Table of Contents What the Remittance Basis Really Means Non-Dom Status in Malta: Requirements and Pitfalls When Foreign Income Remains Tax-Free Practical Application for Different Life Situations Common Mistakes and How to Avoid Them Step-by-Step: How to Apply for Non-Dom Status Tax Planning with the Remittance Basis: Strategies and Limits Frequently Asked Questions Imagine earning 80,000 euros a year as a digital nomad, living in Malta, and paying no Maltese tax on most of it. Sounds too good to be true? It isn’t—if you truly understand and apply the remittance basis correctly. Today, I’ll explain how this tax system works, when it applies, and above all: which pitfalls you absolutely need to avoid. After two years of living in Malta and countless conversations with tax advisors, expats, and the occasional frustrated client, I can assure you of one thing: The remittance basis is neither magic nor tax evasion. It’s a legal system Malta offers to certain people—but only if you play strictly by the rules. What the Remittance Basis Really Means The remittance basis is a taxation system in which you pay taxes in Malta only on the income you actually transfer to or use in Malta. Sounds simple? And it is—until you get into the details. Understanding the Basic Principle Imagine you have three pots: Pot 1: Maltese income (always taxable in Malta) Pot 2: Foreign income you bring into Malta (taxable) Pot 3: Foreign income that stays abroad (not taxable in Malta) The trick is to keep Pot 3 as large as possible. But caution: The Maltese tax office isnt naive. They have precise rules for when money is considered brought to Malta. Who Can Use the Remittance Basis? Only individuals with non-domiciled status can benefit from the remittance basis. Non-domiciled (or non-dom for short) simply means: you live in Malta, but your centre of life is somewhere else. This concept is more complex than merely your residence. Important note: I am not a tax advisor. This article provides an overview, but does not replace professional advice. For specific cases, consult a Maltese tax advisor or lawyer. According to Maltese tax law (Income Tax Act, Chapter 123), a person can be non-dom if neither they nor their father was born in Malta or of Maltese origin. It may sound old-fashioned, but it’s the law. The Two Types of Remittance Basis Property Global Non-Dom Malta Non-Dom Annual Fee €5,000 None Minimum Tax €5,000 None Taxation Remittances Only Remittances Only Requirements Not Maltese domiciled Malta resident, not domiciled What does this mean for you? Most expats use the Malta Non-Dom status without an annual fee. The €5,000 option is only worthwhile for those with very high income or highly complex international structures. Non-Dom Status in Malta: Requirements and Pitfalls This is where it gets tricky. Non-dom status is not just a form you fill out. It’s a legal assessment of your life circumstances. The Basic Requirements You can be non-dom if: You were not born in Malta Your father is not of Maltese origin You have no intention of making Malta your permanent home Point three is the crux. “Intention” is hard to prove—or disprove. The Maltese tax office looks at your actual actions: Where are your main personal relationships? Where is your economic focus? Where do you plan to live long-term? Where did your children go to school? Where is your family’s burial place? (Yes, really!) Typical Pitfalls for Non-Dom Status Pitfall 1: The Property Trap You buy an apartment in Sliema for €400,000 and furnish it completely. Suddenly, the tax office argues you intend to stay permanently. Solution: Rent instead of buy, or declare the property as an investment if you must buy. Pitfall 2: The Family Trap Your children attend school in Malta, your spouse works there. These are strong indicators of intent to domicile. You’ll need to be very careful in your reasoning here. Pitfall 3: The Business Trap You start a Maltese business and move all operations to Malta. This can jeopardize your non-dom status, even if it makes sense for tax reasons. Proof and Documentation The Maltese tax office can check your non-dom status at any time. Be ready: Document your ties to your home country Keep a detailed travel log Retain receipts for expenses in your home country Document both professional and personal relationships outside Malta What does this mean for you? Non-dom status is not automatic or forever. You must maintain and be able to prove it. After 15 years in Malta, things become critical—a presumption of domicile applies. When Foreign Income Remains Tax-Free Now for the big question: When do you pay no tax in Malta on your foreign income? The answer is surprisingly complex. The Remittance Principle in Practice You pay Maltese tax only on foreign income you remit (transfer or physically bring) to Malta. But what qualifies as a remittance? Clear Remittances: Direct transfer from your German business account to your Maltese account Paying Maltese expenses with a foreign credit card Bringing cash into Malta Paying Maltese service