Malta: trading income = foreign-sourced income?

[Maverick2608]

In Malta foreign-sourced income is tax exempt. Income is only taxed when remitted to Malta.

Question: Is trading income from trading US equities through a US broker considered foreign-sourced income?

Qualifications:
For: The exchanges, the securities, the broker, the server and the gains are located abroad.
Against: The person doing the trading is located in Malta.

A tax lawyer once told me that in the UK, where a similar remittance tax system applies to foreign-sourced income, trading income is not considered foreign-sourced.

Your help is greatly appreciated.

Thank you.

Sincerely,
Maverick

P.S. I know that a setup of a trading company and a mother company in Malta combined with a mother company in e.g. Belize will result in a net tax of around 5-8% in Malta. But I am just interested in knowing whether the simpler setup of trading in your own name and paying tax only on remitted income is legitimate.

 

[scose-no-doubt]

Depends on a lot of things

 

[soldintime]

As far as I know. Trades abroad are taxed only on remittance within the same tax year.

In the UK things are complicated - Share trading is income when it is your main source of income and it becomes your job. As a non dom in the UK there are still easy ways of getting around this.

As far as Malta - This tiny island has now investigative resources to know what is going on outside its borders. So hence why remittance is used is this only applies to money remitted to a Maltese bank account.

 

[Maverick2608]

Hi Soldintime,

Thank you so much for your answer.

I have been interested in moving to Malta with my wife, but thanks to your posts and the specter of the EU financial transaction tax I am now looking into Andorra instead. I am Scandinavian and have lived 3 years in New York.

However, in order to fully understand the Maltese system, I will ask the tax authorities in Malta directly whether I can apply the remittance basis on trading income from abroad?

The reason I am in doubt is because I hired a tax consultant who told me that in the UK (non-domiciled) I would not be allowed to use the remittance basis on trading income from abroad because the UK tax authorities perceive the source of trading income to be the UK when I am physically located in the UK while trading irrespective of whether you use an online US broker and trading only US-listed securities.

The tax consultant claimed that he had seen a legal opinion on the issue from one of the big legal firms in London. Due to the close ties between Malta and the UK he believed that the practice in Malta would be the same, although he was not completely sure because he had not seen a legal opinion on the issue from Malta.

I will provide the answer from the Maltese authorities here when I receive it.

Thank you.

Sincerely,
Maverick

 

[soldintime]

Hi Soldintime,

Thank you so much for your answer.

I have been interested in moving to Malta with my wife, but thanks to your posts and the specter of the EU financial transaction tax I am now looking into Andorra instead. I am Scandinavian and have lived 3 years in New York.

However, in order to fully understand the Maltese system, I will ask the tax authorities in Malta directly whether I can apply the remittance basis on trading income from abroad?

The reason I am in doubt is because I hired a tax consultant who told me that in the UK (non-domiciled) I would not be allowed to use the remittance basis on trading income from abroad because the UK tax authorities perceive the source of trading income to be the UK when I am physically located in the UK while trading irrespective of whether you use an online US broker and trading only US-listed securities.

The tax consultant claimed that he had seen a legal opinion on the issue from one of the big legal firms in London. Due to the close ties between Malta and the UK he believed that the practice in Malta would be the same, although he was not completely sure because he had not seen a legal opinion on the issue from Malta.

I will provide the answer from the Maltese authorities here when I receive it.

Thank you.

Sincerely,
Maverick

The same rules do not apply to Malta. But good to find an official answer if you will find one. Check out the british expat forum for Malta. There is a guy called gozomark who has been living for 10 years in Gozo. I believe he uses a top accounting firm in Malta to provide the answer and he has been living tax free for years.

 

[lloydbee]

I am looking forward to hearing how you get on with this....

 

[Roco]

Hi

Any News

Thanks in advance

 

[flashback]

Hi

Any News

Thanks in advance

Quote Up!

I asked to many advisors in Malta, but each one of them has a different view...
The different versions are the following:
1 ) No need of licence and total tax exemption ( if no income remitted in malta )
2) Need of MFSA license but total tax exemption ( if no income remitted in malta )
3) The income arise in Malta ( because you are trading from Malta) so you need a licence if you are doing it from a company, instead as individual the taxation depends on the residence scheme applied ( pro rata - from 0 to 35% - HNWI 15% taxation )

4) other interpretation of law that aren't credible.....


Please let us know a final answer!!!!!!!!!!!!!!

Thanks in advance

 

[LookatMe11]

Basic facts on a maltese company

Maltese aggregation law is principally based on English aggregation law and in acquiescence with EU directives. Main legislation is the Companies Act of 1995. Shipping companies are adapted by the Merchant Shipping Act.

Capital The minimum authorised and issued allotment basic beneath Maltese law is as follows:

• clandestine companies - €1,164.69 with at atomic 20% thereof paid up aloft subscription;

• accessible companies - €46,587.47 with at atomic 25% thereof paid aloft subscription.

