The Maltese islands have never been in a better position to accommodate one’s desire to relocate to Malta, and why not, to start a business there. Although its economy is small, fully exposed to the vagaries of the global economic context, Malta has managed to weather recent upheavals very well. That is happening thanks to the fact that the economy is diversified, with the result that a downturn in any one sector is compensated for by continued strong performance in another area or even better, in many other areas. Even though Malta is known more as a tourist destination and, increasingly, as a financial services hub, the manufacturing industry also plays an important role in contributing around fourteen per cent to the country’s GDP. Combined with the fact that Malta is the second largest employer on the island, all this points to a competitive edge, not only in new sectors to be expected, but also in well-established areas, like the industry.
- Financial Licensing in Malta
- The Trade License in Malta
- Malta's special licenses and permits – Your entry ticket to success
- Join the Game! Online Gambling License in Malta
- Malta's Full Imputation System helps avoid Double Taxation
- Malta's Tax Refund System provides Benefits for Shareholders
- Non-Dom Status –What does it mean?
- Resident Non-Dom Status
- Source & Remittance Basis of Taxation and Tax Reliefs
- Schengen Tourist Visa
- Permanent Residence in Malta
- Permanent Residency in Malta
- Ordinary Residence in Malta
The Maltese islands are located at the southern tip of Italy with just over 316 square kilometres in area and lying midway between Europe and North Africa. As descendants of ancient Carthaginians and Phoenicians, with strong elements of the Mediterranean stock, the Maltese are considered to be among the most international of peoples. However, Malta’s population is a little bit more than 400,000 people, which makes it the smallest country by area and population among the whole European Union.
The official language of Malta is Maltese, but English is considered the second official language there. The Laws of Malta and the Government Gazette are printed in both Maltese and English. Most of the educated Maltese on the island can speak fluent Maltese, English, as well as Italian, considering the history.
As of January 1, 2008, the official currency of Malta is the Euro, replacing the Maltese lira.
A great place to start a business
Despite being the EU’s smallest member state, Malta has been one of the most exciting countries to see and invest in. The Maltese business condition has been marked by change and broadening during the last decades.
Malta has a diversified free-market economy which mainly focuses on tourism, different financial services, as well as manufacturing. Malta also provides many different economic incentives and runs a tax regime that also stimulates financial and economic growth in the island.
There are things to consider in case a business is about to be built in Malta, including the range of activities which are liable to licensing and supervisory oversight. The most common examples are financial services and gaming activities.
In any case, licensing is a complex procedure itself. Licenses will not be issued in Malta without first having successfully completed a scrutiny review. Among the bussines sectors that require licenses are also tourism accommodations and facilities as well as the ones that are dealing with foodstuff.
Financial Licensing in Malta
The Financial Services Authority (MFSA) of Malta is in charge of all financial licensing on the island. Each licensing application is managed exclusively on a case-by-case premise, meaning that there is no established procedure as per which one may be appointed to a specific administration division. Instead, the authorities review and pre-review after that each application and then they review also the following items as a different stage of the whole procedure, which has a duration of minimum twelve months in total.
The Trade License in Malta
As per the Department of Commerce in Malta, there are requirements for companies involved in manufacturing or engineering activities there. These types of companies are obliged to obtain a special permit from the Trade Licensing Directorate. Before receiving the license, companies have to abide by regulations regarding environmental and waste control. Before applying for the trade license, companies must obtain all necessary permits from the Malta Environment and Planning Authority (MEPA) before starting the application process for the trade license in general.
Trading licenses also apply for companies which operate in the food or drink sector, as well as for beauty salons, spa and fitness facilities. Before applying for the trade license, these types of companies must obtain the “No Objection Declaration”, which can be received only from the Environmental Health Directorate.
Malta's special licenses and permits – Your entry ticket to success
For catering businesses, a special license from the Malta Tourism Authority (MTA), called “catering establishment licensе“, must be issued, taking round about 20 days. The first thing that has to be done in order to obtain the catering establishment permit is to submit an application form with the Malta Tourism Authority. The list with all the supporting documents needed includes:
- a criminal record issued by the police
- copies of identification papers
- receipt after payment of application fee
- blue prints drafted by an architect
- land department permit and photos of the property
- copy of the articles of association of the company
- lease contract proving the value of the bar area to be rented.
