Tax

Malta has opened its doors for the filming of some of the most renowned blockbusters and TV series recently produced in the film industry.  Malta really has well and truly proved to film industry stakeholders that it not only has some great attractions and characteristics to offer but also that the professionals in the industry are up to the task of servicing a very demanding market.  Boasting a rich and diverse 5,000 years of history, our warm Mediterranean island has the architecture, locations and environment for to suit a wide range of movie sets.

Apart from the locations and climate, there are also some very attractive financial incentives offered under Maltese legislation.

MALTA CASH REBATES

The Government of Malta has recently upgraded the cash rebates for filmmakers making the financial guidelines more attractive to the film industry.

Productions which satisfy a cultural test can benefit from a rebate of up to 25% of eligible expenditure with an additional 2% if the production boasts added local cultural values such as the featuring of Malta within the production. Qualifying productions are required to present a provisional application to the Malta Film Commission, including a detailed projection of the Malta budget for the production. The rebate is given once filming is complete and on receipt of the audit report.  Upon final review by the Commissioner, the cash rebate is forwarded to the qualifying production not later than five months from the date of receipt of the presented production expenditure in Malta. Feature film, television film or television series or mini-series, animation, creative documentary, transmedia and cross-media productions are all eligible for the incentives, provided that the qualifying production is all or partially produced in Malta. Expenditure incurred during production in Malta which qualifies  for a cash rebate, includes the following items: EU below-the-line labour (that is labour directly engaged on a production during its shooting in Malta and exclude salaries for producers, director, cast and stunts, including their travel and living expenses as well as miscellaneous ancillary associated costs over Euro 200,000), accommodation, transportation equipment and hire, location fees, catering services, per diems, leasing of offices, computer equipment, props, property, animals, equipment, vehicles, and boats. Other qualifying expenditure includes wardrobe rentals, courtesy payments, telecommunications, craft service, laundry and cleaning services and professional services.  Fuel is not qualifying.

TAX CREDITS

Investment aid for audio-visual facilities is available under the Malta Enterprise Act. The aid is offered in the form of tax credits to a qualifying company in respect to an initial investment project in relation to qualifying expenditure.

Tax credits are computed as a percentage of either the value of capital investment or the value of wages for 24 months, covering new jobs created as a result of an investment project. Facilities for filming and audio-visual productions qualify for investment tax credits.

Qualifying enterprise must be engaged solely in eligible activities as established by the Incentive Guidelines which include:

• The production (through scriptwriting, casting, shooting, directing and editing) of audio-visual productions, which includes: feature films, television films, advertisements and documentaries;
• The operation and provision of facilities and equipment (such as film studios, audio-visual editing facilities and filming equipment) required in the production of feature films, television films, advertisements and documentaries;
• The operation of a sound studio; and
• The development of digital audio-visual media and digital games.

Undertakings engaged in broadcasting of audio-visual content to live audiences through any media channels and/or engaged in programming and broadcasting activities are not considered eligible.

The Government of Malta, under various other legislative provisions, also, offers filmmakers the possibility to produce and distribute audio-visual productions from Malta and pay the lowest corporate tax rates in the European Union, also by way of significant tax credits.

CO-PRODUCTION FUND

The Government of Malta allocates a significant budget for film co-productions. The main purpose of the fund is to encourage collaboration between Maltese and foreign companies to produce films and TV series for international distribution.

Malta Co-Production Fund

The main purpose of this fund is to encourage foreign filmmakers and producers to engage with Maltese counter-parts in order to produce feature film, television film or television series or mini-series, animation, creative documentary, transmedia and cross-media productions intended primarily for cinema release/broadcast and suitable for international distribution. The fund aims to grow and further develop the Maltese film industry as well as strengthen Maltese participation within the industry.  It also boosts the country’s economy, since qualifying projects have to be filmed primarily in Malta and make use of Maltese talent. The purpose of supporting co-productions is to strengthen partnerships between Maltese and international producers and to develop skills in the Maltese film industry. The fund will also allow partner countries to share the risk and cost of screen production. Co-production arrangements offer both cultural and economic benefits to partner countries. Co-productions have the ability to engage new international audiences and enhance existing relationships between partner countries. Productions that have been approved as official co-productions are treated as ‘national’ productions in each partner country.

The total budget available under the Malta Co-Production Fund is €1 million per annum. The amount of the financial contribution to be awarded will be determined within the limits of the available budgetary resources and with regard to the cost and nature of each proposed action.

