Malta: Taxes and Costs

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Taxes are moderate to high in Malta

INDIVIDUAL TAXATION

Nonresidents are liable to tax on all their income sourced in Malta. Married couples may choose to be assessed and taxed jointly or separately.

INCOME TAX

Taxable income is generally the gross income, except for income from immovable property. Nonresident individuals are subject to a withholding tax of 25% and this is generally the final tax.

For income from properties (such as rent) the withholding tax is credited to the nonresident’s tax liability when they file their income tax returns. The taxable income is then taxed at the following progressive rates:

Rental Income Tax

Permit to rent is only granted to owners with properties having a communal or private swimming pool and worth more than MTL100,00000 (€232,460).

Taxable income is gross rent less the following: any rent or ground rent payable by the owners relevant to the property, license fees related to the Malta Travel and Tourism Act, interest expense on housing loans, and an allowance of 20% on the gross income remaining after deducting the rent and the license fees. The standard 20% allowance covers maintenance costs, repairs, and other related expenses. Income is then taxed at progressive rates.

CAPITAL GAINS TAX

A non-resident may only sell their property in Malta to a Maltese citizen. However, if he is not able to find a buyer who is either a Maltese or EU citizen, only then can he make the transfer to another foreign national.

Capital gains are generally taxed at a flat rate of 12%. The tax is applied to the transfer value or the selling price. Only brokerage fees can be deducted from the selling price. During the sale, a provisional tax equal to 12% of the selling price must be paid to the notary public who will then pass it on to the Inland Revenue as payment of the tax liability.

Capital gains earned when the property was held for less than five years can be taxed in two ways. It can be taxed at a flat rate of 12% or at progressive rates under the old system.

However, a non-resident seller may be subject to tax on the gain in his country of residence. Normally he would have the right to claim double taxation relief in his country of residence. However, it is possible that the relief would only be granted if the tax paid in Malta were a tax on the gain.

A non-resident may therefore choose to have the transfer taxed under the old system rather than at 12%. Under the old system, the gains can be considered as ordinary income and taxed at progressive rates. During the sale, he will be required to pay a provisional tax equal to 7% of the selling price through the notary public, who will then pass this on to the Inland Revenue as initial payment. This amount is credited to the total tax payable.

To avail this, he needs to produce a notarized statement from the tax authorities in his country of residence confirming his residency and certifying that he is subject to tax in that country.

Consequently, residents of tax-haven countries and countries whose basis of taxation is the source of income and not the residency status of the taxpayer cannot avail of this option.

PROPERTY TAXATION

There are no property taxes levied in the Islands of Malta.

Malta - more data and information

• Guide to buying houses and registering property sales in Malta

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