The Immigration Act (Chapter 217 of the Laws of Malta) is the legal instrument which regulates the inward movement of foreigners into the Island. Precisely, Article 7 of the Act provides for the issue of residence permits for indefinite stays in Malta. This is then supplemented by the Resident Scheme Regulations, 2004 which sets the conditions that must be satisfied by an individual so that he may obtain a certificate, issued by the Commissioner of Inland Revenue, which entitles him to benefit from all the advantages of the scheme1.
What Is Attracting An Increasingly Number Of Foreigners In Taking Up Permanent Residence In The Maltese Islands?
A great good number of advantages are offered to foreigners who wish to purchase a home or to take up permanent residence in Malta:
- A pleasant Mediterranean climate.
- A peaceful way of living.
- A rich cultural and historical heritage.
- A highly respected jurisdiction for incorporating low-tax companies.
- A good number of favourable double-taxation agreements with key countries.
- An ideal retirement location.
- An attractive residence scheme which offers the following incentives:
An Unusually Low Tax Rate
A flat rate of 15% Malta Income Tax per annum is charged on all income received in or remitted to Malta from either local or foreign sources.
Overseas capital funds invested locally are only taxed on any interest generated thereon at a flat rate of 15%.
Permanent residents may also take advantage from the double taxation agreements existing between Malta and most European countries and other key countries such as Canada, the United States and Australia, ensuring that tax is never paid twice upon the same income.
The above is subject to a minimum payment of Euro 4193.00 per fiscal year after double taxation relief. The tax is calculated on income and capital gains arising in Malta and on foreign income (excluding capital gains) remitted to Malta.
The holder of a Permanent Residence permit in Malta is not subject to tax on worldwide income.
Exemption From Customs Duty On Importation
Persons transferring their normal place of residence from a country outside the EU to Malta benefit from an exemption from customs duty on importation of personal property which includes household effects and motor vehicles. This exemption is subject to certain conditions which include the following:
- It is only granted to persons whose normal place of residence has been outside the customs territory of the Community for a continuous period of at least one year.
- Personal property must have been in possession of and, in case of non-consumable goods, used by the person concerned at his normal place of residence for a minimum of six months before he ceased to have his normal place of residence in the country of departure.
- It is intended to be used for the same purpose at his normal place of residence.
- Relief is only granted in respect of personal property entered in Malta within 12 months from the date on which the person concerned has established his normal place of residence in Malta.
It is important to note that the persons who benefit from the abovementioned exemptions also benefit from preferential rates in registering their imported vehicle.
Individuals transferring their normal place of residence from a EU Member State to Malta are always exempt from paying customs duty on importation of personal property which includes household effects and motor vehicles.
However, registration tax may be paid on motor vehicles coming from both EU and non-EU countries when one transfers his residence to Malta.
Repatriation Of Capital And Income
Any unspent residue of capital brought over to Malta; any income that has accumulated during the permit holder's stay in Malta; and any proceeds from the sale of the immovable property and/or other investments purchased in Malta, may be freely repatriated by permanent residents, provided any tax due has been settled.
Freedom Of Movement
There are no annual minimum stay requirements. A permanent residence permit has the right to apply for a uniform residence permit by which the permanent resident not only benefits from the right to travel to and from Malta freely without the need for a visa or extensions of stay but may also travel in the Shengen Area without the need of visas.
No Death Duties
Though no death duties are payable in Malta, however transfer duty (according to the Duty on Documents and Transfers Act, 1993) is charged on:
- Immovable property in Malta.
- Any shares in a locally registered company (excluding those companies listed on the stock exchange).
Other Tax Related Incentives
No social security contributions are payable by a foreign permanent resident in Malta.
Besides, there are no wealth taxes or property taxes applicable in Malta. However, capital gains tax or final withholding tax is paid on the sale of immovable property in Malta but residents are exempt if they have resided in the property for at least three consecutive years and dispose of the property within one year of vacating it.
Conditions For Residence
Any foreigner who wishes to obtain a Permanent Residence Permit must satisfy the following conditions:
- he must be entitled to an annual income of, at least, Euro 23,000 or possess a minimum worldwide capital of, at least, Euro 349,000 and
- he must prove that he can remit annually to Malta from overseas an income equivalent to, at least, Euro 13,950 plus Euro 2,300 for each of his dependents For the purposes of this scheme, 'dependent' includes the spouse, children under 21 years of age and a parent or grandparent who is wholly dependant on the applicant.
Acquisition Or Rental Of Property
Once in possession of a permit, the permanent resident will, within 12 months of obtaining such permit, be required to:
- to purchase immovable property in Malta valued at not less than Euro 69,000 in the case of an apartment or fifty thousand Euro 116,000 in the case of any other property; or, alternatively
- to rent/lease property for not less than Euro 4,150 per annum.
The permit holder will be required to produce evidence that he has complied with this condition.
The property so purchased is to be used solely as a residence for the owner and his family and, while guests may be accommodated when the owner is in Malta, the property may not be rented out for gain.
While a permanent resident may invest capital in Malta, investments in real estate outside Special Designated Areas are limited to one owner occupied house or apartment.
The permit holder is prohibited from exercising any occupation, profession, business or any other form of employment in Malta. However, he may own shares in Maltese companies.
He is also prohibited from participating in politics in Malta
1. It is important to note that the certificate which is issued under the Residence Scheme Regulations is to be distinguished from the residence permit or residence document which is issued under Regulation 9 of the Immigration Regulations 2004. The latter gives rise to different rights and cannot co-exist with the certificate issued under the Residence Scheme Regulations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.