Income tax and tax, in general, can be something of a complicated subject, but it is nevertheless an important subject that we all should strive to understand as well as we possibly can.
Failure to understand your tax obligations and failure to act on those obligations could lead to problems.
To help you understand the basics though we are going to discuss in this post your obligations with regards to income tax in Malta as a resident.
The circumstances when you are obligated to pay tax and a little about the new proposals regarding the remittance basis for being subjected to tax.
Domicile and Residence
Whether you are obligated legally to pay tax in Malta relates to whether you have what is known as either domicile or residence status.
Resident generally means someone who spends most of their time living in Malta, apart from any temporary periods of time where they are living elsewhere that are not considered to be unreasonable for them to still claim to be a Maltese resident.
As a general rule though, an individual is considered to be a Maltese resident, if they spend over 183 days throughout a calendar year living in the country.
When speaking about the term domicile, a word that is not clearly outlined by the Malta Income Tax Act, it is normally applied to an individual who has to live in Malta on a permanent basis and has ties to the country and has his full-time home there and has severed all his connections to other countries he may have lived in as a resident.
Whether you are in Malta in a domicile capacity or as a resident, you are generally taxed on a global scale.
As a result, all capital gains and income that is generated either in Malta and anywhere outside of Malta is subjected to Maltese tax.
This is true even if the foreign source of income is or isn’t remitted to Malta.
Temporary Maltese Residents
On the other hand, any individuals who are only considered to be a temporary Malta resident, present in a physical capacity in the country for less than 183 days, are only taxed on income from capital gains and other sources that come from Malta itself.
There are progressive rates of income tax in Malta that individuals may be obligated to pay.
This highest rate is currently set at 35%.
While in the past, individuals who were normally resident but not considered domiciled in the country were only subjected to tax on income received in Malta, as of 2019 this changed in line with proposals set in the 2018 Budget Bill.
In these proposals all resident and non-domiciled individuals will be obligated to pay a minimum amount of 5,000 euros every year.
However, it is important to note that this is only payment is only required if:
- The individual does not get taxed in Malta in line with a scheme or programme that outlines a minimum tax amount, such as Residents Scheme Regulations, Malta Retirement Programme, Global Residence Programme and the Residence Programme. Each of such schemes has its own parameters and minimum tax payments, with the over-arching income tax rate being capped at 15% on foreign income remitted to Malta.
- The individual gains income outside of Malta that is more than 35,000 Euros or the equivalent in a different currency. With this in mind, with married couples, the income from both partners would be taken into consideration.
Although it is by no means the most interesting subject in the world to discuss, tax is nonetheless a serious thing. Ensuring that you are on the right side of the tax law and regulations can ensure that you do not face hefty fines or any other serious repercussions as a result.