request relief from double taxation. You will be credited in South Africa on the tax you have already paid in Malta and you will only need to pay tax on any income that is sourced in South Africa.

FinGlobal: Your financial emigration specialists

Moving to Malta? FinGlobal can help get your finances migrated, making for a smooth, seamless transition. We have helped clients in over 105 countries with various aspects of their cross-border financial portfolios, and we’re ready to offer you the same convenient, trusted service – from tax clearance, to tax refunds and foreign exchange. To get started, please leave your contact details in the form below and we’ll be in touch shortly to discuss your requirements.