Malta finally announced long-awaited tax legislation on income tax for digital nomads, offering a 12-month exemption from the date of nomad residence permit issuance and a subsequent 10% tax rate on authorized remote work, complete with double taxation relief and specific reporting requirements.
Malta Digital Nomad Tax Rules, Past Issues
The promise of a 0% income tax for digital nomads under Malta’s Nomad Residence Permit initially positioned the island nation as an attractive destination for remote workers. However, Global Nomad Guide’s investigation revealed a mismatch between what the Residency Malta Agency promised and the actual legal provisions. Permit holders were facing potential tax obligations if they stayed in Malta for more than 183 days, contrary to earlier assurances.
Malta’s Response to Tax Exemption Confusion
In response to the concerns raised by the digital nomad community and media outlets like Global Nomad Guide, the Maltese government, specifically the Ministry of Home Affairs and the Residency Malta Agency, finally took action. it took almost a couple of years but in December 2023 Malta finally announced long-awaited tax legislation on income tax for digital nomads, offering a 12-month exemption from the date of nomad residence permit issuance and a subsequent 10% tax rate on authorized remote work, complete with double taxation relief and specific reporting requirements.
They worked to align the Residency Malta Agency’s statements with Malta’s Income Tax laws, ensuring that existing Nomad Residence Permit holders would not be negatively impacted.
Malta Digital Nomad Tax Rules
Key Points of the Legislation:
- 12-Month Tax Exemption: The new rules clarify that digital nomads will not be charged income tax on earnings from authorized remote work for the first 12 months following the issuance of their nomad residence permit, or from January 1, 2024, whichever is later, provided their residence is not of a casual nature.
- 10% Tax Rate Post-Exemption: After the initial 12-month exemption period, digital nomads will be taxed at a rate of 10% on chargeable income derived from authorized work. This is a significant reduction from Malta’s standard tax rates.
- Authorized Work Definition: The legislation defines authorized work as remote services provided under specific conditions, aligning with the nature of digital nomad work.
- Double Taxation Relief: The new rules also incorporate provisions for relief from double taxation, making it more financially viable for nomads who might be paying taxes in other jurisdictions.
Impact on Digital Nomads
The legislation provides much-needed clarity and legal backing to the initial promises made by the Maltese government. This move not only reinforces Malta’s commitment to the digital nomad community but also establishes a clear, favorable tax environment for remote workers choosing Malta as their base.
Conclusion
With the introduction of this new tax legislation, Malta has taken a significant step in supporting the growing digital nomad community. By providing legal clarity and favorable tax conditions, Malta reaffirms its position as a leading destination for digital nomads. This development is not just a resolution to a previously confusing situation but a testament to Malta’s proactive approach in adapting to the needs of modern, mobile professionals.
Source: Legislation Malta
Actually, the new law leaves more problems, just like the original law did. Examples: (1) If the nomad is performing work that is not within the definition of “authorised work” and that work is not taxed anywhere else and they bring the income into Malta, then it falls into tax in Malta at full normal taxation rates. (Perhaps the nomad is exempt IF they do not bring the funds into Malta under Malta non-dom rules.) (2). Spouses and income earning children are left entirely outside the scope of the tax exemption and 10% tax. So any income they bring into Malta is fully taxed in Malta.
The next question is this: For income fully taxed in Malta does the nomad and / or their income earning spouse need. Pay social taxes in malta? How does that tie in with needing private health insurance under the nomad scheme?
Thank you for your insightful comments on the article regarding Malta’s new income tax rules for digital nomads. Let me try to address the issues you’ve raised:
Taxation on Non-Authorized Work: If a digital nomad’s income is not derived from “authorized work” and it is brought into Malta, it will indeed be taxed at Malta’s normal rates. However, if the nomad qualifies as a non-domiciled resident and does not remit this income to Malta, it could remain untaxed under Malta’s non-dom rules.
Taxation for Spouses and Income-Earning Children: The current tax exemption and the 10% tax rate apply specifically to the primary holder of the nomad residence permit. Unfortunately, any income brought into Malta by spouses or income-earning children falls under the standard taxation rules and would be fully taxed.
Social Taxes and Health Insurance:
Social Taxes: Digital nomads and their income-earning spouses who are fully taxed in Malta are required to pay social security contributions. This is in line with the general obligations for residents earning an income in Malta.
Health Insurance: Under the nomad residence permit scheme, nomads are required to have private health insurance coverage from the start of their stay. This requirement is distinct from the social security obligations and must be met irrespective of any social tax contributions.
Nice summary, thank you. What about social taxes that includes national government health insurance coverage? Is paying that also not applicable during the first 12 months? Or does paying for that start when the first residency permit is issued?