Malta: trading income = foreign-sourced income?

[Roco]

Hi :

Finally
Do you have any news about 3aMalta)
¿What did you do ?

Andorra has new Legislation and i am not sure trading is considered self-employment.
Dubai?

I am looking for a new country for trade for a living but only LEGAL structures.

Thanks in advance

 

[Maverick2608]

Hi :

Do you have any news about 3aMalta)
¿What did you do ?

Andorra has new Legislation and i am not sure trading is considered self-employment.
Dubai?

Hi Roco,
I put Malta on hold because of the pressure for a Eurozone financial transaction tax, although recent news suggests it has now been shelved. I still put Malta on hold because I want to avoid being dependent on advisors charging for complicated schemes whose legality I still need to confirm. Also, “soldintime” lived there for three years and got tired of living on an Island.

It is correct that Andorra has new legislation. However, the new legislation involves a corporate tax rate on non-resident legal entities and VAT. There still is no income tax on residents. It is correct that it is being debated whether to introduce an income tax on residents, but currently there is none.

Dubai is wonderful. However, the long flight is a drawback.

 

[Dareplicant]

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

You can always move to Barcelona and trade from Andorra with a local broker, very close by.

 

[soldintime]

You can always move to Barcelona and trade from Andorra with a local broker, very close by.

That would be a 2 and half hour drive each way. Get a place in 2 countries.

 

[soldintime]

You don't get pastizzi in dubai and andorra

They are cholesterol bombs. I do not miss them.

 

[soldintime]

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.

As an island entity I never enjoyed living there full term. I ended up spending less than 6 months each tax year in Malta. I moved to Andorra, Dubai is way too hot for me and far away from where i want to be.

 

[Counterspell]

I have read that you don't have to pay for abroad capital gains, even if you remit them to Malta. Would winnings from options trading be considered as capital gains and therefore tax free? Or would those capital gains be considered as produced in Malta and therefore taxed?

 

[Maverick2608]

I have read that you don't have to pay for abroad capital gains, even if you remit them to Malta. Would winnings from options trading be considered as capital gains and therefore tax free? Or would those capital gains be considered as produced in Malta and therefore taxed?

What you are writing is correct as regards capital gains. However, if you are trading every day for a living, the gains are not taxed as capital gains. The gains are taxed as business income. As such they are taxed in Malta, because your business activity takes place in Malta. The Maltese tax authorities have confirmed this to me in an e-mail.

 

[Counterspell]

What you are writing is correct as regards capital gains. However, if you are trading every day for a living, the gains are not taxed as capital gains. The gains are taxed as business income. As such they are taxed in Malta, because your business activity takes place in Malta. The Maltese tax authorities have confirmed this to me in an e-mail.

How do they qualify those earnings as capital gains or income? By quantity of operations? By quantity of money won?

 

[Maverick2608]

How do they qualify those earnings as capital gains or income? By quantity of operations? By quantity of money won?

By quantity of operations, i.e. trading frequency and volume. The gain per se is not relevant, it may zero or negative and the activity will still be classified as a business activity.

Do like ´soldintine´ and move to Andorra. The income tax is zero and it is only a few hours’ drive from Barcelona. I will do that myself at some point.

 

[Counterspell]

By quantity of operations, i.e. trading frequency and volume. The gain per se is not relevant, it may zero or negative and the activity will still be classified as a business activity.

Do like ´soldintine´ and move to Andorra. The income tax is zero and it is only a few hours’ drive from Barcelona. I will do that myself at some point.

I also really like Andorra, but I still have to save some money to be able to make that €400 000 investment needed to be a passive resident.

 

[Maverick2608]

I also really like Andorra, but I still have to save some money to be able to make that €400 000 investment needed to be a passive resident.

Be sure that you have time tested your strategy or skills over many years before you make the move.

There is no bigger thrill than to excel on your own in the financial markets. You feel like you can fly and there is only one thing on your mind: how can you escape paying the 30-50% in taxes.

You extrapolate your winnings and think you will become a wealthy man. Then all of a sudden the tide turns and your income drops or even turns negative and you sit in some tax haven having given up your job, fiancé, apartment or house.

Don’t fall into that trap. Make sure you have at least 3-4 years of stable income, i.e. steady income almost every quarter. The market is a bitch that never sleeps. Be sure that you control her, not the other way around, before you give up your life.

 

[Counterspell]

By quantity of operations, i.e. trading frequency and volume. The gain per se is not relevant, it may zero or negative and the activity will still be classified as a business activity.

Would trading 1 day per month or 2 months qualify as income or capital gains? In Malta or abroad?

 

[Maverick2608]

Would trading 1 day per month or 2 months qualify as income or capital gains? In Malta or abroad?

You would have a strong case qualifying that frequency of trading as adjustments to your portfolio, which would imply taxing it as capital gains, in Malta and in every other tax jurisdiction.

However, volume is also important. If you turn over your entire capital each month, the tax authorities could still make a case that you are trading for a living.
The safest option would be simply to ask the tax authorities in Malta or anywhere else whether they qualify your activity as investment management or trading.

 

[zelareka]

about andorra, they now have a 10% income tax.

how does this affect short-term trading gains on derivatives and stocks ?

 

[soldintime]

Andorra

Yes Andorra has now got a 10% income tax. They still have general allowances of 40K before getting taxed. Trading income will be taxed as well.

 

[zelareka]

Yes Andorra has now got a 10% income tax. They still have general allowances of 40K before getting taxed. Trading income will be taxed as well.

I read that stocks short-term trading is still at 0%, is it true?

So derivatives trading is considered income and not capital gains?



http://www.andorra-business.com/taxation-details-in-andorra.asp

Capital Gains Tax
Given that the income tax proposals should hold no fears for most people, the only area of concern is then the new Capital Gains Tax, which is also set at the rate of 10%. This, at the time of going to press, is the subject of some considerable lobbying and so the details will only be resolved when the law and the regulations are passed.
However there is no lobbying on the following cardinal points:

In any situation where you own less than 25% of an entity, there is no Capital Gains Tax liability. Thus, for example, when you sell shares in a quoted company at a profit, there is no liability for tax, unless of course you happen to own more than 25% of the shares of that company. In the event that this were the case, it is almost inconceivable that the person involved would not already have a structure in place for avoiding the tax anyway.
This exemption also neatly covers situations where you earn your "income" by means of short-term trading on the stock market. Any gains that you make and in reality use as income are classed as gains under the Income Tax rules and given the 25% exemption rule, Capital Gains Tax, does not apply either, so there is a zero tax liability.

 

[zelareka]

Yes Andorra has now got a 10% income tax. They still have general allowances of 40K before getting taxed. Trading income will be taxed as well.

read this:

If your personal income from dividends is substantial, it would be wise to re-structure your investments by putting them into a special investment vehicle (known as a SICAV in Andorra), or into a company or a trust outside Andorra and then taking out any income required in the form of reductions in capital, which are expressly excluded from taxation. Income sheltered in companies or trusts is not counted as personal income and therefore is not taxable.