Malta vs Cyprus vs Estonia vs UAE paired with NHR

[Marzio]

Again will everything be tax free if I don't remit anything to Malta?

If your LLC makes more than 35K you'll have to pay 5K tax even if you don't remit anything to Malta.

Other than this 5K flat tax, you'll pay tax only on money remitted to malta.

 

[GrumpyMess]

2. Sign 1-year rent contract for apartment (and stay for more than 190 days).

How strict are the checks, given that Malta is in Schengen? Will it be possible to take the ferry to Italy and then spend time in Europe?

 

[Sols]

How strict are the checks, given that Malta is in Schengen? Will it be possible to take the ferry to Italy and then spend time in Europe?

As a general rule, no one checks just the average person who otherwise isn't drawing any attention. But if it's questioned, it's up to you to prove that you were in Malta.

If that happens, the tax authority sends you an invoice and it's up to you to prove them wrong. Until you prove them wrong, the invoice is due and any late payment penalties will stack up.

 

[OffshorePhantom]

As a general rule, no one checks just the average person who otherwise isn't drawing any attention. But if it's questioned, it's up to you to prove that you were in Malta.

If that happens, the tax authority sends you an invoice and it's up to you to prove them wrong. Until you prove them wrong, the invoice is due and any late payment penalties will stack up.

In theory, at least in Italy, if Malta is not in your home country blacklist (or whatever country the tax authority claiming your residency is) it is up to them to find proof that you were not staying in Malta.
On the contrary if Malta is on their blacklist it is up to you to prove you stayed there.

 

[GrumpyMess]

As a general rule, no one checks just the average person who otherwise isn't drawing any attention. But if it's questioned, it's up to you to prove that you were in Malta.

If that happens, the tax authority sends you an invoice and it's up to you to prove them wrong. Until you prove them wrong, the invoice is due and any late payment penalties will stack up.

I mean to get a tax residence certificate from Malta

 

[FantomOffshore]

I would still remit a little more than personal allowance which for a single person is something like 9K and pay very minimal taxes just to prove that i'm doing things by the book.

Not remitting anything is not credible.

That's exactly what I will do this year. I was already thinking about how it would work with rent, and reading this thread again put a mischievous grin on my face. It were really your posts about Malta that made me decide to move to Malta, I signed a lease and will settle there for the coming year(s). I will complete the set-up this month in terms of business and will fly in a few weeks. So thanks, again!

My plan in terms of set-up:

- UK LTD for consulting / software work billed to US / EU clients through Wise and Upwork. It might be tricky with VAT (still need to do a consultation for this).
- Cyprus company for e-commerce

- Crypto entity in St. Kitts & Nevis for other business, not sure how this will work if it is considered a "Maltese company" as well, but still figuring this one out and likely will work around it being considered Maltese by having a partner establish more substance in the UAE and me just being a minor shareholder.

I will remit about 9K not including rent to my Maltese bank account, which will be subject to personal income tax. In effect, I would then pay 5K taxes only, will likely do a little more than 9K, pay some extra tax, as a bit of insurance.

Next on my list is to plan for a holding company that can take dividends from the UK LTD as well as the Cypriot company that I can use with IBKR.

Anyway, really glad I found the Maltese set-up. I love Malta for its proximity to Sicily (possibility to get there with ferry is just amazing) and it not being even further away from EST time-zone than say Cyprus. Then the local cuisine and mixture of Mediterranean life with the British post-modern colonialism is quite sweet too. Mid-week trips to Rome or anywhere in Italy, getaways to Southern-France, all within 1/2 hour flight times.

Saw quite some hate on Malta here, and not sure if I understand why.

 

[Marzio]

I will complete the set-up this month in terms of business and will fly in a few weeks

Have you validated the setup with a Maltese professional before proceeding?

 

[FantomOffshore]

Have you validated the setup with a Maltese professional before proceeding?

I will do it once I am on the ground, I simply had to move, or I would be at risk of being considered a tax resident in my domicile country again this year. I did check with a personal friend who works at big four, and he said it would work. If you want, you can DM me, I did some other verifications. Once all is done, I will of course report my experience here as well.

 

[Marzio]

I did check with a personal friend who works at big four, and he said it would work.

Great!

Once all is done, I will of course report my experience here as well.

That's the best way to give back to the community

 

[FantomOffshore]

Great!

