Malta Non-Dom Question

[peerpep]

Hello everyone

I have a question regarding the Non-Dom status, here especially for Malta.
I do not expect a tax-advice obviously but maybe someone can share some light.

If a EU national is moving to Malta (with the idea to leave the island again but not knowing when, could be 10 years later) to work there.
While working he is saving money that is sent to a broker outside Malta lets say IB.
Stocks are bought longterm with a low amount of trading activity - lets say 6 trades a year.

Now if those stocks are sold with a profit, the tax law states that for non-dom residents the capital gains would be tax free (even if the money would be transfered to Malta).

I have heard different answers (even from people that work in that area) regarding wether that person is non-dom in Malta:

"Yes because father is non Maltese"
"Yes because the stay is intendet termporary"
"No, because the person is working fulltime in Malta and that indicates domiciled"

Before I spend money for a tax advisor (which at some point I guess I have to do anyway) I would love to hear if someone of you already has the answer.

Thanks and best regards

 

[Sols]

Maybe I missed it, but what's the question?

 

[peerpep]

Maybe I missed it, but what's the question?

Sorry if I was unclear:

Is a EU national living and working in Malta for lets say 10 years with no family links to Malta a non-dom in the sense that capital gains from investing at a broker outside Malta are tax free?

 

[Sols]

Yes, that would under normal circumstances be enough to qualify as a non-domiciled resident.

 

[peerpep]

Yes, that would under normal circumstances be enough to qualify as a non-domiciled resident.

Thank you for your answer, Sols

The discussions that I had around that questions always are coming up, when traders have to consider a country to live in in the EU
It seems that most say Malta is not a good country and prefer Cyprus.

Maybe the difference between a active trader and a longterm investor is the key.
Or the fact that someone with a job in Malta will not be seen as "living off the stock investments"
Then on the other hand non-dom status as far as i read it from various internet ressources does not take "employment" into consideration (as in if someone is employed or not should not change the non-dom status.

If said person would now quit the job in Malta and stay in Malta ony living from the profits of shares that he holds for a minimum of 12 month before selling.
Is that still non-dom tax free capital gains?

 

[khinkali]

Now if those stocks are sold with a profit, the tax law states that for non-dom residents the capital gains would be tax free (even if the money would be transfered to Malta).

Malta has a 15% flat tax on remitted income. I wouldn't like to guess if 6 trades per year would count as income or capital appreciation.

You might need to show that you're not using untaxed foreign source income for everyday living expenses. I think that Cyprus doesn't tax remittance and has very clear non dom rules, which is probably why some people see it as a better choice.

 

[Martin Everson]

Then on the other hand non-dom status as far as i read it from various internet ressources does not take "employment" into consideration (as in if someone is employed or not should not change the non-dom status.

Correct.

If said person would now quit the job in Malta and stay in Malta ony living from the profits of shares that he holds for a minimum of 12 month before selling.
Is that still non-dom tax free capital gains?

Yes if gains are earned outside Malta and remitted. You may well want to change your residency status to economically self sufficient which will require a change of residency permit also. You will then be left alone for the most part.

 

[lacomaco]

Thank you for your answer, Sols

The discussions that I had around that questions always are coming up, when traders have to consider a country to live in in the EU
It seems that most say Malta is not a good country and prefer Cyprus.

Maybe the difference between a active trader and a longterm investor is the key.
Or the fact that someone with a job in Malta will not be seen as "living off the stock investments"
Then on the other hand non-dom status as far as i read it from various internet ressources does not take "employment" into consideration (as in if someone is employed or not should not change the non-dom status.

If said person would now quit the job in Malta and stay in Malta ony living from the profits of shares that he holds for a minimum of 12 month before selling.
Is that still non-dom tax free capital gains?

The best definition of domicile I have heard is the place where you want to return to die and to be buried. So, the answer is if you are non-dom then only the funds which you earn in Malta, sourced from Malta (irrespective of what kind of job you do) and the funds you remit to Malta are taxable. If you keep your money out of Malta then you are fine. There is a problem though: if you trade for a living, then it could be considered as a local activity and could be taxable irrespective of which stock exchanges you trade. The law is not really clear on this, and I have never heard of anyone being taxed on this but the possibility exists.

 

[lacomaco]

Malta has a 15% flat tax on remitted income. I wouldn't like to guess if 6 trades per year would count as income or capital appreciation.

You might need to show that you're not using untaxed foreign source income for everyday living expenses. I think that Cyprus doesn't tax remittance and has very clear non dom rules, which is probably why some people see it as a better choice.

