Table of Contents Malta Tax System 2025: The Essentials You Really Need Germany vs Malta Taxes: Concrete Calculation Examples for the Self-Employed Austria and Switzerland Compared to Malta: What Entrepreneurs Need to Know Malta Tax Advantages for International Entrepreneurs: Reality vs. Marketing Step-by-Step: How to Legally Optimize Your Taxes in Malta Malta Taxes 2025: Common Mistakes and How to Avoid Them Sitting here by the sea in Malta, working on my German tax return for last year, I think to myself: “If only I had known this sooner.” Not because Malta is some kind of tax haven—it really isn’t. But because the differences between the tax systems are so complex, even my tax advisor in Germany sometimes gets confused. Are you considering moving to Malta? Then let me be honest: The promise of “5% taxes in Malta” is just as misleading as the claim that the sun always shines here. Spoiler: It rains in Malta, too. And taxes? They can actually be higher than in Germany, depending on your personal situation. In this article, I’ll show you what Malta really costs—with real numbers, concrete examples, and no sugarcoating. Because you deserve to know what you’re getting into before you take the plunge and change your life. Malta Tax System 2025: The Essentials You Really Need The Maltese tax system is like a well-guarded family recipe—everyone claims to know it, but the details remain vague. Let me break it down for you, no law degree required. The Maltese Tax System at a Glance Malta has a nominal corporate tax rate of 35%—sounds steep, right? But here’s the twist: As an EU member with a special refund system, the effective tax burden can be much lower. The magic word is “Imputation System”—a system where taxes are paid upfront but partly refunded later. The main tax rates in Malta (as of 2025): Corporate tax: 35% (with refund options) Personal income tax for residents: 0% up to 35% (progressive) Personal income tax for non-residents: 15% flat rate on Malta-sourced income Value-added tax (VAT): 18% (standard rate) The interesting thing: Malta draws a sharp distinction between “residents” and “non-residents,” as well as “domiciled” and “non-domiciled” persons. This distinction can mean thousands of euros difference each year. Non-Dom Status: Your Key to Tax Optimization The Non-Dom Status (non-domiciled resident) is at the heart of tax planning in Malta. As a Non-Dom, you only pay tax in Malta on income that: Is generated in Malta Is from abroad but remitted to Malta Meaning: If you earn money abroad and leave it there, it stays tax-free in Malta. Sounds too good? It kind of is—the conditions are tough. Requirements for Non-Dom Status: You must be a Maltese tax resident (at least 183 days in Malta) Your domicile (main home for tax purposes) is outside Malta You pay a minimum annual tax of €5,000 (from your second year in Malta) If your income exceeds €35,000, the minimum tax increases to €15,000 What does this mean for you? In theory, you can earn millions abroad and pay only the minimum tax in Malta—as long as the money doesn’t enter the country. In practice, it also means: You live here, but your money remains “trapped” abroad. The 35% Rule and the Refund System This gets a bit technical, but stick with me—it’s important. Malta has various “Participation Exemptions” and refund rules that can reduce your effective tax burden: Type of Income Initial Tax Rate Possible Refund Effective Burden Passive income (dividends, interest) 35% Up to 30% refund 5% Trading income 35% Up to 25% refund 10% Foreign income 35% Up to 30% refund 5% But beware: These refunds are only available under certain conditions, and often only after the end of the financial year. You have to pay the full 35% upfront first. Germany vs Malta Taxes: Concrete Calculation Examples for the Self-Employed Enough theory—let’s do the math. I’ll show you three realistic scenarios and compare the tax burden in Germany with Malta. Spoiler: The results may surprise you. Example 1: IT Freelancer with €80,000 Annual Revenue Anna is 32, works as a front-end developer, and earns €80,000 gross per year. She’s single, has no children, and lives frugally. Germany (simplified): Income tax: ~€16,500 Solidarity surcharge: ~€900 Church tax (optional): ~€1,300 Health insurance: ~€7,200 (private insurance) Pension insurance: ~€6,400 (mandatory for IT professionals) Total burden: ~€32,300 (40.4%) Malta (Non-Dom Status): Malta minimum tax: €5,000 Private health insurance: ~€2,400 Private pension provision: ~€4,800 (optional but recommended) Tax advisory/compliance: ~€3,000 Total burden: ~€15,200 (19%) Savings: €17,100 per year But hold on—that’s only half the