Funding through this Fund can be made available through the following methods:

• Loan Guarantee:A loan guarantee may be provided by the Fund to facilitate the access to local banks whereby local banks are more secure in providing loan facilities to allow local producers to contribute to their co-financing share needed to make the film and/or to provide economic support to cover expenditure for the production in Malta and therefore be able to participate in the co-production itself. The Malta Co-Production Fund will act as a loan guarantor and will provide the lending bank with a maximum amount of €200,000 to be utilised as a guarantee against the loan to be taken up by the beneficiary. The loan under guarantee is to be used wholly and exclusively for the film under guarantee. Once the loan is repaid by the beneficiary, this is returned to the Malta Co-Production Fund. This scheme will be subject to De Minimis Regulation and the amount of the guarantee shall be subject to any prior de minimis grants in the prior three years.
• Equity Finance:Equity financing will allow local producers to contribute to their co-financing share needed to make the film and/or to provide economic support to cover expenditure for the production in Malta. Local co-producers are expected to make an effective technical and creative (film-making) contribution in proportion to their financial contribution (this does not apply for ‘finance only’ contributions). Each co-production agreement sets a minimum and maximum financial contribution, and the country of the co-producer(s) making the largest financial contribution is deemed to be the majority country for that film. This scheme is compliant with Commission Regulation (EU) No 651/2014 of 17th June 2014 (Article 54 – Aid Schemes for Audio-visual Works).  Equity Finance may amount up to €350,000.

CO-PRODUCTION TREATIES

Malta has been a member of the European Convention on Cinematographic Co-Production since September 2001. The aim of this Convention is to promote the development of European multilateral cinematographic co-production to safeguard creation and freedom of expression and defend the cultural diversity of the various European countries.

Malta has also signed a bilateral co-production treaty with Canada.  Qualifying as a Maltese film under this treaty provides a number of advantages and productions are eligible to apply for funding and may therefore benefit from financial advantages under this treaty, including that of avoidance of double taxation.

VALUE ADDED TAX

Generally, Malta imposes a Value Added Tax charge of 18% on all goods and services supplied in Malta and on all taxable importations. The VAT rate for accommodation in hotels and licensed premises and the supply of alternative energy equipment stands at 7%.

Certain supplies are exempted [e.g. food and medicine]. On the majority of goods and services supplied, a VAT refund is given to the person/company acquiring the service or good – depending on the types of supplies carried out by that person/company.

Foreign film productions shooting in Malta can also claim refunds in the following cases:

• Input VAT incurred on property rental or hotel accommodation with respect to all those persons, foreign or otherwise, directly engaged in the production of a foreign film, TV series, animation, commercial or documentary;
• Input VAT incurred on fuel may be claimed back when consumed by vehicles, commercial or otherwise, used directly in connection with the production of a foreign film, TV series, animation, commercial or documentary;
• Input VAT on the cost of taxis and car hire relative to the film production – excluding however VAT on purchase of non-commercial motor vehicles;
• Input VAT on the cost of materials used for the purpose of the film production which would not be otherwise recoverable.

VAT refunds are generally affected within five months from the later of the expiration of the time allowed for furnishing the VAT return for the particular VAT period or from the day on which the said return is made.

IGAMING

The last decade has seen Malta emerge as one of the front-runners in the regulation of the online gaming industry.

The foresight and determination of the Maltese authorities to develop the iGaming industry, together with the Malta Gaming Authority’s (MGA) pro-active approach to the inevitable changes in the sector, have created a stable and attractive regulatory environment for this sector to flourish.

In 2004, Malta became the first EU Member State to enact comprehensive legislation on remote gaming.  This set the solid foundations on which a decade old industry has flourished.  Malta is considered by all the sector stakeholders to be a well-developed, tried-and-tested online gaming jurisdiction.

Advantages and incentives

The gaming regulatory framework developed by the Maltese authorities provides for several innovative incentives.

Foremost among these are the wide-ranging incentives available to employees and investors of remote gaming businesses, licensed by the MGA, that may include, subject to satisfying certain criteria, reduced rates of income tax on personal income, exemptions on income derived from patents, refunds on dividends and double taxation relief, apart from all the advantages linked to the free movement of goods and services within the EU.

Non-residents who opt to relocate to Malta are also eligible to benefit from some very attractive tax planning opportunities. These include the High Net Worth Individuals Scheme and the Global Residence Programme.

Other initiatives include a Continuation of Companies Regulations that further serves to enhance Malta’s appeal, as does a very favourable Participation Holding Exemption regime.

Albeit taxes levied on gaming activities vary depending on the class of gaming licence that is applicable, it is widely acknowledged that such rates are among the most competitive in the world.  This combined with the various tax incentives place Malta at the forefront of the gaming industry.

Growth and Development

With a sound jurisdiction that steers clear of bureaucracy and that has a proven track record, the iGaming industry in Malta is continuing to build on its successful trajectory. The next three years will see the sector, as certain regulations are re-visited and new schemes intended to sustain the industry’s rapid growth are introduced.

The number of licensees operating under Maltese gaming legislation continues to increase as do the gaming operators setting up shop locally, benefitting from the advanced technical capability and relatively low labour costs of the local workforce.