providers from a foreign account Grey Areas: Using a foreign credit card for Maltese expenses Investing in Maltese property from a foreign account Transfers to family members in Malta The Mixed Fund Doctrine This is where things get really complicated. If you mix different types of income in one account, a special rule applies: For mixed accounts, it is assumed that you use the taxable income first. Example: You have €50,000 from Maltese sources and €100,000 from other EU sources in your German account. If you transfer €30,000 to Malta, it is considered as fully stemming from Maltese sources—and therefore taxable. Strategic Bank Account Management The solution: Keep accounts strictly separate. Account Type Purpose Tax Treatment Malta Account Living costs in Malta All incoming funds taxable Foreign Account A Foreign (non-Maltese) income only Only remittances taxable Foreign Account B Maltese income only Fully taxable Investment Account Foreign capital gains Taxable only on remittance Special Types of Income Investment Income: Dividends and interest from foreign sources are only taxable upon remittance. But: capital gains can sometimes remain tax-free even when remitted. Rental Income: Income from German properties is only taxable in Malta upon remittance. Profits from property sales may in some cases be completely tax-free. Pensions: Foreign pensions are only taxable on remittance—a major advantage for retirees. What does this mean for you? With the right account structure and planning, you can legally keep a large share of your foreign income tax-free. But: every euro you bring into Malta will be taxed. Practical Application for Different Life Situations Let’s bring the theory to life with real examples. Here’s how the remittance basis works for a variety of lifestyles. The Digital Nomad: Luca’s Calculation Luca, 34, a UX designer from Italy, works remotely for German and US clients. Annual income: €75,000. His structure: German business account: all client payments Malta personal account: for living costs only Monthly remittance: €2,500 (€30,000 per year) Tax treatment: Taxable in Malta: €30,000 Tax-free: €45,000 (remains in Germany) Maltese tax: approx. €4,200 (14% effective on €30,000) Savings compared to Germany: approx. €8,500/year Luca’s trick: He only uses his German credit card abroad, not in Malta. When friends visit Malta for vacation, he pays expenses in advance and is reimbursed in cash. The Wealthy Retiree: Dr. Mara’s Strategy Dr. Mara, 61, retired doctor from Zurich, has sold her practice and lives off investment income and her pension. Her portfolio: Swiss pension: €85,000/year Investment returns: €40,000/year Rental income from Germany: €25,000/year Her strategy: Remits only €35,000/year for daily living Luxury spending (travel, car) paid from Swiss account Investment returns are reinvested abroad Result: She pays tax in Malta on only €35,000 (about €3,500), instead of being taxed on €150,000 in Switzerland. The Entrepreneur: Complex Structures This is where things get complicated. If you set up a Maltese company, profits can fall under the Full Imputation System—a different tax regime with refund mechanisms. Common mistake: Many believe they can combine Maltese company profits with the remittance basis. This is only possible in exceptional cases and with very careful structuring. The Workation Generation: Short-Term Stays Anna, 29, a remote project manager, wants to spend three months in Malta. For her, the remittance basis doesn’t apply—she doesn’t become tax resident. Rule of thumb: Under 183 days per year on the island, you’re usually not taxable in Malta. But: there are exceptions, especially if you return frequently. Practical Tips for All Groups Maintain separate accounts: Never mix foreign and Maltese income Document expenses: Every credit card charge in Malta can count as a remittance Watch timing: Remittances are attributed to the year they arrive Plan investment structure: Investment income can often be reinvested tax-free What does this mean for you? The remittance basis works best if you adjust your lifestyle and need only part of your income for spending in Malta. The higher your foreign earnings and the lower your Malta expenses, the more you save. Common Mistakes and How to Avoid Them In two years in Malta I’ve seen many costly mistakes. Here are the most common—and how to avoid them. Mistake 1: The Credit Card Trap The Problem: Marcus uses his German credit card for everything in Malta—restaurants, gas stations, supermarkets. At year’s end, he gets a tax bill for €8,000. Why: Every foreign credit card expense for use in Malta is a remittance. The €45,000 in credit card turnover is regarded as transferred income. The Solution: Use foreign credit cards only when traveling outside Malta Transfer a fixed monthly amount to Malta Pay everything in Malta from your Maltese account Mistake 2: The Investment Confusion The Problem: Sarah buys Maltese government bonds from her German account and assumes this is a remittance. Why It’s a Problem: Investments