truth. Anna needs to consider: Higher cost of living in Malta (+15-20%) Annual travel to Germany (~€2,000) More complex tax situation and risks No statutory pension insurance in Germany Actual savings after factoring in all aspects: ~€8,000 per year. Example 2: Online Shop Owner with €150,000 Profit Marco runs a successful online shop and earns €150,000 profit per year. He’s married, his wife doesn’t work, and they have two children. Germany (married couple): Income tax: ~€35,400 Solidarity surcharge: ~€1,900 Trade tax: ~€5,250 (varies by location) Family health insurance: ~€11,700 Pension insurance: ~€6,400 Total burden: ~€60,650 (40.4%) Malta (corporate structure): Corporate tax: €52,500 (35% of €150,000) Trading income refund: -€37,500 (25%) Effective corporate tax: €15,000 (10%) Dividend tax Marco: €0 (Non-Dom) Family minimum tax: €15,000 (income > €35,000) Family health insurance: ~€8,400 Tax advisory/compliance: ~€8,000 Total burden: ~€46,400 (30.9%) Savings: €14,250 per year Marco also needs to keep in mind: Substance requirements: Office in Malta required (~€12,000/year) Regular presence in Malta required Complex international tax situation EU tax audit risks Example 3: Consulting Business with €250,000 Revenue Dr. Schmidt runs a successful consulting firm and earns €250,000 profit annually. He’s divorced, pays alimony, and has high business expenses. Germany: Income tax: ~€89,400 Solidarity surcharge: ~€4,900 Trade tax: ~€8,750 Health insurance: ~€11,700 (max contribution) Pension insurance: ~€6,400 Total burden: ~€121,150 (48.5%) Malta (optimized structure): Corporate tax: €87,500 (35%) Refund: -€62,500 (25%) Effective corporate tax: €25,000 (10%) Personal minimum tax: €15,000 Health insurance: ~€6,000 Tax advisory/compliance: ~€15,000 Malta substance costs: ~€25,000 Total burden: ~€86,000 (34.4%) Savings: €35,150 per year For Dr. Schmidt, the effort is generally worth it—the savings are substantial and justify the complexity. Austria and Switzerland Compared to Malta: What Entrepreneurs Need to Know “But I’m from Austria/Switzerland—aren’t taxes already lower?” I hear that a lot from readers. It’s partly true, but let’s look more closely. Malta vs Austria: Detailed Tax Calculation Austria has one of the highest tax burdens in the EU. For entrepreneurs, Malta can be quite appealing. Austria (Example: €120,000 profit): Income tax: ~€32,400 (27%) Social security: ~€18,000 (15%) Chamber levy: ~€1,200 Total burden: ~€51,600 (43%) Malta (same structure as before): Effective corporate tax: €12,000 (10%) Minimum tax: €15,000 Health insurance: ~€3,600 Compliance costs: ~€6,000 Total burden: ~€36,600 (30.5%) Savings: €15,000 per year For Austrian entrepreneurs, Malta is often more attractive than for Germans, as the local base tax rate is even higher. Malta vs Switzerland: Is the Move Worth It? Switzerland is a different beast. Here, it’s tough for Malta to keep up. Switzerland (Canton Zug, CHF 150,000 profit): Income tax: ~CHF 18,000 (12%) Social security AHV/IV/EO: ~CHF 12,600 Health insurance: ~CHF 4,800 Total burden: ~CHF 35,400 (23.6%) Malta (€150,000 ≈ CHF 160,000): Effective corporate tax: €15,000 Minimum tax: €15,000 Health insurance: ~€4,800 Compliance: ~€8,000 Total burden: ~€42,800 (28.5%) For Swiss nationals, Malta is usually not attractive from a tax perspective. Other factors may count more: climate, EU access, lower cost of living. EU Compliance and Substance Requirements Regardless of your country of origin—the EU tightened its Anti-Tax Avoidance Directive (ATAD) in 2018. This means: Proof of substance required: Office, staff, real business activity in Malta Economic Substance Test: Activities must be economically meaningful Automatic exchange of information: Your home country will learn of your Malta structure CRS reporting: Accounts and incomes are reported automatically What does this mean for you? Pure mailbox companies no longer work. You need to establish real substance in Malta—and that costs money. Malta Tax Advantages for International Entrepreneurs: Reality vs. Marketing Now it gets real. Most articles about Malta taxes read like advertisements. I’ll tell you what really happens when you arrive here. The Real Costs of a Malta Move The “5% Malta tax” advertising leaves out a few key details. Here’s the full cost breakdown for a typical setup: Cost Item One-Time Annual Note Company formation €3,500 – Minimum—can be higher Tax advisory €2,000 €8,000 More for complex setups Nominee services – €3,600 Local director required Malta office €5,000 €12,000 Substance requirement Bookkeeping – €4,800 Professional bookkeeping necessary Compliance/auditing – €6,000 For companies above a certain