Minimum Tax for Res non-Dom individuals

The Maltese tax authorities have recently issued guidelines on the remittance basis of taxation which are applicable to persons who are ordinarily residents but not domiciled in Malta.  The guidelines have also provided a better clarification of what is meant by residence, ordinary residence and domicile as well as how one can determine whether income […]

Written By ACT Team

On June 5, 2019
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The Maltese tax authorities have recently issued guidelines on the remittance basis of taxation which are applicable to persons who are ordinarily residents but not domiciled in Malta.  The guidelines have also provided a better clarification of what is meant by residence, ordinary residence and domicile as well as how one can determine whether income arises in Malta or outside Malta and when income is considered to be remitted to Malta. 

Persons who are ordinarily resident and domiciled in Malta are subject to income tax in Malta on their world-wide income and capital gains.  Persons who are either ordinarily resident or domiciled in Malta are subject to income tax in Malta on income and gains arising in Malta and on foreign income which is received in Malta.  Persons who are neither resident nor domiciled in Malta are not subject to tax in Malta on a remittance basis but are only subject to tax on income and gains arising in Malta. 

Residence in Malta does not depend on nationality and a person may be resident in more than one country.  Presence in Malta for more than 183 days in any particular year amounts to residence in Malta for that year, regardless of the purpose and nature of the individual’s stay in Malta.  

A person who lives in Malta on a permanent or indefinite basis is ordinarily resident in Malta.  If one’s stay in Malta is of a temporary nature, that individual might still be considered to be ordinarily resident in Malta if that individual is in Malta for more than 183 days in each year over a long period, say for three consecutive years.  This will also be the case for individuals who do not stay in Malta for more than 183 days in any year but who come to Malta regularly over a long period of time, say over a period of three years and establish personal and economic ties with Malta. 

Individuals who are in Malta and consider Malta as their permanent home are domiciled in Malta.  ‘Home’ implies stronger ties with a country than residence. 

Income is considered to be arising in Malta where there is a strong link to Malta.  For example, income derived from employment or from a trade or business is considered to arise in Malta if the activities are performed in Malta. Passive income is deemed to arise in the country where the source is situated.  Rent and other income from immovable property is deemed to arise in the country where the immovable property is situated.  Income is received in Malta if it is paid to a recipient in Malta. Proceeds of a capital nature such as inheritance, proceeds from the disposal of a capital asset will not be subject to tax in Malta even if remitted to Malta. 

With effect from year of assessment 2019, individuals who are ordinarily resident but not domiciled in Malta, will be subject to a minimum tax of Eur5,000 p.a.  The minimum tax liability will not be applicable to those individuals whose annual foreign income is less than Eur35,000.  This amount includes any Maltese tax withheld at source but does not include any tax payable in Malta on transfers of immovable property situated in Malta. In the case of a married couple, the Eur35,000 threshold is to be calculated by reference to the total income of the couple and the Eur5,000 minimum tax is applicable to the couple.  The individual may opt to be taxed on a worldwide basis, instead of the remittance basis, if his tax liability on his worldwide income is less than the minimum tax.

How can we help?  

For further information, please contact one of the firm’s tax partners, Stephen Balzan on [email protected] or Elaine Camilleri [email protected]. ACT can help you understand the changes to the tax rules and how these can impact your business.  

Apart from its offices in St. Julian’s Malta, ACT operates from a second office in Gozo, which is situated in the capital city of Victoria.  For an appointment in our Gozo office, please call on 00356 21378672 or send us an email on [email protected]. 

Disclaimer: This article contains general information only and is not intended to address the circumstances of any particular individual or entity. ACT, by means of this article is not rendering any accounting, business, financial, investment, legal, tax, or other professional advice or service. This article is not a substitute for such professional advice, nor should it be used as a basis for any decision or action that may affect your finances or your business. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. Before making any decisions or before taking any action that may affect your finances or your business, you should consult a qualified professional adviser. ACT shall not be responsible for any loss whatsoever sustained by any person who relies on this article.