Many of our clients ask us about the tax implications of obtaining citizenship through the Naturalisation by Direct Investment route, in Malta. Firstly, it is important to note that there is no direct relationship between obtaining citizenship in Malta and being taxable therein.
Once an individual obtains Maltese citizenship, as part of the above-mentioned programme, he/ she will not be automatically deemed tax resident or domiciled in Malta, simply as a result of becoming a Maltese citizen. The attainment of tax residence or tax domicile in Malta depends on a number of other factors, which are totally separate from the citizenship process.
An individual will be deemed to be tax resident in Malta if such individual resides in Malta for more than 6 months in one calendar year or resides in Malta with the intent to establish his or her residence therein. Once an individual is deemed to be tax resident in Malta, they are taxable on:
- Income and Capital Gains arising in Malta;
- Foreign income which is received in Malta.
Any other income or gains would not be taxable.
Therefore, whilst an individual could become tax resident in Malta as a result of the number of days spent here, there is no automatic link between obtaining Maltese citizenship and being taxable in Malta.
The concept of ‘domicile’, on the other hand, is distinct from nationality and residence. Every individual is born with a domicile of origin, typically this would be the domicile of their parents. An individual could change one’s domicile, to a domicile of choice. This is done by severing all ties with one’s previous domicile with an intent to never return and to establish themselves and all their ties, in the new domicile of choice. Here again, the concept of obtaining citizenship in Malta does not result in one being deemed to be tax domiciled there.
Typically, taxation always comes into play when individuals relocate from one country to another. This could be both as a result of become taxable in a new country or of any exit taxes applicable in the country where one would be relocating from. It is important to understand when and if such taxes would apply, prior to simply deciding on which citizenship or residence route seems most attractive.
Nicky Gouder
Partner, Seed Consultancy
January 2023