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The IBSA Podcasts
IBSA podcasts contain information from a global community of entrepreneurs and professional advisors dealing with international business structuring and regulatory compliance.
Hosted by Roy Saunders, who has over 50 years’ experience within the financial sector, these podcasts delve into enlightening conversations with a wide range of leading professionals aiming to demystify the complex world of business and provide invaluable insights to help listeners deal with various complex technical matters to best support their business and clients.
Disclaimer: We believe the information in this podcast to be correct at the time of recording. The information given is relevant at the time in line with governmental legislations. Competent counsel in the jurisdiction(s) whose laws are involved should be consulted. The podcast is made available by the IBSA for educational purposes only and to provide general information. The information should not be used or relied upon as a substitute for competent legal advice from a licensed professional in your jurisdiction.
The IBSA Podcasts
International Relocation Tax Benefits: Why Malta Stands Out
Could Malta be the effective tax haven UK wealthy individuals may choose to emigrate to? Join us as we unravel the intricacies of establishing tax residency in this Mediterranean gem with the expertise of Geraldine Schembri and David Borg. You'll discover how Malta's flexible requirements, which prioritize intention and personal ties over the number of physical days spent in the country, could be beneficial for both EU and non-EU nationals. We’ll discuss the advantages of Malta's tax system, including the absence of inheritance tax and favourable conditions for non-domiciled residents, making it an attractive option for those considering relocation due to tax concerns.
In this episode, we also tackle the notable comparison between Malta's tax policies and the UK's evolving non-dom rules. Geraldine and David provide a clear understanding of how Malta stands out, especially for those wary of the UK's statutory residence test introduced in 2013. With deep insights into tax strategies and the nuances of international relocation, this episode offers indispensable knowledge for anyone navigating the complex world of tax residency. Don't miss this enlightening discussion that could reshape your approach to international tax planning.
This series of podcasts explores the beneficial tax regimes in Italy, Spain, Portugal, Malta, Cyprus, Switzerland, Singapore, Israel and Dubai in respect of where UK residents may wish to emigrate in light of the non-dom changes introduced by the Conservatives, and the likely tightening of these rules under the new Labour government.
Hello and welcome to the IBSA series of podcasts on considering countries to where UK residents may wish to emigrate, in light of the non-dom changes proposed by the Conservatives and the likely implementation of these rules under the new Labour government, which might include bringing foreign trust assets within inheritance tax and increasing capital gains tax rates to income tax levels. That's particularly aiming at fund managers. My name is Roy Saunders, founder and chairman of the IBSA, the International Business Structuring Association, which is a multidisciplinary global association of entrepreneurs and their professional advisors, dedicated to sharing their expertise with each other within a great networking platform. Our current series of 15-minute podcasts will review beneficial tax regimes in Italy, spain, portugal, malta, cyprus, switzerland, singapore, israel and Dubai.
Speaker 1:Now today I'm joined by tax specialist and accountant Geraldine Skembery, a long-term and valued member of the IBSA, who is a partner of EMCS in Malta, and David Borg, a chartered accountant and founder of ARQ Group, a professional services organisation based in Malta. So welcome, geraldine and David. Malta can join Cyprus, italy, spain, portugal, amongst some of the countries we're covering in our series of podcasts, offering great food, wonderful weather and an excellent tax regime for incoming residents. We'll talk about that in a minute, but what's the criteria for individuals becoming tax residents in?
Speaker 2:Malta. What's the criteria for individuals becoming tax resident in Malta? Well, criteria to become tax resident not really anything particular. What we are looking for is people who actually have established Malta as their place of ordinary residence and, apart from, of course, meeting the regular criteria, such as fit and proper, but apart from that, it's just a question of whether they want to go under one of the tax regimes that is available for people who want to establish themselves here or establish their residence, and there are regimes which cater for people who come from the EU and EEA and Switzerland and for people who come from outside the European Union. So it all depends on, of course, the nationality, the domicile of the individual. It also depends on the particular circumstances of that individual and also what they plan to do whether they plan to continue generating overseas sourced income, whether they want to enter into business. All of these parameters need to be viewed at with a person, with an advisor, who can then point them in the right direction.
