New Tax Rules for Digital Nomads in Malta - Introduction
On 7 December 2023, Malta’s Finance Minister announced the implementation of the Nomad Residence Permits (Income Tax) Rules 2023.
These rules offer a beneficial tax regime for digital nomads, reducing their tax burden and simplifying compliance.
Overview of the New Tax Rules
Reduced Tax Rate
Individuals with a valid nomad residence permit will be taxed at a flat rate of 10% on income derived from “authorised work”.
This is a notable decrease from Malta’s progressive tax rate, which can go up to 35%.
Definition of “Authorised Work”
"Authorised work" refers to services provided remotely through telecommunications technology by a main applicant either employed by a non-resident employer or self-employed for clients not residing or operating in Malta.
Double Taxation Relief
Eligible individuals can benefit from double taxation relief as per Malta’s tax treaties, provided they meet the criteria of being a tax resident in one of the contracting states.
Exemption Period
A 12-month exemption period from income tax on authorised work is available, starting either from the issuance of the nomad residence permit or 1 January 2024, whichever is later.
This exemption aims to ease the transition for new permit holders.
Conditions for Exemption
To qualify for the exemption, applicants must declare that their residence in Malta during this period is not merely temporary.
However, the exemption does not apply to those whose nomad visa has expired within two years, although they can still benefit from the reduced tax rate.
Taxation of Other Income
Income not derived from authorised work will be subject to Malta’s general taxation rules under the Income Tax Act.
Reporting Obligations
Nomad visa applicants must file income tax returns and register for income tax in Malta.
During the first twelve months, income from authorised work is exempt from reporting unless a specific declaration is made.
Proof of foreign tax payment at a rate of at least 10% exempts applicants from reporting that income in Malta, with the responsibility of forwarding proof lying with the Residency Malta Agency.
Implications for Digital Nomads
These new rules make Malta an attractive destination for digital nomads.
The reduced tax rate, combined with the initial tax-exempt period, provides significant financial benefits.
Additionally, the clear definitions and simplified reporting obligations facilitate compliance and reduce administrative burdens for digital nomads.
The approach acknowledges the growing trend of remote working and positions Malta as a forward-thinking jurisdiction that caters to the needs of this emerging workforce segment.
It offers a viable option for digital nomads seeking a tax-efficient base while maintaining compliance with international tax norms.
New Tax Rules for Digital Nomads in Malta - Conclusion
In summary, Malta's new tax rules for digital nomads offer an enticing mix of reduced tax rates and simplified procedures, likely to attract more remote workers to its shores.
Final thoughts
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