This is the type of information which if it is presented this way is highly misleading. Only people who participate in two of the residency programs qualify for this rate. For all the others normal tax rates are rising up to 35%. I respectfully ask you that if you are not intimately familiar with the Maltese or other tax systems then please do not make such statements.

 

[khinkali]

I agree with @lacomaco that the lower flat tax for remitted income only applies in some cases and I was wrong to mention it. @peerpep asked about the tax free treatment which can apply to capital gains for non doms. What I tried (and failed) to bring up, is whether profits from 6 trades per year are likely to count as capital or income if remitted to Malta.

 

[lacomaco]

I agree with @lacomaco that the lower flat tax for remitted income only applies in some cases and I was wrong to mention it. @peerpep asked about the tax free treatment which can apply to capital gains for non doms. What I tried (and failed) to bring up, is whether profits from 6 trades per year are likely to count as capital or income if remitted to Malta.

If @peerpep can prove that it is capital return then probably no tax will be due (same way as everyone taking up non-dom status in the UK was advised to have a separate capital and income bank account), but the profits will be surely taxable. If of course he wants to remit it to Malta

 

[Rzeznik]

I do not expect a tax-advice obviously but maybe someone can share some light.

I was researching that subject since this in kind my situation.
There is few options for you how Malta taxman will treat you depends on nature of your stay.

Depending on the residence and domicile of the individual, liability to Maltese income tax arises -
- on a worldwide basis, or
- on a remittance basis, or
- on a territorial basis 1.2.
The worldwide basis of taxation applies to the income of persons who are ordinarily resident and domiciled in Malta.(not you!) It also applies to persons who hold the status of long-term resident or are in possession of a permanent residence certificate or a permanent residence card (as defined in the Status of Long-Term Residents (Third Country Nationals) Regulations and the Free Movement of European Union Nationals and their Family Members Order). In the case of a married couple living together, if one of the spouses is ordinarily resident and domiciled in Malta, the worldwide basis of taxation applies to the income and capital gains of both spouses1 .

So this not apply for "ordinary residence" that have right to stay in Malta for 5 years so nature of your stay is temporary. ! (self suficient / employed etc) those residents are taxed on remittance basis BUT.....
Be warned they on taxman site write allso:

A person who is in Malta for a temporary purpose may become ordinarily resident in certain circumstances. This would apply, for example, to individuals who are in Malta for more than 183 days in each year over a long period - say, for three consecutive years. It can also apply to individuals who do not stay in Malta for more than 183 days in any year but who come to Malta regularly over a long period - say, over a period of three years - and establish personal and economic ties with Malta.

So when I add what they write on site means that not only domicile decide about your worldwide basis taxation but more about your stay !
From that what they wrote it means if you stay there over 3 years and have there some connections you can be taxed as worldwide basis.
And worldwide basis you want avoid.

Stocks are bought longterm with a low amount of trading activity - lets say 6 trades a year.

as "ordinary resident" your capital gains outside of Malta are not taxable, even if you are Maltese citizen long therm investment are not taxed (as they wrote somewhere in web.)
Problem will be if that trading is ONLY INCOME you got then they can treat it like "work".
Then if its work you will end with worldwide basis tax or remittance basis depends how long you are in Malta and what status you have here.
Anyway long therm investments should not be problem for you if you are not actively trading it and other main source of income.






Reference from official sites that gives you insight how they look on those matters:
https://cfr.gov.mt/en/individuals/Pages/Tax-Residence.aspxhttps://cfr.gov.mt/en/inlandrevenue... for Individuals under the Income Tax Act.pdf
https://malta-residency.com/ordinary-residence/

. Domicile
3.1. Individuals who are in Malta and consider Malta as their permanent home are domiciled in Malta. “Home” here refers to the place where a person belongs and implies stronger ties with a country than residence.
3.2. Domicile does not depend on nationality.
3.3. Every individual acquires domicile at birth (domicile of origin). This is normally the domicile of the parents, regardless of the place where the individual is born.
3.4. An individual may change his domicile of origin and acquire a domicile of choice. A domicile of choice in a particular country is acquired when the individual takes up residence in that country with the intention of making that country his permanent home. A person who takes up residence in a country, even if for a long or indefinite period, does not acquire domicile in that country if he has the intention of returning some day to his country of domicile or of settling some day somewhere else.
3.5. No individual can be without a domicile and no individual can have more than one domicile at the same time. An individual does not lose his domicile of origin unless and until he acquires a domicile of choice. If an individual acquires a domicile of choice, he can change domicile again by taking up a new domicile of choice or returning to the country of his domicile of origin. If an individual abandons a domicile of choice without establishing his permanent home in any other country, his domicile of origin will revive automatically.