The Maltese way of taxing capital gains can be one of the more attractive tax-related factors drawing expats and retirees to Malta. Compared to other developed countries, Malta taxes capital gains – generally speaking, the profits arising from the disposal of shares, property, ownership of private businesses and the like – in a very favourable way. Most of the time, non-domiciled residents of Malta are not charged at all for any capital gains arising outside the country. Many can be understandably excited at the prospect of selling their shares and incurring no tax!
Which Capital Items Are Taxed in Malta?
Note that several exceptions exist (see below) for foreigners residing in Malta.
- Gains or profits generated from transferring ownership or rights over any immovable property or assigning usage rights to it.
- Gains or profits resulting from transferring ownership, rights, or assignments concerning securities, businesses, goodwill, business permits, copyrights, patents, trademarks, trade names, or any other intellectual property.
- Profits from transferring the beneficial interest in a trust. This includes transferring full or partial beneficial interests, disclaiming interests, or no longer being a beneficiary of the trust.
- Profits originating from transferring securities via de-grouping provisions and transferring value in securities through the value-shifting provision. These are pretty advanced restructuring operations that don’t normally affect private investors.
- Profits resulting from transferring ownership, rights, or assignments concerning any partnership interest.
Which Capital Items Are Not Taxed?
- Sale of bonds and government stock
- Sale of shares which are not classified as securities
- Sale of antiques and paintings
- Sale of second hand cars
- Sale of jewellery
Taxes Associated With Immovable Properties (Property Transfer Tax)
It’s important to emphasise that this tax isn’t based on profits but rather on the initial transaction cost. The tax is typically 8% of the selling price or transfer value, with some exceptions for properties bought before 2004. Additionally, if the property is sold within 5 years of purchase, the tax drops to 5%.
Malta’s Capital Gains Tax Applicable to Stocks and Shares
Concerning the sale of assets, individuals or businesses in Malta are typically subject to a flat rate of 35% for capital gains tax. Nonetheless, there may be exemptions in certain cases.
Capital gains tax may apply to certain securities in Malta. For instance, assets acquired through share purchases are often subject to stamp duty tax (this tax typically applies only to Maltese securities, not foreign ones), calculated based on the market value at the time of acquisition (the net value of combined stocks and/or shares).
The tax rates are as follows:
- A fixed 2% of the current market value.
- 5% if 75% of any immovable assets are within Maltese legal jurisdiction.
In case of a loss, a group company can transfer these losses to another group, provided the common shareholding between them exceeds 50%. However, such transfers must be completed within the same fiscal year.
Cases Where No Capital Gains Tax Is Due in Malta
As mentioned at the beginning of the article, non-doms (broadly speaking, this applies to any resident of Malta who isn’t a Maltese citizen) generally benefit from an exemption from tax on capital gains, as long as those gains arise outside Malta – think for instance of a US retiree who lives in Malta who sells their shares in Apple held in their 401(k).
- Gross Foreign Capital Gains – An individual residing in Malta but not officially domiciled there will not need to pay taxes on capital gains earned outside of Malta, even if those gains are brought into Malta, provided they can be evidenced with supporting documentation. Such individuals would only be taxed in Malta on foreign income brought into the country, highlighting the importance of identifying the source of remittance to Malta, whether it’s in the form of capital or income, for tax purposes.
- Capital Gains Related to Individuals Not Residing in Malta – Individuals who are not official residents of Malta or are classified as temporary residents will not face taxes on capital gains earned outside of Malta. They will only be responsible for capital gains generated within Malta.
- Stocks, Shares and Asset Transfer Exemptions – The exchange of shares held by an individual, within a group of companies, for shares in another company or companies within the same group.
- Fixed-Rate Investments – Assets generating a fixed rate of return, like certificates of deposit (aka CDs), money market funds, and corporate bonds, won’t incur capital gains tax in Malta if they’re subjected to a final withholding tax.
It’s important to highlight that the particular structures implemented can offer significant advantages, especially for individuals with substantial investments. The framework is crafted to optimise returns from asset sales, presenting a notable benefit, especially for former residents of countries with high tax rates such as the Nordics, other European countries and most US states.
Important: You May Still Need To Pay Tax Abroad
It may not be obvious to everyone that, while Malta won’t generally tax gains on sales of assets occurring outside the country, the country where that asset is located may. This most often happens with property sales. Think for instance of a British pensioner living in Malta and selling their second home in France or in the UK itself: while Malta won’t tax any gains arising from the sale, tax will need to be paid in the other country. Furthermore, for those countries that impose an exit tax on former residents – it is the case, for instance, of Denmark, which assumes in certain conditions that your assets are “sold” the moment you leave the country, and capital gains tax becomes payable accordingly – becoming a tax resident of Malta won’t prevent the other country from taxing you. Keep in mind that you’ll very often be able to offset foreign tax paid against your tax liabilities in Malta.
Conclusion: Malta’s Treatment of Capital Gains Can Be Very Advantageous For Expats
In conclusion, understanding capital gains tax rules is crucial for effective tax management and compliance with local regulations. Navigating Malta’s capital gains tax regulations can be particularly beneficial for individuals seeking to engage with a diverse financial environment. Remember, staying informed and proactive about your tax obligations can lead to better financial outcomes in the long run. For more guidance on this topic, you are welcome to contact our experts at Expatax.mt
English 
Danish 
French 
German