NON DOM RESIDENT TAXATION IN MALTA
A useful clarification by Dr. Rossella Gianazza, a lawyer qualified and chartered in Italy and Malta, partner of MALTAway
The main systems of world taxation are two: that of worldwide taxation and that of territoriality.
The tax system of “worldwide taxation”. is based on taxation on a worldwide basis, according to which income produced anywhere in the world by a resident individual is subject to taxation, and not only that produced in the territory of the State.
For example, a natural person who is an Italian citizen and resident in Italy is subject to this tax system and must therefore pay taxes to the Italian Authority on the basis of all income produced in Italy or in the world.
Different is the system of taxation on a “territorial” basis that applies to non-domiciled persons who are required to pay taxes in the country of residence only on income produced there.
For example, an Italian citizen who has transferred his residence to Malta is subject to this tax system and is considered non-domiciled.
It is necessary to clarify the concept of domicile of Anglo-Saxon derivation and not to confuse it with the domicile provided for by the Italian Civil Code as the place where the person “has established the principal seat of his affairs and interests”. (art 43 C.C.)
Domicile under the Maltese law:
- Individuals who are in Malta and consider Malta as their permanent home are domiciled in Malta. “Home” here refers to the place where a person belongs and implies stronger ties with a country than residence.
- Domicile does not depend on nationality.
- Every individual acquires domicile at birth (domicile of origin). This is normally the domicileof the parents, regardless of the place where the individual is born.
- An individual may change his domicile of origin and acquire a domicile of choice. A domicile of choice in a particular country is acquired when the individual takes up residence in that country with the intention of making that country his permanent home. A person who takes up residence in a country, even if for a long or indefinite period, does not acquire domicile in that country if he has the intention of returning some day to his country of domicile or of settling some day somewhere else.
- No individual can be without a domicile and no individual can have more than one domicile at the same time. An individual does not lose his domicile of origin unless and until he acquires a domicile of choice. If an individual acquires a domicile of choice, he can change domicile again by taking up a new domicile of choice or returning to the country of his domicile of origin. If an individual abandons a domicile of choice without establishing his permanent home in any other country, his domicile of origin will revive automatically.
An Italian citizen who chooses to transfer his residence abroad in order not to be subject to taxation in Italy must therefore respect some basic criteria both formal and substantial and the main ones are:
- live outside the Italian territory more than 183 days
- have their usual residence abroad
- enrolling in the register of foreign residents
- have the center of professional and personal interests abroad
Therefore, a non-Maltese citizen, who transfers residence to Malta, in accordance with the rules, acquires the status of non-domiciled resident also called NON DOM.
As a NON-DOM RESIDENT in Malta will pay taxes:
- on income in any form produced in Malta and on capital gains produced therein
- on foreign source income only if transferred to Malta
As a NON-DOM RESIDENT in Malta you will NOT pay tax on:
- ”clean capital” remitted to Malta
- ”capital gains” produced abroad and partially or totally transferred to Malta.
Residence does not depend on nationality or any other civil status but is a question of fact. A person may be resident in Malta even if he is also resident for tax purposes in another 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 the nature of the individual’s stay in Malta. An individual who comes to Malta to establish his residence here becomes resident from the date of his arrival, regardless of the duration of his stay in Malta in any particular year
The Remittance Basis of Taxation for Individuals under the Income Tax Act
1.Depending on the residence and domicile of the individual, liability to Maltese income tax arises –
- – on a worldwide basis, or
- – on a remittance basis, or
- – on a territorial basis
- The worldwide basis of taxation applies to the income of persons who are ordinarily resident and domiciled in Malta. It also applies to persons who hold the status of long-term resident or are in possession of a permanent residence certificate or a permanent residence card (as defined in the Status of Long-Term Residents (Third Country Nationals) Regulations and the Free Movement of European Union Nationals and their Family Members Order). In the case of a married couple living together, if one of the spouses is ordinarily resident and domiciled in Malta, the worldwide basis of taxation applies to the income and capital gains of both spouses1.
- Under the worldwide basis of taxation, all income and capital gains are subject to Maltese tax regardless of where they arise and where they are received.
- The remittance basis applies to persons who are either not domiciled or not ordinarily resident in Malta. The remittance basis also applies, under certain conditions, to returned migrants.
- Under the remittance basis of taxation –
- – all income arising in Malta is subject to tax, regardless of where it is received
- – income arising outside Malta is subject to Maltese tax only if and to the extent that it is received in Malta
- – capital gains arising outside Malta are not subject to tax, even if they are received in Malta
Here is the normative source on INCOME TAX in Malta
CHAPTER 123 / INCOME TAX ACT / To impose a Tax upon Incomes./ Amended by: XVII. 1994.35
For specific categories of income and cases of double taxation, reference should be made to the numerous treaties in force between Malta and over 70 jurisdictions.
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