in Malta can count as remittances—but don’t always. The line is complex and case-specific. Better strategy: Buy Maltese securities only from Maltese accounts For international investments, use foreign brokers Document every investment transfer precisely Mistake 3: The Timing Confusion The Problem: Peter transfers €50,000 to Malta on December 31, but the money arrives only on January 2. Tax consequence: The remittance is attributed to the new tax year—his planning is thrown off. The Rule: The date the money arrives in Malta counts, not the transfer date. Mistake 4: The Family Complication The Problem: Thomas transfers money to his Maltese girlfriend for shared expenses. Risk: Transfers to third parties in Malta can be seen as indirect remittances, especially for family or partners. Clean solution: Partners keep separate finances Each covers their own expenses Shared payments are made from one partners Maltese account Mistake 5: The Documentation Gap The Problem: Lisa can’t prove which transfers came from which income sources during a tax audit. Consequence: The tax office assumes all transfers are from taxable sources. Recordkeeping System: Document Purpose Retention Account statements (all accounts) Proof of income sources 10 years Wire transfer receipts Proof of remittance date 10 years Credit card statements Proof of spending location 10 years Income statements Proof of income type 10 years Mistake 6: Ignoring Double Taxation The Problem: Many forget that their home country can still tax them. Example Germany: Even as a Malta resident, you can remain taxable in Germany if you maintain significant economic ties there. Protection via double tax treaties: Malta has treaties with most EU countries These prevent double taxation But: You must still comply with both countries’ rules What does this mean for you? Most costly mistakes come down to poor recordkeeping or careless payment habits. With a clean system and professional advice, these pitfalls are avoidable. Step-by-Step: How to Apply for Non-Dom Status Non-dom status is not granted automatically. You must apply and provide proof of eligibility. Here’s a practical guide: Step 1: Check the Requirements Before you invest time and money, be honest with yourself: Place of birth: Were you born outside Malta? Father’s origin: Is your father not of Maltese origin? Long-term plans: Do you genuinely not plan to make Malta your permanent home? If you’re unsure about any point, consult a Maltese tax advisor first. Step 2: Gather Documentation Mandatory documents: Birth certificate (certified and translated) Father’s birth certificate Passport Proof of residence in Malta Last year’s tax return Additional proof for a strong application: Rental agreements or property ownership in your home country Business connections outside Malta Family ties in your home country Memberships in clubs, etc. Step 3: Get Professional Help I strongly advise using professional support. The cost (€1,500–3,000) is money well spent. What a good advisor provides: Assessment of your non-dom chances Preparation of all application paperwork Communication with the tax office Strategy advice for optimal tax planning Step 4: Submit to Commissioner for Revenue The application goes to the Maltese tax office (Inland Revenue Department). You submit: Formal application letter: Explanation of your situation Supporting documents: All collected proof Declaration of non-domicile status: Affidavit Step 5: The Review Process Normal processing time: 3–6 months Possible queries: Detailed explanation of your future plans Additional documents Personal interview (rare, but possible) The tax office may give a preliminary confirmation while further reviewing your case. Step 6: Approval and Implementation If successful, you’ll receive official confirmation—usually backdated to the application date. Now you must: Adjust your tax return accordingly Optimize your account structure Set up a remittance tracking system Costs of the Process Item Cost Notes Tax advisor €1,500–3,000 One-off Document translation €200–500 Depending on quantity Certifications €100–200 €20–€50 per document Application fee €0 No official fee Fallback Strategies What if your application is declined? Appeal within 30 days Revise your arguments Alternative: Residence but not domiciled programme What does this mean for you? The non-dom application is not a formality, but with proper preparation and professional help, most eligible applicants succeed. Allow 6–12 months from application to full implementation. Tax Planning with the Remittance Basis: Strategies and Limits After you have non-dom status, the real work begins: optimal tax planning. Here are tried-and-tested strategies and their boundaries. Basic Strategies Strategy 1: Minimize Current Remittances Only bring into Malta what you truly need for daily living. Example: Annual income: €120,000 Malta living expenses: €40,000 Tax savings: about €12,000/year vs. Germany Strategy 2: Strategic Timing Use remittance timing to optimize taxes. Tactics: High remittances in