size Apartment Malta €6,000 €18,000 Deposit + rent for residency Total Year 1 €16,500 €52,400 €68,900 total Subsequent years – €52,400 Excluding taxes! In other words: Even at 0% tax, Malta will cost you at least €52,400 per year. Taxes are on top of that. Minimum Stay and Substance Proof This is where many Malta dreams collide with reality: Residence requirements: At least 183 days in Malta (for tax residency) Maximum 183 days in your home country (otherwise you remain taxable there) Documented presence (flight tickets, credit card statements) Center of vital interests demonstrably in Malta Substance requirements for companies: Management and control in Malta Reasonable number of local employees Real business activity, not just administrative tasks Adequate office space and equipment What does this mean for you? You have to genuinely live and work here. A couple of weeks at the beach won’t cut it. Risks and Pitfalls When Setting Up in Malta I know plenty of entrepreneurs who failed in Malta. The most common problems: 1. Aggressive tax audits in your home country Germany, Austria, and other EU countries examine Malta structures very closely. A lack of substance can mean years of retroactive taxes due. 2. Double taxation Poorly designed structures can result in taxation in both countries. A Munich tax advisor told me of a client who ended up paying 60% tax. 3. Ongoing compliance requirements Malta has strict reporting and documentation duties. Missed filings are punished harshly. 4. Changes in legislation What is legal today may change tomorrow. The EU continually puts pressure on Malta. 5. Personal factors Not everyone can handle spending 183+ days a year on a 320 km² island. The sense of isolation can be difficult. Step-by-Step: How to Legally Optimize Your Taxes in Malta If you’re still convinced after all these warnings—here’s your roadmap. I’ll explain every step so you don’t get any nasty surprises. Check Requirements: Am I a Good Fit? Before you spend a cent, honestly review these criteria: Financial requirements: At least €100,000 annual profit (otherwise the hassle isn’t worth it) Liquid funds for 1–2 years of setup costs (~€150,000) Stable, predictable income streams A business model that works location-independently Personal requirements: Willingness to live in Malta for at least 6 months/year No strong family ties in your home country Good English for dealing with authorities Resilience to handle complex tax situations Business requirements: Your business must be presentable in Malta No regulated industries (banking, insurance, etc.) International client base (local Malta business is tough) Be honest: Do you tick all the boxes? If not, save yourself the trouble. Setting Up a Malta Company: Process and Costs Made your decision? Here’s how it goes: Phase 1: Preparation (2–4 weeks) Find a tax advisor in Malta and in your home country Choose company form (usually a Private Limited Company) Reserve company name Identify office space (don’t rent yet) Prepare formation documents Phase 2: Incorporation (3–6 weeks) Register company with the MFSA (€245) Open bank account (the hardest part!) Tax registration VAT registration if needed Appoint nominee director (if required) Phase 3: Setup (2–3 months) Rent and fit out office Hire local staff (at least part-time) Set up IT infrastructure Transfer business activity to Malta Prepare first tax filings Detailed costs: Item Cost Note Setup fees €3,500–5,000 Depending on complexity Legal advisory €5,000–10,000 For structuring Bank account setup €2,000–5,000 Often tricky, requires support Office setup €10,000–20,000 Deposit + basic furnishing Marketing/website €3,000–8,000 For Malta presence Applying for Non-Dom Status: Your 2025 Guide Non-Dom status is not automatic—you have to apply for it and prove eligibility. Required documents: Proof of Maltese tax residency Evidence of foreign domicile Income statements from the past 3 years Bank confirmations for foreign accounts Statement of planned duration of stay Application process: File application with the Maltese tax authority (IRD) Authorities’ review (2–6 months) Answer any additional queries If approved: Annual renewal required Key deadlines: Apply by March 31 of the following year Pay minimum tax by June 30 Late payment: penalties and interest Pro tip: Apply as early as possible. Maltese authorities are thorough but slow. Malta Taxes 2025: Common Mistakes and How to Avoid Them After three years in Malta and countless chats with other expats, I’ve seen the typical pitfalls. Here are the main mistakes and how to steer clear: Mistake 1: Not Enough Substance in Malta Many underestimate substance requirements. A