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Investment Taxation for Expats in Malta

Submitted: April 2014

Income in this category includes:

  • interest from bank and building society deposits
  • interest from government and corporate stocks (bonds)
  • rental income from properties both in Malta and abroad
  • dividends
  • capital gains, and
  • pensions.

Interest

In Malta, interest income is generally taxed as ordinary income irrespective of its origin. Interest received by residents from local banks, listed companies or government bodies is taxed at 15%. With regards to interest income received from outside Malta, if the country of origin of interest payments has a suitable tax treaty with Hong Kong, the amount of tax that can be charged by the country of origin is generally reduced to between 10% and 15%. A link to each Maltese treaty in force can be found here.  

Rental income

Rental income is as ordinary income after deductions including bank interest, license fees and ground rents payable. Once these deductions have been taken into account there is an additional deduction for maintenance of 20% of the net rent.

Dividends

In Malta, dividend income is taxed as ordinary income. To avoid double taxation on income earned by the company and paid out in the form of dividends, the amount of tax already paid by the company is credited in full to the shareholder’s personal tax liability. This is called dividend imputation. In addition shareholders can be entitled to tax refunds when they receive dividends, depending on the type of taxed income the dividends are paid out from at the company level. Generally the refund system can result in a tax rate of between 0% and 10%. There is a guide called Tax System for Companies Resident in Malta available as a pdf from this search.

Overseas dividends may be taxable in the country of origin, however if the country of origin of dividends has a suitable tax treaty with Malta, the amount of tax that can be charged by the country of origin can often be reduced to between 10% and 15%. A link to each Malta treaty in force can be found here. The section dealing with dividends can usually be found half way through the treaty document.

Capital gains

Capital gains made on such things as shares, copyrights, patents and trademarks are taxed as ordinary income. There is no taxable capital gain on the sale of your home as long as it has been held for three years. Generally sales of property generate a withholding tax of 12% on the transfer value. Under certain circumstances taxpayers can elect for the gain to be taxed as ordinary income. There is a guide to tax on property transfers here. Non-residents are exempt from capital gains made on the sale of shares in a Maltese company provided the company is not a property company.

Pensions

Pension payments that are Malta based are taxed as income. Malta has a special scheme for European nationals who transfer their pensions to Malta which results in a fixed rate of income tax of 15%. There are some conditions attached which are described here.

 

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