Tax residency Comparison: Cyprus vs Malta Tax Resident program
Both Cyprus and Malta are popular destinations for individuals seeking tax efficiency, but they have distinct differences in their tax regimes. Here’s an in-depth look at how these two jurisdictions compare:
Non-Domicile Status Cyprus vs Malta
Cyprus: Offers a Non-Domicile (Non-Dom) status that exempts foreign income, dividends, and interest from taxation for 17 years. Cyprus residents with Non-Dom status do not pay the Special Defence Contribution (SDC).
Malta: Operates a remittance-based tax system for non-domiciled residents. This means that foreign-sourced income is only taxable if remitted (brought into) Malta. However, the minimum annual tax on foreign income is €5,000.
Advantage: Cyprus provides broader tax exemptions, particularly for non-domiciled residents, without requiring a minimum annual tax on foreign income.
Personal Income Tax Rates in Cyprus and Malta
Cyprus: Individuals enjoy progressive tax rates, starting at 0% up to €19,500 of annual income, with a maximum rate of 35% on income above €60,000. Additionally, Cyprus offers a 50% exemption on personal income for high-earning expatriates (income above €55,000) for up to 17 years.
Malta: Malta’s tax rates are also progressive, but with higher effective rates, reaching up to 35% on income above €60,000, without the specific expatriate exemptions that Cyprus offers.
Advantage: Cyprus is more favorable for high-income individuals due to its expatriate tax incentives and lower effective rates.
Corporate Taxation
Cyprus: A flat corporate tax rate of 12.5%, one of the lowest in the EU. Cyprus also offers a wide network of double tax treaties and has a full imputation system that avoids double taxation on dividend income.
Malta: While the standard corporate tax rate is 35%, Malta provides an effective rate of 5% after refunds for foreign shareholders under the imputation system, making it competitive for international businesses.
Advantage: While Malta offers attractive corporate refunds, Cyprus’ simpler, lower flat rate with broader EU compliance and treaties makes it easier to manage for international operations.
Capital Gains and Wealth Taxes
Cyprus: Offers zero tax on capital gains (except for the sale of real estate within Cyprus) and no wealth, inheritance, or gift tax.
Malta: Capital gains on certain securities are exempt, but there may be taxes on property transactions and other asset disposals. Malta also does not impose wealth or inheritance tax but has stamp duty on property and certain asset transfers.
Advantage: Cyprus is more tax-friendly overall for high-net-worth individuals due to its broader capital gains exemptions and lack of stamp duties.
Residency Rules and Lifestyle
Cyprus: Offers flexible residency options through the 183-day rule and 60-day rule, allowing residents to spend significant time abroad while still qualifying for tax benefits. The cost of living is relatively lower, with a high quality of life, making it attractive for families and retirees.
Malta: Residency requires individuals to demonstrate habitual residence, generally needing a physical presence for at least 183 days per year. Malta is known for its rich history and English-speaking population, but it typically has a higher cost of living compared to Cyprus.
Advantage: Cyprus provides more flexibility for those looking to optimize their time across multiple jurisdictions, with a lower cost of living and broader residency options.
Conclusion: Why Choose Cyprus Over Malta for your Tax residency?
For individuals seeking a more straightforward tax regime with extensive benefits, Cyprus emerges as the winner. Its generous non-domicile benefits, lower personal and corporate tax rates, and flexible residency rules make it an ideal choice for entrepreneurs, high-net-worth individuals, and retirees. Malta remains competitive for international businesses seeking corporate refunds, but Cyprus offers a more attractive package overall, especially for those prioritizing wealth preservation and tax efficiency.
