Ordinary Residence

Nationals of the EU, EEA, and Switzerland
A person who resides in Malta for over 3 months is obliged to obtain a residence permit under a specific reason. There are different options for a person who is a national of the EU, EEA, and Switzerland to obtain an Ordinary Residence permit in Malta, depending on the purpose of taking up residence. In order to obtain ordinary residence, the applicant is required to own or rent a residential immovable property in Malta with no minimum value requirements.
A person may take up residence in Malta for the purpose of employment and such residence permit is applicable for as long as such person is employed and is valid for 5 years after which it has to be renewed,
Third country nationals (Non-EU, EEA and Switzerland Nationals)
A person who resides in Malta for over 3 months is obliged to obtain a residence permit under a specific reason. In order to obtain ordinary residence in Malta, the applicant is required to own or rent a residential immovable property in Malta without any minimum value requirements. There are the following different options for third-country nationals to obtain an Ordinary Residence permit in Malta, depending on the purpose for taking up residence. A person who has the ordinary residence permit in Malta is allowed to travel within the Schengen Area without the need of a visa.
A third country national may take up residence in Malta for the purpose of employment through a work permit which needs to be renewed on an annual basis. Prior to starting the process for the application for a work licence, the applicant would need a job offer from a business in Malta.
Tax Treatment of Ordinary Residence in Malta
Persons who are ordinarily tax resident but not domiciled in Malta are not taxed on their worldwide income and capital gains but are taxed on a source and remittance basis.

 

This means that such persons are subject to tax in Malta on:

  • Income and capital gains arising in Malta;
  • Foreign income which is remitted to Malta.

They are not taxed on:

  • Foreign income not remitted to Malta;
  • Foreign capital gains even if remitted to Malta.

Foreign income remitted to Malta and taxed in Malta is subject to any double taxation relief which he/she may be entitled to, in terms of the double taxation treaties which Malta has concluded. Persons who are ordinary residents but not domiciled in Malta deriving foreign income or capital of not less than €35,000 which is not remitted to Malta are subject to a minimum tax liability of €5,000.

 

Taxable income is charged to tax at the progressive tax rates:

Tax rates applicable to single persons (and to married persons who opt for a separate computation)
Tax rates applicable to married couples living together
Tax rates applicable to parents who, subject to certain conditions, maintained a child under their custody during the year
The above tax rates are also applicable to nationals of the EU and EEA who are not tax residents in Malta but derive at least 90% of their worldwide income in Malta.
Employment
Employment exercised in Malta is taxed by means of the Final Settlement System (FSS), whereby tax and social security contribution on the gross emoluments is deducted at source by the employer and paid by the employer on behalf of the employee on a monthly basis. Every year the employer must provide the employee with an FS3 Form duly filled in indicating the gross emoluments, the income tax and social security contributions deducted therefrom and the resulting net emoluments for that particular year.

 

The social security contribution in Malta is partly deducted from the salary of the employee and partly incurred by the employer. The amount of such contributions varies depending on the weekly salary of the employee, however, capped to a maximum amount which increases slightly every year.

Self Employment
Tax
Self-employed profits are chargeable to tax after computing; the revenues earned during a calendar year, deducting the allowable deductions incurred in the production of the income during the respective year. The resulting profits are subject to tax at the above progressive tax rates (mentioned above).

Social Security Contribution
Social security payments for a self-employed individual, in relation to the activities carried out in Malta, are to be paid on the last day of April, August and December in arrears. The amount varies depending on the annual profits earned, however, the amount is capped to a maximum amount which increases slightly every year.
VAT
Persons carrying out a commercial activity in Malta should be registered for VAT purposes and submit VAT returns accordingly.

Persons whose annual turnover does not exceed €20,000 can be registered under article 11 and be exempt from charging VAT on their supplies. Under such registration, the registered person is not allowed to claim back any input VAT incurred.

Persons whose annual turnover exceeds €20,000 have to be registered under article 10 and charge VAT on their supplies. Under such registration, the registered person has the right to recover the input VAT incurred.