Why Malta Could Become Europe’s Gateway for U.S. Citizens

Malta as a Second European Base for Americans: Why Interest Is Growing

Until only a few years ago, a U.S. citizen asking an adviser how to obtain a second residence in Europe would have been a relatively unusual case. Today, the landscape has changed.

It is no longer only a question of individuals who have already decided to leave the United States. An increasing number of U.S. citizens, including high-net-worth families, entrepreneurs and professionals, are considering European residence not necessarily as an immediate expatriation decision, but as a form of personal and wealth diversification: a second base from which they may live, travel or potentially relocate in the future.

In other words, a form of Plan B: the possibility of securing a stable base in Europe without necessarily being required to relocate there immediately.

In this context, Malta deserves particular attention.

Why Malta?

Malta is the smallest Member State of the European Union and forms part of the Schengen Area. Its location in the Mediterranean and its history have, however, made it a highly international jurisdiction.

For an American, the first advantage is probably the language. English and Maltese are both official languages, and English is routinely used in business, public administration and everyday life.

Other advantages include a pleasant climate and Mediterranean lifestyle, a significant artistic and cultural heritage, air connections with numerous European cities and, more recently, a direct flight connection with New York, relatively compact geographical dimensions, and an environment in which integration is generally straightforward even without knowledge of the Maltese language.

For individuals who continue to maintain professional or entrepreneurial activities in the United States, Malta may therefore represent a European base that is comparatively easy to manage.

However, the most interesting element is probably another one.

Permanent Residence Without an Obligation to Relocate Immediately

The Malta Permanent Residence Programme (MPRP) enables nationals of countries outside the European Union, the European Economic Area and Switzerland — including U.S. citizens — to obtain permanent residence rights in Malta through a regulated residence-by-investment programme.

A distinctive feature of the programme is that obtaining such status does not necessarily have to coincide with a definitive relocation.

The beneficiary acquires the right to reside permanently in Malta and may travel within the Schengen Area for up to 90 days in any 180-day period, while continuing, if desired, to maintain the United States as his or her principal centre of life.

This is precisely what may make the programme particularly attractive to an American family.

Maltese permanent residence can be obtained today and used as a European base when the need arises: to spend longer periods in Europe, to be closer to children studying or working here, or as part of a future relocation decision.

A Solution That Can Include Several Generations

The programme is not intended exclusively for the individual investor.

Subject to the applicable conditions, the same family application may include the spouse and other dependent family members. Residency Malta currently highlights the possibility of including up to four generations within the same application.

This aspect may be particularly important for American families approaching residence planning from a long-term perspective.

The choice of a second residence, in fact, does not necessarily concern only the place in which one intends to live today. It may also become part of a broader strategy concerning children, parents, international mobility and the future organisation of the family.

What Does the MPRP Require?

The programme provides for asset requirements, a real-estate commitment — through either the purchase or lease of a qualifying property — as well as contributions and administrative costs.

This is not Maltese citizenship, but permanent residence. It is precisely this distinction that may make the programme attractive to those seeking to establish a European presence.

At present, the applicant must demonstrate ownership of assets of at least €500,000, of which at least €150,000 must consist of financial assets, or alternatively assets of at least €650,000, of which at least €75,000 must consist of financial assets.

The applicant must also maintain a qualifying property in Malta, either by purchasing property for at least €375,000 or by leasing property at a minimum annual rent of €14,000.

Other costs include, among others, a government contribution of €37,000, an administration fee of €60,000 and a donation of €2,000 to a qualifying Maltese non-governmental organisation. Additional amounts are also payable in respect of certain adult family members included in the application.

Malta as a “European Plan B”

For many U.S. citizens, Malta may represent not so much a destination to be immediately selected as their new place of residence, but rather a stable European base that can be used over time: as a second home in the Mediterranean, as a base from which to spend longer periods in Europe, or as the first step towards a future relocation.

For an American family seeking a second European base, Malta combines a number of features that are difficult to find together.

The key advantage is the possibility of separating two distinct decisions: obtaining European permanent residence today and considering only at a later stage whether also to transfer one’s tax residence.

Malta combines permanent residence, membership of the European Union and the Schengen Area, widespread use of the English language, international connectivity and a tax system that distinguishes between residence and domicile.

The decisive question, therefore, is not merely how permanent residence can be obtained and how much it costs, but rather what role Malta should play within an individual’s personal, family and tax planning.

Permanent Residence Is Not, However, the Same as Tax Residence

This is where planning becomes particularly relevant for a U.S. citizen.

Holding a Maltese permanent residence permit and being tax resident in Malta are two separate matters.

An American may therefore obtain MPRP status as a second European residence while continuing to live predominantly in the United States. Obtaining Maltese residence status does not automatically make that individual tax resident in Malta.

Maltese tax residence depends on the specific facts and circumstances of each case.