Currency The company’s allotment basic may be denominated in any currency. Malta does not accredit any barter ascendancy restrictions and this facilitates the use of Maltese accumulated cars for all-embracing business. Barter accident is added minimized by the actuality that the company’s assets tax is paid in the aforementioned bill of the allotment capital. Any tax refunds are aswell accustomed in the aforementioned currency.

Registration The allotment of a aggregation is done by appointment the all-important affidavit to the Registry of Companies. The affidavit includes the Memorandum and Articles of Association (M&A) calm with an identification certificate of the subscribers, and affidavit that antecedent allotment basic has been paid up. The M&A accept to be active by the subscribers or their attorneys, but charge not be accomplished in foreground of a agent public. This enables subscribers to set up a aggregation after in fact accepting to physically appear to Malta, however, due activity affidavit with account to KYC procedures are required. Once all the affidavit is submitted to the Registry of Companies the aggregation assimilation or allotment is done aural 24 hours.

Fiduciary casework Malta has a absolutely fledged trustee administration and appropriately shares in Maltese companies may be captivated by accountant advisers in a fiduciary adaptation for and on account the subscribers.

Directors and Aggregation Secretary Companies accept to accredit at atomic one administrator and one aggregation secretary. The administrator may be a accumulated article but the aggregation secretary accept to be an individual. As a rule, a sole administrator cannot absorb the column of aggregation secretary as able-bodied unless the aggregation is a individual affiliate aggregation and has an ‘exempt’ status.

General Affairs The accepted affairs charge not be captivated in Malta but may be done via a blast or video conference. Moreover, a aggregation may opt not to assemble a accepted affair if all the shareholders are in acceding and assurance the all-important resolutions.

Annual Acknowledgment & Ceremony Accounts Companies accept to abide an ceremony acknowledgment aloft ceremony anniversary of the company’s allotment date calm with the ceremony fee. After the banking year end, audited banking statements able in accordance with the Companies Act accept to be laid afore and accustomed by the accepted affair of the aggregation and eventually submitted to the Registry of Companies. Companies are accustomed to abide abridged accounts.

Continuation of Companies Maltese law allows companies to change their abode in and out of Malta. Companies affective their abode to Malta accept to appear.

 

[Maverick2608]

I asked the Malta Inland Revenue in an e-mail yesterday.

I will post their answer, when I receive it.

I assume that if you trade through a corporation you can use the popular setup in Malta of two trading companies in malta combined with a mother company in Belize and end up with a net taxation of 5-8%.

However, my question to the Malta Inland Revenue relates to the simpler setup of trading as an individual resident in Malta.

Here is the question I have forwarded to the Malta Inland Revenue:

Dear Inland Revenue,

I understand that non-domiciled foreign holders of a permanent residency permit in Malta are taxable on a remittance basis only.

Question: Is trading income from trading US equities through a US broker considered foreign-sourced income?

Qualifications:
The exchanges, the securities, the broker and the gains are located abroad
The person doing the trading is located in Malta

Your help is greatly appreciated.

Thank you.

 

[Roco]

Thank you Maverick

I look forward to hearing from you. I think that consult the Malta Inland Revenue is the most secure. The question asked is very clear and concise but I fear the worst.

I always prefer the easiest solution but if not possible, could you tell me why is necessary two trading companies in Malta? I thought one malta company and one Belize company was enough

Thanks

 

[metapin]

As far as I know. Trades abroad are taxed only on remittance within the same tax year.

In the UK things are complicated - Share trading is income when it is your main source of income and it becomes your job. As a non dom in the UK there are still easy ways of getting around this.

As far as Malta - This tiny island has now investigative resources to know what is going on outside its borders. So hence why remittance is used is this only applies to money remitted to a Maltese bank account.

Uncorrect. The income obtained with trading/investments as a day-trader or swing trader or even medium/long term does from his house/place IN Malta is taxable as income that has a SOURCE in Malta. This apply to a lot of countries that traders, self advisors - self reading laws, thinks like Hong Kong and Singapore. A lot of countries like UK, Malta etc with special tax regime allow to be not taxed at all but the way to do so is much different and far from what a trader desire. For example investments need to held in hedge funds, mutual funds, managed accounts etc and those need to be really traded by an advisor (no way to cheat using remote servers, false IPs etc, I mean, this is just a way to avoid taxes, but the law is clear, nobody is untaxable as you think as trader doing the trader from Malta).

 

[metapin]

Hi Soldintime,

Thank you so much for your answer.

I have been interested in moving to Malta with my wife, but thanks to your posts and the specter of the EU financial transaction tax I am now looking into Andorra instead. I am Scandinavian and have lived 3 years in New York.