The MGA, together with the various Maltese authorities, continues its mission to create the right environment for gaming operators to feel safe and protected.  A consistent approach to regulation, together with the launch of Gaming Malta and the Gaming Academy, will ensure that Malta will continue to be considered by the gaming industry as a centre of excellence – both as a gaming jurisdiction as well as a dynamic economic hub for iGaming and ancillary services.

The Global Residence Programme has been introduced for individuals who are not nationals of the EU, EEA, or Switzerland and their scope is to set out favourable conditions for third country nationals who are granted Maltese residence.  An individual may apply for a special tax status under the GRP Rules but he must prove to the satisfaction of the Commissioner of Revenue that the requirements as laid out in the rules have been satisfied.

Requirements

1. The applicant holds a “Qualifying Property Holding” which is defined as immovable property situated in Malta which was either purchased in Malta for a consideration of not less than €275,000, or in Gozo or the South of Malta for a consideration of not less than €220,000 or rented for not less than €9,600 per annum for a property situated in Malta or €8,750 for a property situated in Gozo or the South of Malta. In either case the applicant should occupy such property as his primary residence;
2. The applicant is not a person who benefits under the Residents Scheme Regulations, the High Net Worth Individuals EU/EEA/Swiss Nationals Rules, the High Net Worth Individuals Non-EU/EEA/Swiss Nationals Rules, the Malta Retirement Programme Rules, the Qualifying Employment in Innovation and Creativity (Personal Tax) Rules or the Highly Qualified Persons Rules;
3. The applicant is not a long-term resident of Malta, i.e. the applicant does not have a long-term resident status in terms of the Status of Long-term Residents (Third Country Nationals Regulations) nor has the person applied for the long-term resident status under the same Regulations;
4. The applicant is in receipt of stable and regular resources which are sufficient to maintain himself and his dependants without recourse to the social assistance system in Malta;
5. The applicant is in possession of a valid travel document;
6. The applicant is in possession of sickness insurance in respect of all risks across the whole of the European Union normally covered for Maltese nationals for himself and his dependants, recognising also as dependant the person with whom the beneficiary is in stable and durable relationship;
7. The applicant can adequately communicate in one of the official languages of Malta i.e. English or Maltese; and
8. The applicant is a fit and proper person i.e. the individual must prove to be of good conduct and good morals, has no criminal record or disqualifications or censorship by professional or regulatory bodies and is not adjudged bankrupt by a competent Court or authority, amongst other criteria.

The above conditions must be satisfied on an ongoing basis.

Procedure for Application

An application for special tax status under these Regulations can only be submitted to the Commissioner of Revenue through the services of an Authorised Registered Mandatary (“ARM”). The ARM is tasked with submitting the application, and making certain declarations on behalf of the applicant, such as those stating that the applicant is in receipt of stable and regular resources, that the applicant is not domiciled in Malta, etc. The acknowledgement or request for more information of the application will be sent to the Applicant’s ARM.

The applicant represented by an ARM applies to the Commissioner of Revenue for special tax status under these rules by paying a non-refundable administrative fee of €6,000 upon application and in case the qualifying property is situated in the south of Malta a non-refundable administrative fee of €5,500 upon application.

Tax Treatment

An individual in possession of the special tax status under these rules would be subject to the following tax treatment in Malta:

1. Income arising outside Malta should be subject to a flat tax rate of 15% only if remitted to Malta by the beneficiary, the beneficiary’s spouse and children, provided that a minimum amount of tax of €15,000 shall be paid by not later than 30th April of the year in which the income is received in Malta and must be accompanied by a return made to the Commissioner confirming that all conditions of the scheme have been satisfied.
2. The above income if not chargeable on the flat rate of 15% shall be charged as separate income at the rate of 35%.

It is advisable that the individual in possession of the relevant special tax status certificate may not reside in any other jurisdiction for more than 183 days in any calendar year.

Localities for the purposes of the definition of “South of Malta”

Birzebbugia	Kalkara	Mqabba	Senglea
Cospicua	Kirkop	Paola	Siggiewi
Fgura	Luqa	Qrendi	Tarxien
Chaxag	Marsascala	Safi	Vittoriosa
Gudja	Marsaxlokk	Santa Lucija	Xghajra
Zabbar	Zejtun	Zurrieq

Given the expansion and modernisation of Malta’s economy, the conscious decision was taken by the Government to attract knowledgeable and experienced personnel in the financial services sector, gaming sector and aviation. This gave rise to the Highly Qualified Persons Rules aimed at attracting highly qualified persons to occupy “eligible office” with certain types of companies. “Eligible office” comprises employment in positions such as Actuarial Professional, Chief Executive Officer, Chief Financial Officer, Chief Commercial Officer, Chief Investment Officer, and Head of Investor Relations, amongst others.

The individual income from a qualifying contract of employment in an “eligible office” is subject to tax at a flat rate of 15% provided that the income amounts to €75,000 (excluding the annual value of any fringe benefits) adjusted annually in line with the Retail Price Index. The 15% flat rate is imposed up to a maximum income of €5,000,000, the excess is exempt from tax.