The final step towards gaining a catering establishment in Malta is submitting all required documents with the Licensing Administration department at the Malta Tourism Authority.
The documents include:
- development permit issued by the MEPA
- authorization from the Public Health Department
- the public sewer discharge permit issued by the Water Services Corporation
- a CV of the chef
- copy of the menu
- a fire safety certificate.
- Catering venues must also file an application with the Department of Environmental Health for a food safety certificate.
There are a couple of business types that require a tourism license in Malta, including outgoing and incoming tourism agents, excursion organizers as well as destination management companies. The following documents must be submitted in order to receive a tourism permit in Malta:
- a receipt after payment of registration fee
- identification papers copies and criminal record of the applicant
- the CV of the operator
- blue prints of the business area
- companies must submit copies of the articles of association
- a development permit issued by the MEPA
- third-party accountability insurance
- Other specific supporting documents for the company or the operator.
In addition, after receiving all of the documents, the MTA has to check the place and location before the company starts to operate.
Join the Game! Online Gambling License in Malta
The decision and the assignation of the Maltese authorities to develop the iGaming industry, together with the Malta Gaming Authority’s pro-active approach to the impending changes in this business sector, have led to an attractive environment for this sector to thrive. Nowadays, companies dealing with gaming and betting are among the fastest-growing business sectors in Malta.
The first online betting site in Malta was launched in 2000. The Malta Gaming Authority was created to regulate all forms of gaming in Malta, including remote gaming operations. In April 2004, Malta became the first EU Member state that regulates remote gaming. In 2009, the island nation brought in 52.5 million euros in tax revenue thanks to remote gaming.
The remote gaming regime applied is considered both technology- and game-neutral. That means that it covers all types of games that can be offered from a distance through all types of distance communication tools, including the Internet, digital TV, mobile phone technology etc.
Depending on the type of gaming business, there are two types of online gaming licenses issued in Malta – B2C license and B2B license.
Тhere are basic requirements that need to be met in order for an online gambling license to be obtained in Malta, including:
- Original Certificate of no criminal record of the owners of the company to ensure that there are no criminal records about these owners, not older than three months
- Pass ‘Fit & Proper’ Test
- Fill various key function compliance roles
- Notarized/certified copy(ies) of passport(s)
- Original bank references of owners; not older than three months
- Original or notarized/certified copies of utility bills, not older than three months
- A detailed business plan
- Details of all gaming software systems used
- Compliance & software audit
- Hosting of operations/gaming servers must be in Malta
Depending on the type of gambling games companies would like to receive licenses for and the exact style of the business, there are four different classes of licenses in Malta. Respectively, the fees are also different.
- Class 1 License
The Class 1 license is issued to websites for gambling that offer casino-style games, including roulette, slots or blackjack
€4,660 for the first six months €7,000 per month after that
- Class 2 License
A Class 2 license is issued to operators who are managing sports betting types of wagers.
0.5% tax rate on total amount of bets placed
- Class 3 License
A Class 3 license is issued to operators who take a commission on peer-to-peer bets for games, including poker, bingo and any kind of lotteries.
5% of total real income
- Class 4 License
A Class 4 license is issued to companies in the business sector that manage and host gaming operations. A good example for that would be software providers who manage games and bets but who they are not involved in taking bets for their own profit.
no fee for the first six months
€2,330 for the next six months
€4,660 per month thereafter
A license of any class is granted for a period of five years. There is a possibility for a license to be renewed again for the period of fine years.
Currently, all types and forms of gaming in Malta are regulated by the Lottery and Gaming Authorities under the Remote Gaming Regulations of 2004. Malta appears to be one of the safer licensing authorities in the world thanks to the strict standards for gambling sites and its status as a full member of the EU.
Sun, Sea … and Low Taxes
There are many attractive advantages of living and building a business in Malta, one of them being the fact that Malta offers a highly efficient fiscal regime. It is designed in a way that it simply avoids the double taxation on already taxed company profits which are distributed as dividends.