However, in order to fully understand the Maltese system, I will ask the tax authorities in Malta directly whether I can apply the remittance basis on trading income from abroad?

--

You have an honest/good tax advisor for UK... the same you need to find for Malta and you will see that is the same. Your profits will be considered sourced in Malta, all traders should pay 35% income tax.

Who don't pay?

1. self advisors, that are reading laws and make interpretation "dreaming to have found the 0% taxation"
2. bad advisors that will offer structures like trading with offshore companies and/or use an holding to accumulate capital gains done with a maltese LTD and paying just 5% taxation. Again, this is less bad than the previous point, butis against the law, the problem is that Malta is small island, everybody do this things against the law and hope the govt never will do problems because if they stop to allow this systems the island will remain with few investors/money and will go in bankrupt because live of this money and financial matters. But is not a good reason will let you sleep well, you will finish stressed, there are better countries than Malta.

 

[metapin]

Forgot to say to Maverick:

the tobin tax, financial transaction tax, you Can't avoid it moving residenced!!! the tax is on each trades and applied to the exchange/bank/broker, so nobody can avoid it! That's why will crash volumes in the exchanges and eliminate every trader! The unique thing can happen will be that UK will not apply it and will create a new exchange were to trade foreign stocks and derivates tax free but will take time and EU government can impose corporate laws that will restrict even this, it's a war.

 

[metapin]

Quote Up!

I asked to many advisors in Malta, but each one of them has a different view...
The different versions are the following:
1 ) No need of licence and total tax exemption ( if no income remitted in malta )
2) Need of MFSA license but total tax exemption ( if no income remitted in malta )
3) The income arise in Malta ( because you are trading from Malta) so you need a licence if you are doing it from a company, instead as individual the taxation depends on the residence scheme applied ( pro rata - from 0 to 35% - HNWI 15% taxation )

4) other interpretation of law that aren't credible.....


Please let us know a final answer!!!!!!!!!!!!!!

Thanks in advance

In Malta traders get taxed! then they are speaking of somthing else, a license have nothing to do with the personal investments/trading, that I repeat is taxable! I can let you obtain official letters by top auditors stating this. Now way as individual. Who state the contrary is just people that have no fear to get caught in Malta instras of more angry places as Italy, France, Germany, Holland and so on.

 

[metapin]

I asked the Malta Inland Revenue in an e-mail yesterday.

I will post their answer, when I receive it.

I assume that if you trade through a corporation you can use the popular setup in Malta of two trading companies in malta combined with a mother company in Belize and end up with a net taxation of 5-8%.


Thank you.

taxation is 5%

the structure is NOT LEGAL

otherwise why should paid residents 35% tax when EVERY citizen/residents could use this structure to pay for life 5%?

is a crap of Malta, they says "everybody do this" and they will leave you in pace if you pay 5% in Malta... but is not like this, will arrive a day you can get caught specially now with worries around the EU and austerity plans, we need to be more serious.

If Malta want to do a good thing could do more simple things like a 10% flat tax like in Bulgaria, and no capital gain tax or a low 5%. That could be good.

The rest is just a pure illusion in fact any tax advisors will right you that as a trader, resident, you will not be taxed as individual and even not remitting at all the profits in Malta. The souce of you income was in Malta and taxed have to be paid! Then if they don't discover it, could happen in other 27 EU members states too.

So the question is, better to avoid taxes on the Malta sun than on the north of Europe.

 

[canats123]

The same rules do not apply to Malta. But good to find an official answer if you will find one. Check out the british expat forum for Malta. There is a guy called gozomark who has been living for 10 years in Gozo. I believe he uses a top accounting firm in Malta to provide the answer and he has been living tax free for years.

Wow! that's nice then. Is such rule being applied to Malta? I will check for that.

Thanks for your info!

 

[davissjeffer]

The site was very interesting. Malta has always had a full imputation system of taxation, and therefore tax paid by a company is credited in full to the share holder upon the payment of a dividend. The company tax rate is 35% and is equal to the minimum rate of personal tax in Malta. It consists of three categories of distributed reserves as Maltese taxed account, Maltese untaxed account and foreign income account.

 

[Maverick2608]

I finally received the answer from the Malta Inland Revenue Department:
“Any trading income that is made while one is residing physically in Malta is considered as income arising in Malta and taxable in Malta.”

Consequently, I consider the simple setup in Malta as dead.

Dozens of advisors in Malta promote the corporate setup described in this link:
Tax Refunds and Dividend Taxation in Malta -3a Malta

I may forward a question to the Inland Revenue Department to confirm whether this setup is indeed legal.

However, I prefer a simple setup in order to lower the risk of getting caught by legal fine print/details and to avoid too much dependence on legal advisors.

For that reason at the moment I prefer Andorra or Dubai as these locations involve no income tax and thus present a clean and simple setup.

 

[China Diapers]

You don't get pastizzi in dubai and andorra