This means that the minimum income (based on the Retail Price Index published by the National Statistics Office) must exceed the following thresholds:

• €75,000 for basis year 2010
• €76,136 for basis year 2011
• €78,207 for basis year 2012
• €80,100 for basis year 2013
• €81,205 for basis year 2014
• €81,457 for basis year 2015
• €82,353 for basis year 2016

The 15% tax rate applies for a consecutive period of 5 years for EEA (i.e. EU countries plus Norway, Iceland and Liechtenstein) and Swiss nationals and for a consecutive period of 4 years for third country nationals. However, EEA and Swiss nationals who have availed themselves of the benefit under this scheme may apply for a one-time extension of 5 years to the qualifying period.

For an individual to benefit from the 15% tax rate the below requirements shall be met:

• derives employment income subject to income tax in Malta
• has an employment contract subject to the laws of Malta and proves to the satisfaction of the Competent Authority that the contract is drawn up for exercising genuine and effective work in Malta
• proves to the satisfaction of the Competent Authority that he is in possession of professional qualifications and has at least five years professional experience
• has not benefitted from deductions available to investment services expatriates with respect to relocation costs and other deductions (under article 6 of the Income Tax Act)
• fully discloses for tax purposes and declares emoluments received in respect of income from a qualifying contract of employment and all income received from a person related to his employer paying out income from a qualifying contract as chargeable to tax in Malta
• proves to the satisfaction of the Competent Authority that he performs activities of an eligible office
• proves that:
  1. he is in receipt of stable and regular resources which are sufficient to maintain himself and the members of his family without recourse to the social assistance system in Malta
  2. he resides in accommodation regarded as normal for a comparable family in Malta and which meets the general health and safety standards in force in Malta;
  3. he is in possession of a valid travel document
  4. he is in possession of sickness insurance in respect of all risks normally covered for Maltese nationals for himself and the members of his family

All other requirements set in the law should also be met.

An application for a formal determination relating to eligibility under the Highly Qualified Persons Rules must be made to the Malta Financial Services Authority in the case of financial services, to the Lotteries and Gaming Authority and to the Authority for Transport in Malta using this form in case of Aviation Services.

The benefit is exercised for each year of assessment by means of a declaration signed by the beneficiary and endorsed by the competent authority as the case may be. This form is to be attached to the income tax return and filed with the Inland Revenue Department by the tax return date.

The last decade has seen Malta emerge as the undisputed front-runner in the regulation of the online gaming industry.
The foresight and determination of the Maltese authorities to develop the iGaming industry, together with the Malta Gaming Authority’s (MGA) pro-active approach to the inevitable changes in the sector, have created a stable and attractive regulatory environment for this sector to flourish.
In 2004, Malta became the first EU Member State to enact comprehensive legislation on remote gaming. This set the solid foundations on which a decade old industry has flourished. Malta is considered by all the sector stakeholders to be a well-developed, tried and tested online gaming jurisdiction in the world. Today, Malta is at the apex of the online gaming industry.

ADVANTAGES AND INCENTIVES
The gaming regulatory framework developed by the Maltese authorities provides for several innovative incentives.
Foremost among these are the wide-ranging incentives available to employees of remote gaming businesses, licensed by the MGA, that may include, subject to satisfying certain criteria, reduced rates of income tax on personal income, exemptions on income derived from patents, refunds on dividends and double taxation relief, apart from all the advantages linked to the free movement of goods and services within the EU.
Non-residents who opt to relocate to Malta are also eligible to benefit from some very attractive tax planning opportunities. These include the High Net Worth Individuals Scheme and the Global Residence Programme.
Other initiatives include a Company Re-domiciliation Act that further serves to enhance Malta’s appeal, as does a very favourable Participation Holding Exemption regime.
Albeit taxes levied on gaming activities vary depending on the class of gaming licence that is applicable, it is widely acknowledged that Malta’s tax rates are among the most competitive in the world.

GROWTH AND DEVELOPMENT
With a sound jurisdiction that steers clear of bureaucracy and that has a proven track record, the iGaming industry in Malta is continuing to build on its successful trajectory. The next three years will see the sector, as certain regulations are re-visited and new schemes intended to sustain the industry’s rapid growth are introduced.
The number of licensees, both local and overseas, operating under a Maltese gaming legislation which number continues to increase consistently year-on-year as does the influx in gaming operators setting up shop locally, benefitting from the advanced technical capability and relatively low labour costs of the local workforce.
As jurisdictions try to catch up by adopting Malta’s regulatory approach, the MGA, together with the Maltese authorities, continues its mission to create the right environment for gaming operators to feel safe and protected.
A consistent approach to regulation, together with the launch of Gaming Malta and the Gaming Academy, will ensure that Malta will continue to be considered by the gaming industry as a centre of excellence –both as a gaming jurisdiction as well as a dynamic economic hub for iGaming and its ancillary services.

