The Nomad Residence Permit enables third country nationals* who can prove that they are working remotely from Malta, using telecommunications, to legally reside and work from Malta, when the entities or customers to whom they are providing services have no presence in Malta.
On December 7th 2023, the Ministry for Finance and Employment has issued Updated Nomad Residence Permits Rules, LN 277 of 2023, coming into effect on 1st January 2024.
The most significant change concerns the income tax for Digital Nomads, rule 3 (sub-rules 1-3).
Before:
Nomad Residence Permit holders were subject to income tax at progressive rates, with the top rate being of 35%, as residents.
And at the same time, Digital Nomads could mitigate the tax burden in Malta using the double taxation relief as per Malta's tax treaties (was available only for Digital Nomads who were being tax residents in one of the contracting states of the tax treaty**). Consequently, those Digital Nomads were at times not be subject to personal income tax in Malta since their employment was already were taxed at origin, the tax due was considered settled through double taxation relief provisions and the permit was a temporary basis of stay.
Now:
Nomad Residence Permit holders will be subject to income tax at a rate of 10% on income derived from "authorised work". The earliest this low-income tax rate will apply is as from the basis tax year commencing 1st January 2024. This is substantial reduction from the progressive rate of taxation.
Digital Nomads are still able to benefit from the double taxation relief as per Malta's tax treaties, and in such case, they must provide proof of paying taxes outside Malta at a rate of at least 10% on such income, and therefore that would not have to pay the 10% income tax in Malta.
- Authorised work is defined as work with a non-resident employer who does not carry on business in Malta through a fixed place of business, or services performed on a self-employed basis for clients who do not reside in Malta and who do not carry on a business in Malta through a fixed place of business.
- Regarding any other income derived not from the authorised work, such as dividends, interest and so on, it will be subject to the general taxation rules as per Malta's Income Tax Acts.
- The Rules also prescribe reporting obligations. Digital Nomads have the obligation to register for income tax purposes – report the income received, file an annual income tax return, and pay tax as per above.
- A permit granted for the Digital Nomad to reside in Malta may be extended, and from an income tax perspective may be renewable for a further two-year period.
* Non-EU citizens. Nationals from the currently ineligible countries of (or have close ties with) Afghanistan, North Korea, Iran, Democratic Republic of Congo, Somalia, South Sudan, Sudan, Syria, Yemen and Venezuela are not eligible. Additionally, applications from the Russian Federation and the Republic of Belarus are currently not eligible. The list of ineligible countries may be revised from time to time by the Agency, at its discretion.
** List countries Malta has signed double tax treaties can be found here https://cfr.gov.mt/en/inlandrevenue/itu/Pages/Double-Taxation-Conventions.aspx
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.