virtual office and a few emails are not enough. You need: Real business activity in Malta Local employees (at least part-time) Regular business meetings on-site Documented decision-making processes in Malta Mistake 2: Underestimating Home Country Tax Obligations “Im taxable in Malta”—that doesn’t prevent follow-up demands from your home country. Check: Extended limited tax liability (Germany) Withholding tax on German clients Trade tax on German branch offices CFC taxation on mailbox companies Mistake 3: Poor Documentation Malta structures are under particular scrutiny. Document everything: Periods of residence (flight tickets, receipts) Business decisions made in Malta Proof of substance Compliance measures Mistake 4: Unrealistic Expectations About Quality of Life Malta is not Munich with sunshine. The reality: Limited cultural offerings High rents in good areas Traffic jams and construction sites Few local business opportunities Mistake 5: Underestimating Ongoing Costs Annual costs are higher than most think: Tax advisory: €8,000–15,000 Compliance/auditing: €5,000–10,000 Office costs: €12,000–24,000 Travel expenses home: €3,000–6,000 Higher cost of living: €6,000–12,000 My advice: Calculate realistically and plan for a test phase of 2–3 years. Malta is a marathon, not a sprint. If you want to succeed here, you need patience and realistic expectations. What’s the bottom line? Malta can be attractive tax-wise—but only if you follow the rules to the letter. Half-hearted solutions just lead to expensive headaches. If you’re still interested: Get professional advice from experienced tax consultants in both countries. And remember: The taxes you save are worthless if you’re unhappy on an island, missing your old life. Frequently Asked Questions (FAQ) Is Malta really a tax haven? No, Malta is not a classic tax haven. It’s an EU member state with a regular tax system, but special schemes like Non-Dom status and refund mechanisms allow for lower effective tax rates. The advertised “5% tax” is only achievable under very specific conditions and with significant added costs. How much do I need to earn for Malta to be worthwhile? As a rule of thumb, aim for at least €100,000 in annual profit. For lower amounts, the annual compliance costs (~€50,000) will eat up your tax savings. At €150,000+ profit, Malta can get interesting—at €250,000+, even more so. Do I really have to spend 183 days in Malta? Yes, to obtain Maltese tax residence you need at least 183 days in-country—and you must document this. At the same time, you can’t spend more than 183 days in your home country, or you’ll remain taxable there. This is a real residence shift, not just an extended holiday. Can I simply move my German/Austrian company to Malta? A direct transfer is very complex and often tax-unfavorable. Usually it’s better to set up a new Maltese company and gradually transfer business operations. But this does require real substance in Malta—mailbox companies don’t work anymore. What happens if EU laws change? Malta is under constant scrutiny from the EU Commission. Legal changes are possible and likely, so Malta should never be your only pillar of tax planning. Stay flexible and have backup options. How do I find a reputable tax advisor in Malta? Look for advisors with international experience who know both Maltese and German/Austrian tax law. Important: Ask for references and check credentials. Cheap providers often lead to costly problems later. Can employees benefit from Malta’s tax advantages? Opportunities are very limited for employees. The Non-Dom status works mainly for the self-employed and entrepreneurs. Employees pay regular income tax in Malta up to 35%. The only exception: if your salary is paid abroad and remains there. What about health insurance in Malta? Malta has a public health service, but most expats opt for private health insurance (€2,400–8,400/year). The quality is generally good, but for complex treatments, many people travel to Germany or elsewhere in the EU. What are the main risks with a Malta structure? The biggest risks are: 1) Aggressive tax audits in your home country if you lack substance, 2) Double taxation from a poorly designed structure, 3) High ongoing costs eating up savings, 4) Changes in EU law, 5) Personal dissatisfaction with living on a small island. Is Malta worthwhile for Swiss nationals? For Swiss, Malta is usually not attractive tax-wise, since Switzerland already has low tax rates (especially in cantons like Zug). Malta makes more sense for Germans and Austrians with heavy tax burdens. Swiss nationals usually choose Malta for lifestyle reasons: EU access, climate, lower cost of living.