Malta has a vast network of double tax treaties with important trading countries and emerging economies in order to encourage the growth of international trade. Malta’s double tax treaties are modelled on the OECD’s Model Tax Convention on Income and on Capital, and attempt to eliminate or reduce double taxation.

To date treaties are in force with 73 countries rendering considerable advantages to businesses who have chosen to establish legal entities in Malta and individuals who have chosen to relocate in Malta.

The following table is an updated list with all the countries Malta has signed a DTT:

Albania	Georgia	Liechtenstein	Serbia
Australia	Germany	Lithuania	Singapore
Austria	Greece	Luxembourg	Slovakia
Azerbaijan	Guernsey	Malaysia	Slovenia
Bahrain	Hong Kong	Mauritius	South Africa
Barbados	Hungary	Mexico	Spain
Belgium	Iceland	Moldova	Sweden
Bulgaria	India	Montenegro	Switzerland
Canada	Ireland	Morocco	Syria
China (P.R.C)	Isle of Man	Netherlands	Tunisia
Croatia	Israel	Norway	Turkey
Curacao	Italy	Pakistan	Ukraine
Cyprus	Jersey	Poland	United Arab Emirates
Czech Republic	Jordan	Portugal	United Kingdom
Denmark	Korea (R.O.K)	Qatar	Uruguay
Egypt	Kuwait	Romania	Viet Nam
Estonia	Latvia	Russia
Finland	Lebanon	San Marino
France	Libya	Saudi Arabia

Under the MRVP rules the successful applicant is granted with a certificate for residence in Malta which allows him to reside, settle or stay indefinitely in Malta provided that the conditions of the programme are satisfied.

Eligibility Criteria

An applicant needs to meet all the below requirements, throughout the entire duration and persistence of the certificate, in order to be eligible to benefit from the MRVP:

1. Be at least 18 years of age
2. The applicant is a third country national and is not Maltese, EEA or Swiss national
3. The applicant must not be a beneficiary under the Residents Scheme Regulations, the High Net Worth Individuals Rules, the Malta Retirement Programme Rules, the Residence Programme Rules, the Qualifying Employment in Innovation and Creativity Rules or the Highly Qualified Persons Rules
4. The applicant holds a “Qualifying Property Holding” for a minimum period of 5 years from the date of the certificate, at a consideration of:
5. not less than €320,000 for a property situated in Malta or not less than  €270,000 for a property situated in Gozo or in the south of Malta (qualifying owned property); or
6. rent property at a lease of not less than  €12,000 per annum for a property situated in Malta or not less than  €10,000 per annum for a property situated in Gozo or in the south of Malta (qualifying rented property);
7. Holds a qualifying investment having an initial value of €250,000 in a form determined from time to time by Identity Malta, which investment needs to remain so held for a period of 5 years from the date of the certificate
8. The applicant is in receipt of stable and regular resources which are sufficient to maintain himself and his dependants without recourse to the social assistance system of Malta
9. The applicant is in possession of a valid travel document
10. The applicant is in possession of sickness insurance in respect of all risks across the whole of the European Union normally covered for Maltese nationals for himself and his dependants, if any
11. The applicant should provide an affidavit declaring that from the date of the application onwards he has either an annual income of not less than hundred thousand euro (€100,000) arising outside Malta or has in his possession a capital of not less than five hundred thousand euro (€500,000)
12. The applicant must make a “one-time” financial contribution of €30,000 to the Government of Malta;

Procedure for Application

An application under MRSVP can only be submitted to Identity Malta through the services of an accredited agent. The accredited agent is tasked with submitting the form, and making certain declarations on behalf of the applicant, carrying our due diligence procedures, etc. The acknowledgement or request for more information of the application will be sent to the Applicant’s accredited agent.

Necessary due diligence procedures should be carried out in line with the qualifications, general requirements and eligibility criteria laid down by the MRSVP. The applicant should provide the authority with a proper background verification of the applicant and his dependents if any, over the age of 12 years, a police certificate, shouldn’t be indicted before the International Criminal Court, not listed with INTERPOL etc.

Tax Treatment

From a tax perspective, the beneficiary would not be subject to a reduced rate of Malta tax and the general Malta basis of taxation would apply i.e.:

Persons who take up residence in Malta but retain a domicile of origin or choice outside of Malta are only taxable on a remittance basis and are subject to Maltese tax on:

(a)    Income/capital gains arising in Malta; and

(b)   Income arising outside of Malta which is received in Malta

The certificate which is issued by Identity Malta is monitored annually for the first 5 years from issuance, and every 5 years thereafter.