Speaker 1:Is there a set number of days, a minimum number of days that they have to reside?
Speaker 3:So if you stay 183 days in Malta, you exceed those 183 days, you're tax resident in Malta. Okay, but if you intend to reside in Malta, then you become resident from the day that you intend to reside. We have the concept of ordinary residence. So if someone comes to Malta with the intention of some permanency, some continuity, and he will be caught up as an ordinary resident. So you can have a situation of someone who comes and he stays regularly for three years, in that case he's an ordinary resident. You can even have someone who doesn't spend 183 days, he's not here for a significant period within a year, but because he intends to stay in Malta, he intends to be an ordinary resident in Malta and he creates sufficient personal and economic ties to Malta, then he will be deemed to be an ordinary resident.
Speaker 1:So somebody coming for, say, let's say, 30 days at a time, regularly to Malta, he has a home in Malta but he comes back and forth. Let's say he comes back to the UK. You know this yourself, Geraldine, that you can spend, let's say, up to 90 days in the UK. So they want to keep on coming back and forth, but basically they don't have to be there for 120 days or whatever they can be. Just it's the intention that's important.
Speaker 3:Yeah, you need to see the assessment of the time, obviously in terms of all the factors as well. So, as David mentioned earlier, you need to look at specifics. We don't say a specific day, number of days. You need to see how much time he's attached and what the particular circumstances are. So if you have an entrepreneur, for example, example, who comes to malta and for business reasons, has to travel extensively um and and and therefore he is not spending a significant amount of time in malta but he still has significant um, personal and economic ties to malta, then yes, you can possibly have a situation that he's resident in Malta, he's already a resident in Malta.
Speaker 3:But then if you have someone who just comes for a bit and has no attachment, simply just rents a property and nothing else, that could be very difficult to justify as someone who has a sufficient ties. It's also interesting at this stage possibly to mention Roy. So the basis of taxation in Malta can either be on a worldwide basis, whereby if the person is resident and domiciled, he's taxed on all his income, whether it's remitted to Malta or not, or else, if the person is resident and non-domiciled, he would be taxed on income arising in Malta. He would be taxed on income arising overseas but remitted to Malta, and then he would not be taxed on capital gains arising overseas, even if those are remitted to Malta.
Speaker 2:And also if you look at inheritance taxes there's no inheritance tax in Malta, so it is interesting. Jurisdiction for estate planning, family office type structures, family trusts, foundations, so it's quite a versatile regime which is, I suppose, borrows a lot from UK tax legislation.
Speaker 1:Well, that's a difference to the non-dom regime that we had, and also, of course, we had a limited period of time.
Speaker 3:Which doesn't exist anymore so there's no limitation. Obviously, unless the person's status changes and his domicile status changes.
Speaker 2:but there isn't a period of time and so far, we don't have deemed domicile rules which kick in, unlike the UK, where before it was 14 years or 15 years and now it's reduced to four, kicking unlike the UK where before it was 14 years or 15 years and now it's reduced to four. So that's also something which I think is quite valuable as well.
Speaker 1:So, david, there's no specific tax regime for incoming residents. It's a question of whether they're non-domiciled and can benefit from the remittance basis. Is that the only one?
Speaker 2:No, not precisely so. There are specific regimes but, as Geraldine mentioned before, you know we look at residence and we look at domicile and we also look at intention. So if a person intends to make Malta his centre of vital interest, you know where he habitually returns to, even when he's travelling for business or for personal reasons, but he habitually returns back to Malta. That is a very strong indicator that the intention is to make Malta his center of vitality, where most of his social and economic ties are established.
