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Malta proposes changes to the Remittance Basis of Taxation

Malta offers an extremely attractive remittance basis, whereby an individual ordinarily resident but not domiciled in Malta (“non-domiciled person”) is only taxed on income arising or received in Malta. One of the changes suggested in the Budget Bill 2018, relates to the remittance basis of taxation, where “non-domiciled person” may be subject to a minimum annual tax of €5,000.

The minimum tax of €5,000 will apply if the individual:

  1. Is Ordinarily resident in Malta but Non-domiciled therefore taxable on a source and remittance basis; and
  2. Is not taxable in Malta in accordance with a scheme establishing a minimum amount of tax in Malta, including The Residence Programme, Global Residence Programme, Malta Retirement Programme and the Residents Scheme Regulations; and
  3. Derives income arising outside Malta of at least €35,000 (not received in Malta), or its equivalent in another currency. In the case of a married couple, the €35,000 will be considered as a total.
  • In computing the minimum tax, one should take to consideration any tax paid in Malta, whether by withholding or otherwise, excluding tax paid on capital gains.
  • If the income of a non-domiciled individual in any single tax year results in a tax liability of less than €5,000, the minimum tax of €5,000 will be payable. For example, if an individual is liable to pay €2,500 on income arising or received in Malta, they will be required to ‘top up’ that tax by an additional €2,500.
  • No changes are proposed regarding tax payable on capital gains arising outside of Malta. Irrespective of whether this income is brought into Malta or not, no tax is payable.
  • It is anticipated that these changes will be implemented in the Maltese Income Tax Act with effect from 1st January 2018 upon approval by Parliament and will be introduced mid-2018.

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