Malta applies the remittance basis of taxation which has been a crucial feature of Malta’s success as financial centre. In accordance with the Income Tax Act a person who is both domiciled and resident in Malta is subject to tax in Malta on its worldwide income. However a person who is resident but not domiciled in Malta is subject to tax in Malta only on Malta source income i.e. income accruing or derived in Malta and on income arising abroad but remitted to Malta. As regards capital gains the same person is subject to tax in Malta only if capital gains arise in Malta. The remittance basis of taxation applies to both individuals and corporate entities.

As of basis tax year 2015, where the spouse is ordinarily resident and domiciled in Malta, then a worldwide basis of taxation should apply for the other spouse. Income is taxable at graduated rates.

Maltese Residents

Tax rates for basis tax year 2016 are as follows:

Single rates (or married couples opting for a separate computation)

Taxable income (EUR)		Rate (%)	Deduct (EUR)
From	To
0	9,100	0	0
9,101	14,500	15	1,365
14,501	19,500	25	2,815
19,501	60,000	25	2,725
60,001	and above	35	8,725

 

Married rates

Taxable income (EUR)		Rate (%)	Deduct (EUR)
From	To
0	12,700	0	0
12,701	21,200	15	1,905
21,201	28,700	25	4,025
28,701	60,000	25	3,905
60,001	and above	35	9,905

 

Parent rates

Taxable income (EUR)		Rate (%)	Deduct (EUR)
From	To
0	10,500	0	0
10,501	15,800	15	1,575
15,801	21,200	25	3,155
21,201	60,000	25	3,050
60,001	and above	35	9,050

 

Non-Malta Residents

The following table should be used by taxpayers not residing in Malta for computing the amount of tax on their chargeable income.

 

Tax rates for basis year 2008 onwards:

Taxable income (EUR)		Rate (%)	Deduct (EUR)
From	To
0	700	0	0
701	3,100	20	140
3,101	7,800	30	450
7,801	and over	35	840

Once a person has acquired or has just disposed of immovable property in Malta, both the buyer and the seller are subject to taxation. The buyer is obliged to pay the Duty on Documents and Transfers (stamp duty) and in turn the seller pays property transfer tax. The laws of Malta do not provide for any local council or municipal tax. Beneficial tax rates have been promulgated not only to benefit Maltese citizens but also to attract non-Maltese individuals as well as third country nationals, who are willing to invest in Malta’s alluring real estate market.

DUTY ON DOCUMENTS AND TRANSFERS ACT

Transfers of immovable property from one party to another upon the drawing up of a public deed are subject to duty under the Duty on Documents and Transfers Act. The buyer must pay stamp duty at the rate of 5%. The chargeable stamp duty is calculated on the value of the consideration for the transfer of the immovable property or on the value of the immovable property, whichever is the higher.

Once the stamp duty is calculated it shall be paid upon the drawing up of the final deed which in turn signifies the acquisition of the immovable property by the buyer. However, a provisional payment of 20% of the stamp duty must be paid to the Commissioner for Revenue in order to uphold the validity and legality of the promise of sale agreement, which is locally referred to as the “konvenju”.

OUTRIGHT EXEMPTION FROM DUTY

Nonetheless, no duty should be charged on the assignment of immovable property and on the transfer of marketable securities between:

• Persons who are married;
• Consequent to a separation or to a divorce between such persons;
• On the dissolution of the community of acquests existing between such persons;
• On any partition of any property held in common between spouses; and
• On the death of one spouse between the surviving spouse and the heirs of the deceased spouse.

BENEFITING FROM REDUCED RATES OF STAMP DUTY

A citizen of the European Union wishing to purchase a property from Malta’s thriving real estate market may benefit from a favourable rate of 3.5% on the first €150,000 of the price and the remaining amount which exceeds the first €150,000 is then calculated at the rate of 5%. It is important to note that a buyer wishing to take advantage of this reduced rate must make a declaration on the deed that he intends to dwell in the property which is being purchased by him and thus taking up the status of a sole ordinary residence.

Additionally, an individual is also granted the possibility of avoiding stamp duty on the first €200,000 in the case of transferring an immovable property gratuitously to his descendants. Duty will then be due on the surplus at the rate of 3.5%, therefore also evading the higher rate of 5% stamp duty.

EXCHANGE

A contract of exchange shall be deemed to constitute one transfer and the duty chargeable thereon shall be calculated on the higher of the values of the properties being transferred. Provided that if different rates apply, duty shall be charged on the value of either of the properties being transferred at the rate or rates which attract the higher amount of duty.

PROPERTY TRANSFER TAX

The previous regime for property transfer consisting of both a 12% final withholding tax on the transfer value and 35% tax on the profit or gain has been phased out and as from 1st January 2015, and one final withholding tax of 8% calculated on the value of the property transferred has been enacted. It is important to note that a property which was acquired before 1st January 2004 in respect of which a notice of a promise of sale or transfer relating to that immovable property had not been given to the Commissioner of Revenue before 17th November 2014 the applicable final withholding tax rate shall be 10% on the value of the property transferred.