Speaker 1:Where we have in Italy and Spain and Portugal, you have a limited period of time like 15 years, 10 years, whatever UK four years under the proposals. Here you have no limitation of tax, but so you don't need a special special tax regime like you have in Italy, Spain and Portugal for incoming residents. This is a standard thing for anybody who is non-domicile of Malta if you're resident and non-domicile.
Speaker 2:And if you're resident, domiciled, there are specific regimes which are enshrined in our income tax act, but then there are also supplementary tax regimes which have been introduced I would say maybe the last eight, nine, ten years ago, and which have continuously evolved, and these are primarily meant for people who wish to come to Malta, either under a retirement program. There's the Malta retirement program, which taxes retirement income at 15 percent, and then there is the global residence program, which is intended for people who come from outside the European Union who wish to set up their residence in Malta and benefit from this tax regime, and then there is the residence program, which is attractive for people who come from the European Union.
Speaker 3:I would say the difference here, david, is whereas if you come as an ordinary residence person, number one, you have to make sure that you can enter the country, so a new person has freedom of movement.
Speaker 3:Non-eu persons have certain restrictions. There are visa programs, but we will not enter into much detail there. But the difference is if you opt under the normal basis of taxation of residents and homicide, then you fall under the standard tax rates. So that goes from zero to 35% progressive tax rate, whereas if you enter under the programs, as David was saying, you're locked in at 15% and therefore there are minimum tax amounts that need to be paid for the different programs, but the income that you receive beyond that minimum tax amount is taxed at 15. So let's say someone has 120 000 income which he wants remitted to Malta, okay, and he can't plan around using capital. In that case he would avoid being taxed at the rate of 35%, which would kick in on anything over 60,000, and he would be paying at 15%. So I think if you had to gross it up, that's 100,000, anything over and above would be taxed simply at the rate of 15%.
Speaker 2:And on any tranche above the 100,000, underlying tax relief provisions also kick in Correct so effectively on anything above 100,000, which is remitted to MOLDA under this programme would probably benefit from a lesser rate of tax than 15% because of the underlying relief.
Speaker 1:Okay, so that's very interesting. So what restrictions are there for UK people to enter? Obviously, we're not part of the EU anymore, unfortunately, so is it difficult for UK wealthy individuals to migrate to Malta.
Speaker 2:No, no, not difficult at all. Of course you need to look at fit and proper. We need to be able to see what the authorities need to be able to vet the individual involved, make sure that they have no criminal record and they are not, in any shape or form, undesirable to the country. Provided that they meet this fit and proper criteria and they can also explain the source of their wealth, then no, it's a fairly straightforward procedure.
Speaker 1:Yeah, that's different to a lot of countries, so that's quite interesting. Ok, your government. Have there been recent changes which could materialise that could affect the way that taxes are imposed in Malta? I mean, for example, the 5% effective tax rate you have by imposing 35% on a company and then giving a refund of 30%. I've never thought that that would be that approved by the EU, but it seems to have been. Is there likely to be a change in that, and what other changes do you anticipate over the next few years?
Speaker 3:Well, we know that there is the introduction of the minimum tax directive. Malta has opted for a derogation, which is for a period of six years. There are current discussions, so we would expect the authorities to come with some tax proposal, but we have no clarity whether that would involve disbending an existing structure or else putting in place certain provisions to meet the tax challenges going forward.
Speaker 1:Okay, but not for individuals. You haven't heard anything.
Speaker 3:Not for individuals.
Speaker 1:No inheritance tax introductions or anything like that.
Speaker 2:No, so far. So far, there's nothing which is in the public domain which gives one the impression that this is being considered.
Speaker 1:Okay, well, I think that's all that I wanted to ask you on this podcast. It's very interesting. I'm very familiar with the concept of ordinary residence, which we had in the UK until 2013, when we introduced the Saturday residence test, so that's very interesting and it's a very interesting provisions that you have relating to non-domiciled individuals. So it remains for me to thank you, geraldine, and thank you, david.
Speaker 3:My pleasure Roy.
Speaker 1:It's been really interesting and thank you everybody for listening to this.