years with low foreign income Low remittances in years with high foreign income Use gap years for large remittances Advanced Strategies Strategy 3: Clean Capital Use savings from before your Malta residency. Money saved before becoming a Malta resident can often be transferred tax-free. This is known as clean capital. Important: You must be able to prove when and how this money was earned. Strategy 4: Investment Structuring Smart investing for maximum tax benefit. Investment Type Tax Treatment Recommendation EU stocks (accumulating) Capital gains often tax-free Very good Foreign property Only remitted income is taxable Good Offshore bonds Complex rules Expert advice needed Cryptocurrency Legal situation unclear Caution Strategy 5: Corporate Structures For entrepreneurs: combining with Maltese entities. This gets very complex. Malta offers various corporate forms with different tax advantages. Some can be combined with the remittance basis. Important programmes: Malta Global Residence Programme Malta Residence and Visa Programme Highly Qualified Persons Rules The Limits of Tax Planning Limit 1: Substance requirements You need real economic substance in Malta. Shell companies no longer work. Limit 2: EU Directives The EU is steadily tightening anti-avoidance rules. Malta must comply. Recent developments (2024/2025): Stricter substance requirements New reporting obligations for tax setups Closer cooperation between EU tax authorities Limit 3: Home Country Rules Even Malta can’t prevent your home country from taxing you. German-specific rules: Exit taxation for shareholdings Extended tax liability for German-source income CFC rules for low-tax countries Long-Term Planning The 15-Year Horizon After 15 years in Malta, your non-dom status is automatically re-examined. Plan ahead: Years 1–10: Full advantage of the remittance basis Years 11–14: Gradual adjustment of structure Year 15+: Alternative strategies or relocation Exit Strategies Plan scenarios: Move to another tax-friendly EU country Return to your home country with optimized setup Switch to full Maltese taxation with other benefits Compliance and Risk Management Yearly checks: Is non-dom status still valid? Is remittance tracking accurate? Have legal changes occurred? Any optimization potential? Documentation system: Quarterly remittance reports Annual tax planning with expert Ongoing monitoring of legal developments What does this mean for you? The remittance basis is a powerful tool, but not a perpetual motion machine. It requires continuous planning, professional advice, and adjustments as circumstances change. With the right strategy, you can enjoy significant tax savings over many years. Frequently Asked Questions Can I become non-dom in Malta as a German citizen? Yes, your citizenship is irrelevant. What counts is that you were not born in Malta and your father is not of Maltese origin. Most EU nationals can apply for non-dom status. How much tax do I actually save with the remittance basis? That depends on your income and Maltese spending. With €100,000 annual income and €30,000 Malta spending, you can save roughly €10,000–15,000 per year compared to Germany. The higher your income and the lower your remittances, the more you save. How long does non-dom status approval take? Usually 3–6 months. In complex cases, it can take up to a year. A provisional confirmation is often possible after 4–8 weeks. Will I lose non-dom status if I buy property in Malta? Not automatically, but it is a risk factor. Buying property can be seen as intent to domicile. If you do buy, document that it’s an investment or that you have strong continuing ties to your home country. Can I combine the remittance basis with a Maltese company? This is very complex and structure-dependent. Profits from Maltese companies usually fall under different tax rules. A combination is possible but requires very specific structuring and professional advice. What if I spend more than 183 days outside Malta? You may lose your Maltese tax residency. The remittance basis would then not apply. But: Even with less than 183 days in Malta, you can in certain situations be considered resident. Do I have to pay German tax if I am non-dom in Malta? That depends on your situation in Germany. If you fully give up German tax residence, usually not. But: for certain German-source income or shareholdings, German taxes may still apply. How often is non-dom status reviewed? Theres no fixed review schedule, but the tax office can check at any time. Common triggers: changes in your lifestyle, large remittances, or random audits. After 15 years in Malta, review is automatic. Can I lose my non-dom status? Yes, if your circumstances change or you break the rules. Common reasons: developing an intent to domicile, permanently leaving Malta, or breaching remittance rules. Is the remittance basis worthwhile for low incomes? Below €50,000 per year, the effort is usually not worth it. Advisory fees and admin often outweigh the savings. It’s best to do a precise calculation with a tax advisor.