The law also caters for those transferors who do not habitually acquire and transfer properties. In fact, a transferor may benefit from the low rate of a final withholding tax of 5% upon transferring an immovable property within five years from the date of its acquisition. Furthermore, 2% final withholding tax applies upon a transfer of property that was, immediately before the transfer, owned by an individual or co-owned by two individuals, provided that the said property had been acquired for the purpose of their sole ordinary residence and that the transfer is not made later than 3 years from the date of the acquisition of said immovable property.

A special 5% final withholding tax rate is applicable when a transfer pertains to a property located in Valletta and which was acquired by the transferor before 31st December 2018 and such property has been restored or rehabilitated after the date of its acquisition. For this special 5% rate to apply, the property must be transferred by not later than 5 years from 31st December 2018.

Non-residents in Malta are still entitled to opt out of the final withholding tax system and be taxed under the general rules of Income Tax Act. However, once such choice is made the provisional tax paid relating to a transfer of an immovable property made on or after 1st January 2015, shall not be refunded and no claim can be made to reduce the provisional tax payable.

Furthermore, a seller is charged at the rate of 12% of the excess of the transfer value which has been declared on the deed of the transmission causa mortis and the sale price, if any, if the property was acquired by the seller by way of a donation which was made more than five years before the date of the said transfer. Notably, if the property is being listed on the real estate market and consequently sold by the done after the lapse of five years the cost of the acquisition shall be that particular value of the property as declared previously in the deed of donation.

In the case of inherited property, one has to keep in mind that if the property was inherited after the 24th of November 1992 a 12% final withholding tax on the difference between the transfer value and the cost of acquisition is applicable. On the other hand, a final withholding rate of tax at 7% is chargeable on the selling price if the property was inherited before the 25th of November 1992.

Upon further contemplation of property transfer tax and the calculation thereof, where an asset is reassigned from one company to another, and such companies are set up and operating in a group of companies or controlled and owned to the extent of more than 50% by the same shareholders, it is held that neither a loss or a gain has been incurred from the transfer between the companies.

Assets which are being transferred which have been previously utilised in a business for a time span of at least three years and which are subsequently substituted within a year by another asset utilised exclusively for a comparable purpose in the said business, any capital gains will not be taxed but the cost of acquisition of the newly acquired asset will be reduced to the said gain.

OUTRIGHT EXEMPTION FROM PROPERTY TRANSFER TAX

A seller may also benefit from the exemptions prescribed in the legislation as long as all the conditions are satisfied which exemptions include amongst others:

• Donations in favour of spouse, descendants or ascendants;
• Donations to philanthropic institutions;
• Transfers of property owned and occupied by transferor as own residence for a period of at least three consecutive years immediately preceding the date of the transfer;
• Assignment of property between spouses in a separation or divorce;
• Assignment of property after termination or dissolution of the community of acquests between spouses;
• Partition of property between spouses or partition of property between a surviving spouse and the heirs of the deceased spouse;
• Transfer from one company to another forming part of the same group;
• Transfer of property on the incorporation of a business or partnership en nom collectif as a going concern into a limited liability company;
• The settlement of property on trust;
• A transfer of property by a company to its shareholder in the course of a distribution of assets pursuant to a scheme of distribution.

RENTAL

A rate of 15% tax is charged on the gross rental income from immovable property and applies both to residential rental as from 1st January 2014 and commercial property as from 1st January 2016, should the requirements set in the legislation be met. The rates were introduced to encourage investment within the property market.

Currently, the law caters for a deduction of interest allowable, any rent, licence fees and a 20% deduction with regard to maintenance on outstanding income with the result taxed at the individual’s applicable rate of income tax.

Notably, such tax is deemed to be final and a set-off or a refund may not be granted to any person in respect of the chargeable tax.

The 15% flat rate tax is optional. The person undertaking this option is not obliged to declare such income in any return filed according to the Income Tax Act. However, one may choose to declare the gross rental income in his tax return and be charged with the normal rates rather than with the 15% flat rate. If such option is exercised it applies to the total rental income received in the said year from all the tenements let out by such person, subject that the tenements qualify for this rate.

VALUE ADDED TAX ON RENT

As a rule VAT is not chargeable to the tenant occupying the tenement, and furthermore the landlord may not recover input VAT on costs in relation to the said property.

However this exemption is not absolute and VAT is chargeable in the following cases:

• Properties licensed by the Malta Tourism Authority
• The renting out of selected parking areas
• The renting out of property by a limited liability company to a person who is registered under article 10 of the Value Added Tax Act, and which property is being rented for the ultimate purpose of the latter’s economic activity.

The Residence Programme Rules allow EU/EEA/Swiss nationals taking up residency in Malta to benefit from attractive tax incentives.

