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Capital Gains Tax in Malta

Capital Gains Tax in Malta

The capital gains tax applies to real estate properties, stocks, bonds, jewelry, and other assets. Such a tax is paid only on realized gains after the sale of the assets. There are some important facts to consider about the capital gains tax in Malta. Our tax lawyers in Malta are here to provide legal advice and assistance for those wanting to register for taxation in Malta.

Capital gains for transfer of assets in Malta

The Maltese legislation clearly specifies the types of assets for which the capital gains tax is imposed. In most cases, intellectual property and securities are subject to the capital gains tax in Malta, plus related instruments. Such gains are usually included in the taxable income of the company or individual in the calculation of the tax rate. It is worth stating that the capital gains arising outside of Malta are only taxable in Malta if they accumulate to taxpayers who are residents and domiciliated in this country. We can assist foreigners to register for taxation in Malta. Besides that, starting a business in Malta enters the attention of our tax lawyers in Malta, so feel free to discuss it with us at any time.

What you need to know about property transfer in Malta

The transfer of immovable property in Malta is subject to the Property Transfer Tax or PTT instead of capital gains tax. In other words, the PTT is the cost of the transaction and not a tax imposed on the element of gain. The tax is set at 8% of the selling price or transfer value, yet there are a few exceptions for properties acquired before 2004. Also, if the property is sold within 5 years from the acquisition, the PTT is set at 8%.

Is there an income tax for foreign-sourced capital gains in Malta?

The foreign-sourced capital gains are not subject to the income tax in Malta, even if remitted to a Maltese bank account. As an example, there is no income tax imposed on capital gains for selling or buying shares on foreign stock markets, according to the Maltese tax legislation.

This is a huge tax advantage for foreigners in Malta. Also, there is no wealth tax, no gift tax, and no inheritance tax imposed in Malta, other great tax benefits. It is a known fact that Malta has a relaxed tax regime compared to other European countries, and this is why many foreign entrepreneurs decide on doing different types of businesses in the insular state. If you need advice and legal support, please discuss it with our lawyers in Malta.

The HNWI residence scheme in Malta

The High Net Worth Individual residence scheme is a programme meant to attract foreign investors in Malta who can benefit from a series of tax advantages and many more. The foreign-sourced income remitted to a bank account in Malta is subject to a flat rate of 15% for HNWI permit holders. The foreign-sourced capital gains remitted in Malta or not are not subject to taxation.

However, HNWI permit holders must observe the annual tax that ranges between EUR 20,000 and EUR 25,000. In the case of foreigners with a residence permit in Malta, there is no income tax imposed on any kind of foreign-sourced capital gains remitted in Malta or elsewhere. If you need legal guidance for starting a company in Malta, do not hesitate to talk to our attorneys in Malta. We can handle all the business registration formalities in Malta.

Capital gains tax in Malta on other assets

tax lawyer in Malta can tell you how capital gains tax is calculated on other assets as well. For example, trademarks, patents, and intellectual property can be exempt from this tax, if they are owned by a holding company in Malta.

Owners of jewelry or collectors of such assets must consider capital gains tax in Malta and prove that they are registered in this country for the payment of taxes.

An individual may be taxed on income and capital gains arising in Malta and from foreign source income which is remitted to Malta even if such person was resident in Malta. It is good to know that tax is charged on capital gains registered outside Malta, even if they are remitted in this country.

We invite you to discuss more about this topic with our tax lawyers in Malta.

Tax relief for reinvestments

Where an asset that is the subject of capital gains and has been used in a business for at least 3 years is transferred and replaced by an asset for use for a similar purpose in Malta, any capital gain arising from such transfer will not be levied. Even so, the purchase price of this asset is reduced by the realized gain. If the asset is sold without being replaced, then the total profit made by the respective company will be taken into account and will be reduced by the acquisition cost and the transfer price.

If an asset is transferred to a company that is part of a group of companies, then it is considered that no gain results. This is also valid for situations where the two companies are at least half controlled and effectively owned, directly or indirectly, by the same shareholders.

About withholding tax in Malta

A major advantage of the taxation system in Malta is that this country does not impose any withholding tax when assets or shares are transferred to a Maltese company. There is, however, a transfer of shares that is subject to document tax. There are also exemptions for firms making such transfers after obtaining an exemption from this tax. In addition, this exemption is granted to the company whose commercial interests are outside Malta and the shareholders of this company are not resident in the country.

We invite you to discuss all these aspects with one of our tax lawyers in Malta. They can provide you with complete details about capital gains tax in Malta and everything that this type of taxation entails.

Malta, an important financial center

The Maltese financial sector has developed rapidly in recent decades, largely supported by the fact that the country is part of the European Union. The legislative framework provides trust among foreign investors, and the majority of investments are directed to the financial sector, the most prolific in the country.

The above aspects, together with the government’s intention to strengthen Malta’s position as a European center of excellence in financial services and foreign affairs, provide an ideal functioning environment for business, guaranteeing the assignment of Malta as the locator of the worldwide financial sector, aligning with well-known powerful centers.

Making investments in Malta

Malta is a great business destination for all foreigners interested in a solid and reliable business climate that provides a series of advantages. The tax structure is extremely appealing and relaxed, plus, it presents a series of benefits, among which, no capital gains tax for selling or buying shares on foreign stock markets.

Besides the attractive tax regime, Malta offers a skilled workforce and foreign investors can rely on the well-educated labor force and qualified workers available. Sectors like tourism, real estate, communications, financial and insurance sectors, gaming, and pharmaceuticals are among the ones that receive a large amount of foreign direct investments. Here are some facts and figures that show the economy and business direction of Malta:

  • Approximately USD 231 billion was the total FDI stock registered in Malta in 2020.
  • About 99% of the total FDI stock is directed to the financial and insurance activities in Malta.
  • More than 31,000 companies with activities in Malta have foreign stockholders.

Entrepreneurs interested in more details about the capital gains tax in Malta are invited to contact our law firm in Malta. We are here to provide immediate legal advice and assistance.