All You Need to Know about Capital Gains Tax in Malta

Capital Gains Tax is a kind of tax that is realized on real estate properties, jewelry, bonds, stocks, and other kinds of assets. There are various rates of this tax in different countries. In this article, we are going to discuss everything about capital gains tax in Malta.

Know all about Malta’s Capital Gain Tax legislation

What is Capital Gains Tax in Malta?

Capital Gains Tax is calculated during the transfer or sale of individual assets including residential properties, jewelry, stocks and bonds, and all kinds of assets. Since a profit is made during this process, the capital asset falls under regular incomes and it can be both short-term and long-term. Most incomes are taxable, and capital gains are no exception. This sort of tax is only payable during the time of sale of the property when the gains are realized. Every country has different structures and regulations regarding capital gains. While some countries are strict and apply a considerable tax on individual or organizational gains and capital, there are certain countries that don’t apply any tax on capital profits. 

In Malta, there are certain things to consider about capital gain tax. If you are thinking about buying any property in Malta or investing in Malta, you should be aware of the rules and regulations of Capital Gains Tax Malta. The current trends of capital gains concern both residents and non-residents in the country. 

Understanding Capital Gains Tax

Types of Capital Assets

Capital assets are all types of individual or organizational assets that can be sold and made certain profits upon. The capital gains tax does not apply to any unsold or stagnant assets which have not been realized yet. There are both short-term and long-term capital assets, which you’ll find more information on below.

  • Long Term Capital Assets Malta: If an individual possesses any property or asset for more than 36 months, this can be regarded as long-term capital. In some cases, assets owned for a year can also be considered the same. The rate for this kind of asset would be calculated according to the taxpayer’s current bracket and the amount of profit made from the asset.
  • Short Term Capital Assets Malta: If a property, holding, or asset is resold within a year from the original date of purchase, it can be considered as short-term capital. 

Rate of Malta Capital Gains Tax

On the basis of residency type, the tax in Malta is applied to all residents and non-residents for their regular income and some specific capital gains. The rate of capital gain tax can be anything between 15% to 35%. The rate and the chargeable tax amount are decided on the nature of the resident. Malta’s tax structure, along with a double tax treaty and various other plans to benefit both residents and non-residents, can help you achieve significant fiscal efficiency in Malta.

Basis of Individual Taxable Income in Malta for Capital Gain

  • If you are ordinarily based in Malta or domiciled, meaning you are an ordinary resident of the country, then your worldwide chargeable income including some capital gains is subject to Malta’s tax system. 
  • If you are not an ordinary resident in Malta or domiciled in Malta, the income and capital gains arising in Malta or received in Malta would be considered for taxation purposes. 
  • Foreign capital gains, even if received in Malta, are not taxable in Malta.
  • Non-residents and temporary residents only need to pay tax for capital gains and chargeable gross rental income arising in Malta. However, if they are married to any ordinary resident or domiciled persons in Malta, the clauses will be different.
  • Malta allows married couples to file for joint tax calculations. In that case, their aggregated income and intellectual property would be considered as a single taxpayer’s income and the tax will be calculated based on their global income and assets. Any of the spouses can file for separate tax calculations as well and, in that case, each of their incomes will be considered individually. Only one of the spouses will be responsible for the documentation and filing of the tax, even though both spouses are equally responsible for the tax liabilities and norms. 

If you are a non-ordinary, non-domiciled, or foreign individual in Malta and have been planning on investing in Malta, you can benefit from the Malta citizenship by investment plan, which offers an expedited route citizenship by naturalization. We can offer profitable and practical solutions for all kinds of citizenship investment plans in Malta.

For information on the nature of residency for the calculation of personal income tax, check out the glossary section of our page.

Individual tax rules for capital gains in Malta

Corporate Taxation for Capital Gains in Malta

Malta does not have any variable tax structure for corporate companies in the country, and directly applies a 35% flat-rate tax for all kinds of chargeable incomes and corporate capital gains. The imputation system of tax applies to both resident and non-resident shareholders of any company. 

If a company is based in Malta and ordinarily resident and domiciled, then its worldwide income will be considered for taxation in Malta. Even if a company is not ordinarily based or domiciled in Malta, but is controlled, managed, or operated in Malta, it would be subject to tax liability. For invested Malta stocks, both personal and corporate gains are subject to capital gain tax. The situations leading to the liability of this tax can be as follows:

  • If the company’s capital is gained and controlled in/ from Malta.
  • If the capital gain, which is chargeable and significant, is realized in this country.
  • If the capital is realized and derived elsewhere, but the income is remitted in Malta.  

Capital Gains for Transfer of Assets in Malta

The legislation of Malta has distinctive recommendations on which properties or assets need to be assessed for capital gains tax imposition. According to the Maltese tax legislation, all kinds of static intellectual property and secured financial assets can be subject to capital gain and therefore will be taxable at the time of transfer of authority. Due to the double tax treaty system and variable rate of capital gain tax for individuals, many non-resident and temporary residents can invest stocks in Malta along with other assets while making great profits.

Only the kind of asset transfers occurring in Malta would be liable for capital gains tax. Or if the asset holders, both individual and corporate, are ordinary residents of Malta or domiciled here, the profits made during the transfer of assets can be calculated for this tax, along with the regular taxable income of the taxpayer. If you are planning to invest in Malta, go through our detailed guides and feel free to consult our experts for suggestions, who are more than happy to help. 

