Malta operates a remittance basis of taxation for persons who are resident but not domiciled in Malta for tax purposes. By virtue of the Budget Implementation Act (Act VII of 2018), a new article has been introduced in the Income Tax Act (Chapter 123 of the laws of Malta), which seeks to introduce a minimum annual tax, payable by individuals who are subject to tax on a remittance basis.

Effective Basis Year 2018, Year of Assessment 2019, individuals who are resident but not domiciled in Malta and who are not beneficiaries under any of the tax programmes, are subject to the payment of a minimum tax of €5,000 per annum, subject to said individual having income arising outside of Malta of at least €35,000 per annum.  The individual taxpayer is subject to the payment of a minimum tax of €5,000 in Malta, irrespective of whether the €35,000 plus worth of foreign sourced income is remitted to Malta or not.

Where an individual does not have income arising outside of Malta amounting to at least €35,000 per annum, then said individual is not liable to pay the minimum tax of €5,000, but may deduct tax at the applicable rates of tax.  Whereas prior permission from the Commissioner for Revenue is not required to deduct tax at the applicable rates of tax, in the event that an audit or inspection is brought by the Commissioner, the taxpayer would be required to prove that he did not have income arising outside of Malta which amounted to at least €35,000 per annum.

For more information about Malta’s fiscal regime and other opportunities available to private clients in Malta, please contact Dr. Rebecca Diacono, Associate at the Firm.

This bulletin is not intended to offer professional advice and you should not act upon the matters referred to in it without seeking specific advice.