Usually, the companies in Malta pay a tax rate equal to 35 percent. However, there are exceptionable cases where taxation can be avoided, including:
- Cooperative societies
- Certain collective investment schemes
- Organizations of a public character
Companies that are incorporated in the island are treated and considered as domiciled in Malta, which means that there is a taxation that applies on the worldwide income and capital gains of those companies. On the other hand, companies which are not incorporated in Malta are considered residents in Malta if their management and control are executed in Malta. The ones that are residents but not domiciled are supposed to be taxed on chargeable income and capital gains arising outside of Malta and remitted to Malta but not on capital gains arising outside of Malta that are received in Malta. The fact that a foreign company has a branch in Malta does not mean residency. Companies which are neither resident nor domiciled in Malta are taxed on chargeable income and capital gains arising in Malta. Of course, in the case that companies belong to any of the group mentioned previously (cooperative societies, certain collective investment schemes, organizations of a public character), they are considered specific exemptions from that rule.
Despite the fact that the Maltese default corporate tax rate is 35 per cent, due to the full imputation and tax refund system in Malta, the effective tax rate in Malta can be reduced to 5 per cent, depending on the case.
Malta's Full Imputation System helps avoid Double Taxation
In principle, every shareholder of a Maltese company is paying taxes on any dividends derived from such a company but in reality, double taxation is avoided through the operation of the full imputation system of taxation in Malta. That means that taxes paid by Maltese companies on all profits that they distribute as dividends in favour of the shareholders are fully credited against Malta’s tax liability of the shareholders.
The full tax rate that applies to companies is equivalent to the maximum progressive tax rate that also applies for individuals and is equal to 35 percent. Due to that fact, the dividend distribution received by a corporate or a natural shareholder should typically lead to no other taxations at shareholder level.
Moreover, shareholders that pay less than the maximum tax rate of 35 percent are allowed to claim a tax refund of the excess tax paid for companies in Malta. The full imputation tax system is a way of taxation that applies only for few other countries besides Malta.
Malta's Tax Refund System provides Benefits for Shareholders
Malta has developed a tax refund mechanism that is beneficial for shareholders. Shareholders receiving dividends which are distributed out of certain profits of a company in Malta are allowed to claim a refund of the tax paid in Malta by such company on those profits.
Of course, the amount of the refund depends on different factors, including:
- The nature of the underlying profits out of which the dividends is distributed.
- The claiming of double taxation relief by the company on particular profits
Usually, the refund is equal to the 6/7ths of the relevant tax paid in respect of trading income.
There is a chance, however, for this refund to be lower in the cases where:
- The profits put of which the dividend is distributed consist of passive interest or royalties -> the refund is reduced to 5/7ths of the Malta tax suffered on those profits.
- The dividends distributed out of certain profits in respect of which the distribution company has claimed a foreign tax credit in order to relieve cross-border double taxation, where the refund will be 2/3rds of the tax applied.
There are other cases where companies in receipt of dividends or even gains which have been derived from investment that is considered a participating holding can avoid taxation in Malta by
- Electing to apply the participation exemption, in which case the income or the gains will be exempt from taxation;
- including income or gains as part of the taxable income of the company in Malta, which will give rights to the shareholder in receipt of the dividend out of those profits to claim a full refund of tax paid in Malta by the same company on the particular income or gains.
However, it is important to note that no tax refund can be claimed for an income derived, directly or indirectly, from a property that is situated in Malta.
Malta's Attractive Non-Dom Tax Residence Scheme
The exact meaning of domicile and residence under Maltese law is important in order to understanding the tax payment options arising out of the taxation of non domiciliaries residents (Non-Dom Residence) in Malta
Non-Dom Status –What does it mean?
According to the Maltese law, the domicile of origin of any person is that acquired at birth only from the father and this may change when the father obtains a different domicile of choice, showing an intention to reside indefinitely in the new domicile while severing ties with his domicile of origin. After turning 18 years of age, the individual is able to choose his own domicile in the same manner depending on his choice.
Resident Non-Dom Status
Persons may move and take up residence in Malta under the most appropriate residence rules applicable to them. In the case of non-EU or EEA nationals, individuals as well as families may take up residence under the Global Residence Program. Individuals from EU countries may either take up residence in Malta under the Malta Ordinary Residence system or benefit from the Residence Program Rules. Maltese tax law deems an individual non-dom resident in Malta in case of either spending more than 183 days in Malta or in case of circumstances demonstrated by the tax payer that support an intention to reside
Source & Remittance Basis of Taxation and Tax Reliefs
Non-domiciled residents of Malta are taxable on a remittance basis only on foreign-source income which has been remitted to Malta. Income and capital gains arising in Malta are subjects to tax in Malta at the applicable personal income tax rates.