Requirements

1. The applicant holds a “Qualifying Property Holding” which is defined as immovable property situated in Malta which was either purchased in Malta for a consideration of not less than €275,000, or in Gozo or the South of Malta for a consideration of not less than €220,000 or rented for not less than €9,600 per annum for a property situated in Malta or €8,750 for a property situated in Gozo or the South of Malta. In either case the applicant occupy such property as his primary residence;
2. The applicant is not a person who benefits under the Residents Scheme Regulations, the High Net Worth Individuals EU / EEA / Swiss Nationals Rules, the High Net Worth Individuals Non-EU / EEA / Swiss Nationals Rules, the Malta Retirement Programme Rules, the Global Residence Programme Rules, the Qualifying Employment in Innovation and Creativity (Personal Tax) Rules or the Highly Qualified Persons Rules;
3. The applicant is not a permanent resident of Malta which means that the person has a right of permanent residence in terms of article 6 and is in possession of a permanent residence certificate in terms of article 7 of the free Movement of European Union Nationals and their Family Members Order or that the person has applied for the right of permanent residence in terms of article 6 of the same order;
4. The applicant is in receipt of stable and regular resources which are sufficient to maintain himself and his dependants without recourse to the social assistance system in Malta;
5. The applicant is in possession of a valid travel document;
6. The applicant is in possession of sickness insurance in respect of all risks across the whole of the European Union normally covered for Maltese nationals for himself and his dependants, recognizing also the person with whom the beneficiary is in stable and durable relationship;
7. The applicant can adequately communicate in one of the official languages of Malta i.e. English or Maltese; and
8. The applicant is a fit and proper person that is to say, an individual must prove to be of good conduct and good morals, has no criminal record or disqualifications or censorship by professional or regulatory bodies and is not adjudged bankrupt by a competent Court of authority, amongst other criteria.

The above conditions must be satisfied on an ongoing basis.

Procedure for Application

An application for special tax status under these Regulations can only be submitted to the Commissioner of Inland Revenue through the services of an Authorised Registered Mandatory (ARM). The ARM is tasked with submitting the form, and making certain declarations on behalf of the applicant, such as those stating that the applicant is in receipt of stable and regular resources, that the applicant is not domiciled in Malta, etc. The acknowledgement or request for more information of the application will be sent to the Applicant’s Authorised Regulatory Mandatory.

The applicant represented by his registered mandatary shall apply to the Commissioner for special tax status under these rules by paying a non-refundable administrative fee of €6,000 upon application and in case the qualifying property is situated in the south of Malta a non-refundable administrative fee of €5,500 upon application.

Tax Treatment

An individual in possession of the special tax status under these rules would be subject to the following tax treatment in Malta:

1. Income arising outside Malta should be subject to a flat tax rate of 15% only if remitted to Malta by the beneficiary, the beneficiary’s spouse and children, provided that a minimum amount of tax shall be €15,000 euro which shall be paid by not later than the 30th April of the year in which the income is received in Malta and must be accompanied by an annual return made to the Commissioner confirming that all conditions of the scheme have been satisfied.
2. The above income if not chargeable on the flat rate of 15% shall be charged as separate income at the rate of 35%.

The individual in possession of the relevant special tax status certificate may not reside in any other jurisdiction for more than 183 days in any calendar year.

Localities for the purposes of the definition of “south of Malta”

Birzebbugia	Kalkara	Mqabba	Senglea
Cospicua	Kirkop	Paola	Siggiewi
Fgura	Luqa	Qrendi	Tarxien
Chaxag	Marsascala	Safi	Vittoriosa
Gudja	Marsaxlokk	Santa Lucija	Xghajra
Zabbar	Zejtun	Zurrieq

Malta as a Member State of the EU has a value added tax (VAT) system modelled on the EU VAT Directive. VAT is generally imposed on every importation, intra-community acquisition and supply of goods and services that takes place in Malta for a consideration by a taxable person acting in the course or furtherance of its business. Malta has the second lowest standard VAT rate within EU of 18%. However, certain goods and services have a reduced rate. Reduced rates apply at 7% on the provision of tourist accommodations such as hotel, guest house or premises duly licenced for the purpose of that accommodation, and at 5% on certain supplies including medical accessories, electricity, certain Items for the exclusive use of the disabled, confectionery and other edible items, minor repairing of bicycles, shoes and leather goods, clothing and household linen (including mending and alteration), domestic care services such as home help and care of the young, elderly, sick or disabled and admission to museums, art exhibitions, concerts and theatres. There is also an extensive list of exempt with and without credit supplies.

Every taxable person performing an economic activity in Malta is required to register for VAT purposes as long as the requirements set by law are met. There are 3 types of registration for VAT purposes, depending on the supply of goods and services and certain thresholds. Input VAT is recovered through the VAT return by means of a credit against output VAT and any excess credit shall be refunded.

Taxable persons not established in Malta but in another Member State of the EU, can also claim a refund through the procedures of the 8th EU Directive while taxable persons established outside EU and not registered for VAT in Malta can claim a refund under the 13th EU Directive.