Having spend some time reading the Income Tax Act of 1949 with its amendments has me doubting the structure. The reason for this it that I wonder if income is considered foreign if the resident non domiciled company is managed from Malta by someone who is staying there for more than 180+ days under the Economic Self Sufficient scheme (ESS), taking into account that all the income is received to a UK LTD from solely non-Maltese clients. Not really familiar with UK / Commonwealth / Former colonies' taxation, though.

When I read:

Malta Income Tax Act: Chapter 123. Part II: Imposition of Income Tax: 4.1:

(g) gains or profits not falling under any of the foregoing
paragraphs:

Provided that:

(i) in the case of income arising outside Malta to a
person who is not ordinarily resident in Malta or
not domiciled in Malta, the tax shall be payable
on the amount received in Malta;

And then the statement from the commissioner, I think this structure only works if you are for example selling stuff with performing any work?

When looking at the document again from: https://cfr.gov.mt/en/inlandrevenue... for Individuals under the Income Tax Act.pdf, it states:

Income derived from employment or from a profession, business or other self-employment arises in Malta if the activities are performed in Malta.

It is hard for Malta to check, and I wonder if they care, but I guess I will have to do a consultation soon.

 

[Marzio]

It is hard for Malta to check, and I wonder if they care, but I guess I will have to do a consultation soon.

That's a good idea

 

[ilpablo]

Hi there, please correct me if I'm wrong with my understanding of this scheme.

- So if I move to Malta, should I apply as a self-sufficient resident non-domiciled.
- I can incorporate an LTD Uk company and only pay CT and personal taxes according to Maltese laws which are:

• There is an exemption for the first €8,500
• 15% up to €14,500
• 25% up to €60,000

- If you reach the 35k threshold of remitted income, a flat tax of 5k applies for all the remitted income


So let's do a few examples:

A) Company makes 80k/year. Profits after expenses are 30k. I remit 20k in Malta.

Should I pay in Malta the following?

• here is an exemption for the first €8,500
• 15% up to €14,500
• 25% up to €20,000

B) Company makes 1M/year. Profits after expenses are 800k. I remit 100k in Malta.

Should I just pay 5k in Malta?

C) Company makes 1M/year. Profits after expenses are 800k. I remit 30k in Malta.

Should I just pay the same taxes as example A?



Can someone also help me clear these doubts?

1) I own a WISE corporate account and a Revolut personal account. If I change my residence to Malta, any amount of money received into this account will be counted for remittance basis calculation (even if the Revolut account is based in Lithuania)?

2) Should I open a local bank account to keep track of the remitted income?

3) If you buy an apartment, will you lose the self-sufficient non-dom residence and become an ordinary resident and pay normal taxes?

4) According to this statement from the Maltese tax office it seems that you can stay even less than 183 days if you have a permanent domicile (I guess a rental contract is required):

Residence and ordinary residence2.1. Residence does not depend on nationality or any other civil status but is a question of fact. A person may be resident in Malta even if he is also a resident for tax purposes in another country.2.2. Presence in Malta for more than 183 days in any particular year amounts to a residence in Malta for that year, regardless of the purpose and the nature of the individual’s stay in Malta. An individual who comes to Malta to establish his residence here becomes a 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 ordinarily resident in Malta. A person who is in Malta for a temporary purpose may become ordinarily resident in certain circumstances. This would apply, for example, to individuals who are in Malta for more than 183 days each year 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 who establish personal and economic ties with Malta.


Thanks to anyone who will contribute to solving this puzzle!

 

[JimBeam]

I have researched this topic and didn't found all the answers but I'll share what I have been able to discover. If you're non-dom in Malta, you basically pay a minimum €5k/year tax and that covers about €35k remitted to Malta.

Case A)
If you remit 20k to Malta you would basically have to pay €5k flat tax.
You would file a tax report that you have remitted €20k that year and they would calculate the amount you need to pay and since it's below €5k you would have to top it up to €5k.

The math:
€0 - 8.500 - tax free = €0
€8.500 - €14.500 - 15% tax - €6.000 x 15% = €900
€14.500 - €60.000 - 25% tax - €5.500 x 25% = €1.375
Total €900 + €1.375 = €2.275


Case B)
If you remit 100k the math will look like this

The math:
€0 - 8.500 - tax free = €0
€8.500 - €14.500 - 15% tax - €6.000 x 15% = €900
€14.500 - €60.000 - 25% tax - €45.500 x 25% = €11.375
above €60.000 - 35% tax - €40.000 x 35% = €14.000
Total €900 + €11.375 + €14.000 = €26.275


Case C)
Pretty similar to A) so for 30k you would still pay €5k flat.

