Guidance Note
The Remittance Basis of Taxation for Individuals
under the Income Tax Act

1. Introduction
1.1. Depending on the residence and domicile of the individual, liability toMaltese income tax arises - on a worldwide basis, or- on a remittance basis, or- on a territorial basis
1.2. The worldwide basis of taxation applies to the income of persons who areordinarily resident and domiciled in Malta. It also applies to persons who
hold the status of long-term resident or are in possession of a permanent
residence certificate or a permanent residence card (as defined in theStatus of Long-Term Residents (Third Country Nationals) Regulations andthe Free Movement of European Union Nationals and their Family
Members Order). In the case of a married couple living together, if one of
the spouses is ordinarily resident and domiciled in Malta, the worldwide
basis of taxation applies to the income and capital gains of both spouses1.
.
1.3. Under the worldwide basis of taxation, all income and capital gains are
subject to Maltese tax regardless of where they arise and where they arereceived.
1.4. The remittance basis applies to persons who are either not domiciled or
not ordinarily resident in Malta. The remittance basis also applies, undercertain conditions, to returned migrants.
1.5. Under the remittance basis of taxation - all income arising in Malta is subject to tax, regardless of where it isreceived- income arising outside Malta is subject to Maltese tax only if and to theextent that it is received in Malta- capital gains arising outside Malta are not subject to tax, even if they arereceived in Malta

1 “Spouse” includes a partner in a registered civil union

1.6. Persons who are not resident in Malta are subject to tax only on income
arising in Malta (territorial basis).
1.7. Certain exemptions may be available, including the exemptions for nonresidents under article 12(1)(c) of the Income Tax Act.
1.8. Subject to certain limitations, individuals to whom the remittance basis oftaxation applies are subject to the special rule providing for a minimum tax
liability as explained in section 6.
1.9. The application of the general rules described above depends on themeaning of various basic terms and concepts, including - Residence and ordinary residence- Domicile- Income arising in Malta- Income received in Malta
1.10. These guidelines set out the meaning of these terms as applied by theOffice of the Commissioner for Revenue to individuals.
2. Residence and ordinary residence
2.1. Residence does not depend on nationality or any other civil status, but is aquestion of fact.
A person may be resident in Malta even if he is also resident for tax
purposes in another country.
2.2. Presence in Malta for more than 183 days in any particular year amounts
to residence in Malta for that year, regardless of the purpose and the natureof the individual’s stay in Malta. An individual who comes to Malta toestablish his residence here becomes resident from the date of his arrival,
regardless of the duration of his stay in Malta in any particular year.
2.3. A person who lives in Malta on a permanent or indefinite basis is ordinarilyresident in Malta. A person who is in Malta for a temporary purpose may
become ordinarily resident in certain circumstances. This would apply, forexample, to individuals who are in Malta for more than 183 days in eachyear over a long period - say, for three consecutive years. It can also apply
to individuals who do not stay in Malta for more than 183 days in any year
but who come to Malta regularly over a long period - say, over a period of
three years – and establish personal and economic ties with Malta.
2.4. An ordinary resident loses his residence status if he leaves Malta
permanently or indefinitely. If he is temporarily absent from Malta, hecontinues to be considered as resident here unless his absence is or becomesinconsistent with a residence status. This depends on the circumstances ofeach case and, in particular, on the personal and economic ties that theindividual may have retained with Malta.
3. Domicile
3.1. Individuals who are in Malta and consider Malta as their permanent homeare domiciled in Malta. “Home” here refers to the place where a person
belongs and implies stronger ties with a country than residence.
3.2. Domicile does not depend on nationality.
3.3. Every individual acquires domicile at birth (domicile of origin). This isnormally the domicile of the parents, regardless of the place where theindividual is born.
3.4. An individual may change his domicile of origin and acquire a domicile ofchoice. A domicile of choice in a particular country is acquired when theindividual takes up residence in that country with the intention of making
that country his permanent home. A person who takes up residence in acountry, even if for a long or indefinite period, does not acquire domicile inthat country if he has the intention of returning some day to his country ofdomicile or of settling some day somewhere else.
3.5. No individual can be without a domicile and no individual can have morethan one domicile at the same time. An individual does not lose his domicileof origin unless and until he acquires a domicile of choice. If an individualacquires a domicile of choice, he can change domicile again by taking up a
new domicile of choice or returning to the country of his domicile of origin.
If an individual abandons a domicile of choice without establishing his
permanent home in any other country, his domicile of origin will revive
automatically.
4. Arising in Malta
4.1. Income derived from employment or from a profession, business or otherself-employment arises in Malta if the activities are performed in Malta.
4.2. For double taxation treaty purposes, liability to Maltese tax on income froman employment may depend on the duration of the employee’s stay in
Malta, and liability to Maltese tax on income from a profession or business
may depend on whether those activities are carried on through a fixedplace of business in Malta or not. Unless the provisions of a double taxationagreement are applicable, however, the duration of the stay in Malta andthe existence or otherwise of a fixed place of business in Malta are notdetermining factors.

