When moving to another country, it is useful to understand the difference between Domicile and Residency as expats often question the difference. GCS Malta’s professionals have prepared the following article for you to acquaint yourself with the two terms better.
What is Domicile?
It refers to the permanent location known as your home. A person is entitled to only one domicile and is assigned automatically at your birth to the same place as your parents. Also known as your domicile of origin. Being aware of your domicile is essential for tax purposes. At the age of 18, one can change their domicile should they satisfy specific criteria and provide evidence. The following minimum requirements need to be met:
- Leaving the country in which you are, at the time of application, domiciled and settled in another country
- Provide strong evidence that you intend to live in your location permanently or indefinitely
What is Residency?
It gives an individual the right to work, live, travel, study and set up business in a particular country. Malta Residency and VISA Program (MRVP) and Global Residence Program (GRP) are two Residency programmes that grant non-European nationals and their families to settle in Malta. However, it is wise to note that there is a difference between being a resident and a tax resident in Malta.
An ‘ordinary resident’ refers to an individual who spends the majority of 183 days or more each year in their home country. Individuals who spend a more significant period overseas than in Malta are not considered an ‘ordinary resident’. When being present in Malta for 183 days or more, you qualify for a Tax Residency.
Specific factors are taken into consideration when determining an individual’s residency:
- Place of abode;
- Physical presence, i.e. more than 183 days;
- Regularity and Frequency of visits;
- Intention to reside in Malta;
- Ties of birth;
- Ties of the family;
- Business ties.
For individuals who possess a dual residence, tax treaties resolve the issue with the consultation of a tax advisor.
Tax Status
For the tax residency certificate to be granted, several documents are requested to provide an individual physically resides in Malta.
- Proof of utility bills (water and electricity);
- Bank Transactions (money spent in Malta);
- Rental/purchase agreements.
The certificate is available for application yearly and is issued by the Maltese tax authorities. The Malta tax status is awarded to an individual who acquires a residency through GRP and TRP programmes.
Taxes for Expats
Taxation in Malta on an individual’s income is based on a progressive model, meaning, the higher the income, the higher the tax is paid.
An incentive scheme launched in Malta targeted towards international executives who are highly qualified foreign personnel can benefit from a flat personal income tax rate of 15% on income up to €5 million. This incentive is meant for individuals who come from services, gaming and aviation sectors. Income earned that surpasses the €5 million benchmark, will not be subject to income tax. The executives must earn a minimum of €86,385 per year to qualify for this scheme.
Why GCS Malta?
At GCS Malta, we can provide you with quality, tailored advice that helps relieve the pressures associated with making complex tax decisions and ensuring that you adhere both to best practice and the law. Our services offer a comprehensive range of tax advisory, tax compliance and a variety of specialist corporate services to our extensive array of international clients. Get in touch with one of GCS Malta’s professionals today on info@gcsmalta.com for further assistance.
