In 2021, the Nomad Residence Permit (‘the Permit’) was introduced with the aim of attracting third country nationals (‘TCNs’) and their family members to stay in Malta whilst carrying out their employment/self-employment activities for their non-Maltese employer/clients.
The tax treatment of income derived (by TCNs) from the performance of duties in terms of the Permit, and of any other income/ gains derived by the TCN and his/her family members has now been clarified by Legal Notice
Key points covered in the Legal Notice
Subject to certain exceptions, a flat tax rate of 10% should apply exclusively on chargeable income derived by the TCN from authorised work (as defined), subject to any relief from double taxation;
Generally, no tax liability should be triggered on income derived from authorised work before the end of 12 months from the date on which the Permit is issued, or 1 January 2024 – whichever is the later;
Other chargeable income derived by the TCN shall constitute the last part of the income and shall be subject to tax at the progressive tax rates (and the 10% rate should not apply on such other income);
Similarly, income derived by the TCN’s family members does not qualify from the flat 10% rate but rather will be subject to tax at the progressive tax rates;
In the case that any tax is due in Malta by the TCN and/or his/her family members, this should be reported in the income tax return – and subsequently, any tax should be settled through the said tax return.;
Maltese tax compliance registrations (in terms of registrations with the tax authorities and the filing of tax returns) should continue to be respected; and
A permanent establishment (‘PE’) should not automatically be triggered solely by the presence of the TCN in Malta. A review of the income tax position of the employer is normally required.
What does this mean for the individual?
This is still a relatively untested area. Coupled with the fact that implications may vary substantially from one case to another, depending on specific fact patterns, a number of complex considerations (such as the ones discussed below) may arise.
- Considerations for non-domiciled and resident individuals
- Considerations for non-resident individuals
- Considerations in connection to social security contributions
- Employment law considerations
Considerations for non-domiciled and resident individuals
To the extent that an individual is considered a Maltese tax resident but non-domiciled individual, the individual should, in principle, be subject to tax in Malta on any Malta-source income and/or certain specified Malta-source capital gains and on any non-Malta source income that is remitted to/ received in Malta.
As such, an analysis is required to establish the precise income streams of the individual in question (and the portion thereof) on which the 10% rate is chargeable.
How can we help?
The above is not intended to be an exhaustive list and other considerations may arise according to an individual’s specific circumstances. Seeking proper advice and consultation before any decisions are taken is key.
Our multi-disciplinary teams are dedicated to offering the right guidance tailored specifically to the individual’s personal needs and circumstances.
As your representatives, we can also help with preparing and compiling the relevant application forms and supporting documentation to be submitted to the relevant Maltese authorities, and make sure that open line of communication is kept between the individual and such authorities – with the ultimate aim of ensuing a smooth and successful process.
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