4.3. It is to be noted, nonetheless, that incidental or ancillary links to Malta are
not sufficient in order to establish where the activities are performed. Forexample, a person whose business or employment is based outside Malta
is not considered as deriving income from Malta simply because he makes
occasional visits to Malta. The delivery of goods or services to customers inMalta, or the storage, display or promotion of goods or services in Malta, is
not enough to conclude that the income from the sale of those goods orservices arises in Malta.
4.4. Passive income arises in the country where the source is situated. Rent andother income from immovable property arises where the property islocated. Rent or other compensation for the use of tangible or intangible
movable property is usually treated as arising in the country where thelessee is resident or carries on his business. Dividends are normally treatedas arising in the country where the paying company is incorporated whileinterest is treated as arising in the country where the debtor is resident.
4.5. Capital gains arise in Malta if the asset that is transferred is situated inMalta.
5. Received in Malta
5.1. Income is received in Malta if it is paid to the recipient in Malta. Income
paid into an account held abroad is also treated as received in Malta if it issubsequently remitted to Malta.
5.2. Proceeds of a capital nature, such as an inheritance or the proceeds fromthe sale of a capital asset, are not income and the receipt in Malta is not
captured under the remittance basis.
5.3. Remittances to Malta for ordinary expenses, such as living expenses, arepresumed to be remittances of income unless proven otherwise, regardlessof the foreign account out of which the remittance is made. Whenremittances are made for a capital purpose, such as the purchase ofproperty in Malta, and the individual can show that they originate frommoneys held abroad as capital, such as an inheritance or the proceeds fromthe sale of capital assets, they will be regarded as remittances of capital.
6. Minimum tax liability for non-domiciled individuals
6.1. The remittance basis of taxation carries with it the obligation of theindividual to pay a minimum amount of tax in Malta.
6.2. The minimum tax liability for non-domiciled individuals is €5,000 per
annum. This amount includes any Maltese tax withheld at source but does
not include any tax payable upon the transfer of immovable property

situated in Malta in terms of article 5A of the Income Tax Act. This
minimum is reduced by any double taxation relief due to the individual.
Double tax relief can only be claimed on income that is actually remitted toMalta on which tax has been paid abroad.
6.3. The minimum tax liability for non-domiciled individuals does not apply toindividuals whose foreign income is less than €35,000. In the case of amarried couple, the €35,000 threshold is to be calculated by reference tothe total income of the couple and the minimum tax of €5,000 is applicableto the couple.
6.4. The individual may opt to be taxed on a worldwide basis, instead of theremittance basis, if his tax liability on a worldwide basis is less than theminimum tax.
6.5. The minimum tax liability for non-domiciled individuals described above
does not apply to individuals who are beneficiaries of any of the following
schemes:- the returned migrants scheme- the Residents Scheme- the scheme for high net worth individuals (EU/EEA/Swiss nationals)- the scheme for high net worth individuals (non-EU/EEA/Swiss nationals)- the Residence Programme- the Global Residence Programme- the Malta Retirement Programme
6.6. These notes are not meant to offer guidance on special schemes. Individuals
benefitting under special schemes are advised to consult the relevant rules
both in connection with the special tax rates and minimum tax liability
applicable to them as well as in connection with the conditions of theireligibility.