Accordingly, the MPRP may be used by an American family as a European residence option, while the individual’s tax position must be analysed separately by reference to factors including days of physical presence, available accommodation, personal and economic ties, and the actual organisation of family life.

Malta as a Tax Residence

If, instead, an individual decides to transfer his or her effective centre of life to Malta, the tax consequences of that choice must be analysed separately.

It is precisely in this second scenario that Malta presents certain distinctive features.

The Maltese Domicile System and the Remittance Basis

When a U.S. citizen decides to relocate effectively to Malta, one of the most relevant features of the Maltese tax system comes into play.

An individual who becomes tax resident in Malta without becoming domiciled there may, where the applicable conditions are satisfied, be taxed on the remittance basis.

In highly simplified terms, a resident but non-domiciled individual is normally subject to Maltese tax on:

• income arising in Malta; and
• foreign-source income to the extent that it is received in or remitted to Malta.

Foreign-source capital gains, however, receive particularly significant treatment. As a general rule, they do not form part of the Maltese taxable base of an individual who is resident but not domiciled in Malta, even where the relevant capital is subsequently transferred to Malta, provided that the distinction between income and capital is properly maintained and documented.

For an individual with international investments, financial portfolios or assets spread across several countries, this feature may make Malta particularly attractive.

Other Routes to Obtaining Residence

In addition to the MPRP, there are other routes through which residence in Malta may be obtained, including:

• a work permit through a sponsoring company;
• the Nomad Residence Permit;
• the Global Residence Programme;
• the Malta Retirement Programme; and
• the Special Programme for United Nations Pensioners (UNPP).

Only professional advice and prior due diligence carried out by an adviser experienced in international law and taxation can properly identify the most suitable relocation opportunity in light of an individual’s specific circumstances and requirements.

For U.S. citizens, however, there is an important additional consideration.

U.S. Citizenship Continues to Have Tax Consequences

For a United States citizen, there is a further level of analysis that cannot be ignored.

Unlike most European jurisdictions, the United States generally taxes its citizens on the basis of citizenship, including where they live permanently abroad.

Relocating to Malta therefore does not automatically remove a U.S. citizen from the U.S. tax system.

Residence and tax planning must consequently be undertaken by considering simultaneously Maltese law, U.S. federal taxation and the double taxation treaty between Malta and the United States.

For this reason, a relocation from the United States to Malta — or to another European jurisdiction — requires prior professional advice from an international adviser, carefully tailored to the circumstances of the specific case. This is particularly important where the individual holds financial investments, companies, trusts, pensions or substantial assets, so that the final choice of residence and any related structure are appropriate to the individual’s actual requirements.

Relevant Maltaway Articles and Further Reading

• Italy’s €300,000 Flat Tax: The Traps Behind the “New Home of the Super Rich” Narrative
  Updated critical analysis of Article 24-bis, the increase of the lump-sum tax to €300,000 and the principal structural limitations and risks of the regime.
• Malta: Comprehensive Guide to Residency and Taxation for EU and Non-EU Individuals
  Detailed analysis of Maltese residence, non-dom taxation, the remittance basis and special residence programmes.
• Taxation in Malta for Resident Non-Domiciled Individuals
  Specific guidance on the remittance-basis rules applicable to individuals who are resident but not domiciled in Malta.
• Italian New Residents Tax Regime — “La Dolce Vita”
  Historical framework and development of the Italian lump-sum tax regime for new residents.
• Impatriates Tax Regime in Italy
  Analysis of the separate preferential regime applicable to qualifying workers transferring their tax residence to Italy.
• HNWI Global Residence Programme
  Detailed guidance on Maltese residence options for high-net-worth individuals and non-EU nationals.
• Residence in Malta for Non-EU Nationals
  Residence options for third-country nationals intending to relocate to Malta.
• Residence in Europe for Non-EU Nationals
  Analysis of European residence routes available through Malta for third-country nationals.

Disclaimer. This article is intended exclusively for general information purposes and does not constitute legal, tax, financial, investment or immigration advice. The application of any tax or residence regime depends on the individual circumstances of the taxpayer and should be assessed before any relocation or restructuring of personal or family assets.

Maltaway Contacts — Italian Impatriate Tax Regime, New Residents Regime and Retirees Abroad

For any clarification, professional consultation, legal opinion, assistance with procedures and applications for citizenship or residence in EU and non-EU jurisdictions, or advice concerning special tax regimes, pensioners or employees and officials of international organisations, please do not hesitate to contact us. Maltaway professionals place at your disposal an international practice developed over more than thirty years.

Advice from an experienced professional can assist in resolving uncertainties and, above all, in identifying the legal and tax constraints, implications, advantages and disadvantages arising from the interaction between an individual’s country of origin, citizenship, current country of residence and proposed destination, thereby enabling an informed decision to be taken before any relocation is implemented.