Malta has a taxation system that includes both direct and indirect taxes. The system is administered by the Maltese Inland Revenue Department (IRD).
Double Taxation Agreements
Malta has signed double taxation agreements with several countries, including the United States, Canada, and most of the EU member states. These agreements aim to avoid double taxation on income earned in both Malta and the other country. They also provide relief from withholding taxes on dividends, interest, and royalties.
Main Taxes for Expats
Income Tax
Expats who are considered resident in Malta for tax purposes are subject to income tax on their worldwide income. The income tax rates for resident individuals are progressive, ranging from 0% to 35%.
Non-resident individuals are only taxed on their income earned in Malta. The income tax rate for non-resident individuals is a flat rate of 15%.
Social Security Tax
Employees in Malta are required to contribute to the National Insurance Scheme (NIS). The NIS is a social security scheme that provides benefits such as pensions, sickness benefits, and maternity benefits.
Employers are also required to contribute to the NIS on behalf of their employees. The contribution rate for employees is 10% of their salary, while the contribution rate for employers is 10.5% of the employee’s salary.
Value Added Tax
Value Added Tax (VAT) is a tax on the sale of goods and services in Malta. The standard rate of VAT is 18%. However, there are reduced rates of VAT for certain goods and services, such as food, medicines, and books.
Special Tax Breaks for Expats
Global Residence Programme
The Global Residence Programme (GRP) is a tax incentive scheme that is designed to attract high net worth individuals and retirees to Malta. The GRP provides a flat tax rate of 15% on income earned in Malta, with a minimum tax liability of EUR 15,000 per year.
To be eligible for the GRP, expats must meet certain conditions, such as purchasing or renting a property in Malta and not spending more than 183 days in any other jurisdiction.
Highly Qualified Persons Programme
The Highly Qualified Persons Programme (HQPP) is a tax incentive scheme that is designed to attract highly skilled workers to Malta. The HQPP provides a flat tax rate of 15% on income earned in Malta, with no minimum tax liability.
To be eligible for the HQPP, expats must meet certain conditions, such as having a minimum annual salary of EUR 81,901 and working in one of the approved sectors, such as financial services, aviation, or gaming.
Filing a Tax Return in Malta
Expats who are considered resident in Malta for tax purposes are required to file a tax return each year. The tax return must be filed by June 30th of the following year.
Expats can file their tax returns online using the IRD’s online portal. To do so, they need to obtain a username and password, which can be obtained by visiting one of the IRD offices in person.
When filing a tax return, expats need to provide details of their income, deductions, and credits for the relevant tax year. If they have any foreign income or assets, they may also need to declare them on their tax return.
Tax Exit Procedures
Expats who are leaving Malta to move abroad need to follow certain tax exit procedures. Firstly, they need to notify the IRD of their departure and provide details of their new address abroad. They should also settle any outstanding tax liabilities before leaving Malta.
If an expat is considered non-resident for tax purposes, they are only liable for Maltese income tax on income earned in Malta. However, they may still be liable for Maltese tax on any income or gains that arise from Maltese sources, such as rental income or capital gains from the sale of a Maltese property.
Expats who have paid tax in Malta may be entitled to claim a refund of some of the tax they have paid. To do so, they need to file a tax return for the relevant tax year and claim the refund through the normal tax refund process.
The taxation system in Malta is relatively straightforward compared to some other countries in the region. Expats in Malta need to be aware of the main taxes that apply to them, such as income tax, social security tax, and value-added tax, as well as any special tax breaks that may be available. They also need to ensure they file their tax returns on time and follow the tax exit procedures if they are leaving Malta to move abroad. By understanding the Maltese tax system, expats can ensure they are complying with their tax obligations and maximizing any tax benefits available to them.