All capital gains arising outside of Malta are not taxed. Both capital and savings which are remitted to Malta also avoid the Maltese taxation.
Moreover, individuals who take up residence in Malta are eligible to receive their pensions in Malta completely free of tax at source and subject to a mere 15 per cent under the Global Residence Program or the Retirement Program.
Overseas capital funds invested locally are of course only taxed on any interest or dividends generated thereon, again at a 15 per cent flat rate. Permanent residents also benefit from double taxation agreements existing between Malta, the most European countries and Canada, Australia as well as the USA, so that one and the same income will not be taxed twice.
Moving to Malta? A Guide for Foreigners: Residence permit types
Having been a member state of the European Union since 2004, the island of Malta no longer applies restrictions to the movement of nationals of other EU member countries. In addition, in 2007, Malta also became part of the Schengen area, which made people's decision to move there even easier. The fact that the population of Malta is around 450,000 inhabitants, living in a total space that covers around 316 square kilometers, makes it the smallest and at the same time the most densely populated country in the European Union.
Malta has a history of different colonial periods, and the English language can be totally used. All this combined with the relatively low cost of living, it is not a surprise that the island of Malta is attracting more and more people from all over the world which have chosen and decided to move to Malta and call it home.
There are four different types of residency permits in Malta, and there are types of visa and permits that tend to be more suitable than others, depending on the nationality of the applicants.
Schengen Tourist Visa
The Schengen area consists of twenty-six states. The advantage of those member-countries is that people are free to travel from any of them to another one without even having to present a passport or identity card to the border controls. With a Schengen tourist visa, people are also free to move in and out from country to country in the Schengen area for up to ninety days, since that is the duration of this type of visa. The procedure of getting the Schengen tourist visa is pretty simple and consists in having a stamp in the passport at the boarder of the first Schengen country entered. People who already have the Schengen tourist visa and who would like to stay more can simply apply for a visa extension, which can be done at the Central Visa Unit in Valetta, the capital of Malta.
Permanent Residence in Malta
The permanent residence type of visa in Malta is a special one insofar as it is open to everyone, even for non-EU citizens; however, the visa has to be renewed every year at the same time. There are also special credits such as the Malta Global Residency Programme and others for those who wish to buy property in Malta. At any rate, seek advice from an immigration lawyer and others in the ex-pat community in Malta.
Permanent Residency in Malta
The idea of the permanent residency permit is to entitle the holder who is not a citizen of Malta to reside permanently in Malta without the necessity of obtaining and renewing an entry visa. This permanent resident therefore has freedom of movement in Malta.
Provided that the permanent resident remains within the law, then the permit is renewed automatically annually as a formality and once granted, a permit will not be revoked unless the resident in question breaches one or more conditions of the permit. However, the permanent residency permit has no effect on the visas the holder might need to enter other countries from Malta.
Permanent residency permit holders in Malta must pay a flat tax rate of fifteen per cent on all income brought into Malta. This is subject to a minimum payment of 4,500 euros per year. This minimum payment covers an income of approximately 30,000 euros per year. The minimum taxation that is paid under the Scheme is non-refundable. The minimum tax for the first year will be payable by not later than the tax return date. Provisional tax payments apply from the second year of residence. However, the permanent resident’s global income which is not made or brought to Malta should not be taxed in any cases.
Ordinary Residence in Malta
The Malta Ordinary Residence program is a really attractive residence program currently available to EU & EEA nationals as well as nationals of Switzerland looking to transfer their tax residence to a safe and tax-efficient jurisdiction. Malta happens to be the ideal destination for that. Holders of an ordinary residence permit benefit from the right to reside and work in Malta, as well as to travel completely freely across the whole Schengen area.
The ordinary residence permit is the type of visa in Malta that is made for ex-pats that are coming from other European Union countries. The tax rate holders of this visa pay varies depending on the income, marital status, and tax credits. The requirement that citizens will be eligible to apply for that type of residence permit only after they have been legal residents for five years. Moreover, the ordinary residence needs to be renewed every five years.