The math:
€0 - 8.500 - tax free = €0
€8.500 - €14.500 - 15% tax - €6.000 x 15% = €900
€14.500 - €60.000 - 25% tax - €15.500 x 25% = €3.875
Total €900 + €3.875 = €4.775

About your other questions:
1. You can initially bring any amount of money to Malta (tax free) before becoming non-dom.
2. You can but you can even report money you brought in cash or money you spent using your foreign CC.
3. I don't think so - but please double check.
4. Not sure about that one either.

What I was not been able to figure out is: if you run your UK or any other company from Malta - would Maltese tax man consider your UK company a local Maltese company then since it's actively managed from Malta and then apply their tax laws to your company (35% corporate tax rate).

 

[JustAnotherNomad]

if you run your UK or any other company from Malta - would Maltese tax man consider your UK company a local Maltese company then since it's actively managed from Malta and then apply their tax laws to your company (35% corporate tax rate).

I think you can do that, and then you could pay 5% (35% and 30% refund).
Not sure if they actually go after people though, you'd probably have to apply for the status explicitly.
See also this thread: The treaty non-resident UK Ltd. - the best-kept offshore secret?

 

[uncreative]

4) According to this statement from the Maltese tax office it seems that you can stay even less than 183 days if you have a permanent domicile (I guess a rental contract is required):

Residence and ordinary residence2.1. Residence does not depend on nationality or any other civil status but is a question of fact. A person may be resident in Malta even if he is also a resident for tax purposes in another country.2.2. Presence in Malta for more than 183 days in any particular year amounts to a residence in Malta for that year, regardless of the purpose and the nature of the individual’s stay in Malta. An individual who comes to Malta to establish his residence here becomes a 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 ordinarily resident in Malta. A person who is in Malta for a temporary purpose may become ordinarily resident in certain circumstances. This would apply, for example, to individuals who are in Malta for more than 183 days each year 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 who establish personal and economic ties with Malta.

Yes, this is correct, you dont have to stay 183 days in Malta to get a Tax Residency.
I doublechecked this law with some tax advisors. You will also get an official tax certificate if you have enough connections to the country, e.g. your sole residence (rented or bought), a company, friends or family. However, the prerequisite is always that you do not spend 183 days in another country.

This is also the reason why digital nomads choose Malta as their home base. They are usually only in Malta 2-3 months a year and otherwise travel the world. A commonly international recognized and safe setup.

But it is similar in other countries, enough connections to the country are enough to become a tax resident, even without observing the 183 days.

 

[stivemoose]

Hello, I seem to have a question and might be missing something.

OP was aiming to optimize their new Non-Habitual Residency (NHR) status in Portugal. Why wouldn't they consider utilizing an LLC in Delaware and then declaring the lucros di impresas (business profits) as dividends from that particular company?

Under this approach, Portugal wouldn't inquire about the specific company from which dividends are received. Although the LLC itself may not generate dividends, how would they differentiate the declared income as originating from the LLC?

Is this strategy considered to carry any significant risks?

Thank you.

 

[Sols]

OP was aiming to optimize their new Non-Habitual Residency (NHR) status in Portugal. Why wouldn't they consider utilizing an LLC in Delaware and then declaring the lucros di impresas (business profits) as dividends from that particular company?

Under US law, LLCs do not distribute dividends. Maybe Portugal considers income from an LLC dividends, though. Have there been any rulings or guidances issued about it?

Under this approach, Portugal wouldn't inquire about the specific company from which dividends are received.

Why not?

Although the LLC itself may not generate dividends, how would they differentiate the declared income as originating from the LLC?

That's the neat part about tax evasion. It's not up to the tax authority to prove you're guilty. It's up to you to prove you're innocent.

Is this strategy considered to carry any significant risks?

Not especially, so long as Portugal continues to not enforce its tax laws. But it's not specific to running a US LLC.

Probably a lot like Malta and Cyprus, Portugal sees more value in having wealthy foreigners residing there and letting some degree of tax evasion slide, so long as they aren't being egregious or (otherwise) criminal.