European
and other pensions can be remitted to Malta free from income tax
and taxed in Malta at 15%
Malta
has negotiated 34 Double Taxation treaties (click
here for a list of treaties). Not many persons who
are in receipt of a pension in one of these thirty-four counties know
that in terms of the Double
Taxation Treaties, such pensions who take up residence in Malta
can have their pensions remitted to them in Malta free of any income tax
in the state where the pension arises.. The remitted pension is then
taxed in Malta at just 15% allowing for substantial savings to be made.
Depending on the particular double tax treaty, the
scheme may not be available to pensions paid by, or out of funds created by
the government and paid to an individual in respect of services
rendered to the government. This therefore excludes civil service pensions and
similar state pensions.
The
foreign pension which is remitted net of any foreign tax to Malta is then taxed at
15% in Malta, provided the pensioner has obtained a Maltese Permanent
Residence Permit. Assuming
for example that the tax on pensions is 40% and it therefore becomes immediately obvious that
any such pensioner who takes up Maltese residence and remits his pension to
Malta will make a tax saving of 25% on his or her entire pension,
particularly for persons who are in receipt of higher pensions.
Permanent
Residence Permits are granted on condition that the applicant has a
clean criminal conduct and is in receipt of annual income (or pension,
or both) of at least €25,000. The
net yearly minimum cost of having a residence permit in Malta is
€9,000 consisting of a required minimum annual rental of €4,500 and a minimum
income tax liability of €4,500.
A quick
calculation will therefore show that any person in receipt of a
pension in excess of €50,000 annually and who pays a national tax of
40% or more will begin saving on tax
liability once he or she takes up residence in Malta.
Below is a calculation of the
potential savings based on a pension being taxed at 40%.
|
Pension
|
40%
tax
|
Malta
tax and PRP costs
|
Net
savings
|
|
50,000
|
20,000
|
16,500
|
3,500
|
|
75,000
|
30,000
|
19,500
|
10,500
|
|
100,000
|
40,000
|
24,000
|
16,000
|
|
200,000
|
80,000
|
39,000
|
41,000
|
|
300,000
|
120,000
|
54,000
|
66,000
|
Apart
from the substantial savings, such pensioners would be living in Malta
which is now a European Union country and is completely English speaking
with a good standard of living, making the tax saving all the more
attractive.
If you wish
to learn more about Malta's attractive residence scheme for foreigners,
please go to our Malta
Residence Pages.
Residence