What You Need to Know About Property Transfer in Malta

Depending on the source and nature of income, all kinds of taxed income are later on allocated to different tax accounts. One of the distinguished categories in this regard is the immovable property account. Thus, if you plan on transferring any immovable property in Malta, it will be subject to Property Transfer Tax (PTT) instead of a capital gain tax. To explain in detail, there is not any imposed tax on the profit made during the transfer, rather the property transfer tax is deduced according to the cost of the transaction and such a tax is not a tax on the capital. This tax is usually set at a flat rate of 8% for the initial selling price or transfer value of the transfer of the immovable property. Of course, there are certain exceptions for properties sold and transferred before the year 2004. And, if you resell your immovable property within 5 years of your possession, your property transfer tax will be chargeable at only a 5% rate

Know which tax to pay for which purpose from our experts.

Is There An Income Tax for Foreign-Sourced Capital Gains in Malta?

Good news for people investing from foreign sources in Malta, there is no income tax levied on the income, even if it is earned in a Maltese bank account. According to the Maltese tax regulations, you do not have to pay any income tax imposed for capital gains if you are selling or buying shares in any foreign stock markets. So, this is a huge investment opportunity for foreigners in Malta. Malta is also a much more flexible country for other tax liabilities including gift tax, wealth tax, inheritance tax, etc. Compared to other countries in Europe, Malta seems to be a far better location for foreign investors to earn consistent profit through foreign-sourced capital gains. If you happen to be a non-resident foreign entrepreneur, you can gain significant profits and a huge tax refund through versatile business opportunities in this country. 

The HNWI Residence Scheme in Malta

The Malta HNWI Residence scheme is an upgraded special tax scheme that has replaced the previous permanent residency taxes in Malta. HNWI stands for High Net Worth Individual residence scheme, which allows foreign investors to enjoy special rebates and exciting tax offers on their foreign-sourced income remitted in Malta. Businessmen and industrialists that have sufficient revenue and net worth can take up residences in Malta under the HNWI residence scheme. The number of tax rebates and special status for these high net worth individuals will be calculated on the basis of their total taxable income, financial graph, and industrial qualifications. 

Under the HNWI residence scheme, the foreign-sourced income remitted in any Maltese bank account will be subject to tax liability at a flat rate of 15% for HNWI permit holders. This residence scheme only addresses two categories of HNWI: a) Nationals from the European Union and the European Economic Area, and b) Nationals from third countries. Even though the foreign-sourced incomes will not be taxable for capital gain, the investors have to observe the annual income tax ranging from EUR 20000 to EUR 25000. HNWI permit holders can enjoy the double tax relief from capital gains under the wide network of Malta’s double tax treaty relief.

Effective business plan to improve capital gain in Malta

Making Investments in Malta

For many entrepreneurs and business personalities, Malta is one of the most profitable countries in Europe for all sorts of investments. Be it housing plans, selling or sharing stocks in  Malta, or enjoying asset-related profit from foreign sources, you can enjoy some pretty exciting offers by investing in Malta. This destination is a solid platform for a wide array of business opportunities. Read on to know about all the reasons why you should invest in Malta

  • Malta has a booming economy with a safe and sound financial demography. 
  • There is an ample amount of financial infrastructure to support budding businesses from various sources. 
  • If you are a foreign national or not domiciled in Malta, you can enjoy special tax benefits for your capital gains under the variety of tax schemes in Malta. Interestingly, you might be eligible for Maltese citizenship on a non-residential or temporary basis when you make a combination of investments to boost the economy of the country. 

Under the Malta Citizenship by Investment Program, which is more accurately referred to as the Maltese Citizenship Act Granting of Citizenship for Exceptional Services Regulations, you can enjoy huge tax rebates with foreign-sourced incomes. Under this scheme, any high-income individual can get an easy and stable residence in Malta by investing substantially in Malta’s national economy. Even when you are planning financially for your retirement, check out our tips for retiring in Malta

Glossary:

  1. Ordinary Resident: If a person is a resident of Malta for a continuous time or several years. The ordinary status gets lapsed if any inconsistency is found in the regularity of residency.
  2. Domiciled in Malta: According to the private international law of domicile, a person usually inherits their parents’ domicile status as a right to reside in any country. But according to the law, he/ she can be eligible for a new domicile status in a country of their choice with the intention of permanent residency.
  3. Temporary Resident in Malta: A person who has not been in Malta with a permanent residential plan and has lived in the country for less than six accumulative months in a calendar year.

How much is capital gains tax in Malta?

It is dependent on the residential status of the taxpayer and can range anywhere from 15% to 35%.

What is the range for capital gain tax for foreign-sourced incomes in Malta?

Foreign sourced earnings are not accounted for capital gain tax in Malta, even when extracted through Maltese banks.

When is one liable for capital gain tax?

Only during the transfer of assets, the capital gain tax arises and is calculated according to the profit made.

What are the most suitable sectors in Malta for foreign direct investments for capital gain?

Tourism, financial and investment sectors, communication, real estate, gaming and technology and pharmaceutical sectors are some of the most important capital gain sectors for foreign direct investments in Malta.