Malta Tax Myths Part 1: The Private Investor & Day Trading

Over the last few years, I've seen Malta grow incredibly popular as a place to live and work. At Dr. Werner & Partners, we are assisting more and more clients who are moving their lives here and establishing Maltese companies, which is fantastic to see.

The motivations for coming to Malta are diverse, but let's be honest—taxes play a major role in almost every relocation. And rightly so. If you set things up correctly, the advantages are significant.

The Non-Dom Status and Remittance Basis: Handle with Care

In my consultations—whether face-to-face here in Malta or over the phone—I frequently hear ideas that are, to put it politely, adventurous. Sometimes they are simply outdated; other times, they border on illegal. The confusion usually stems from a misunderstanding of the "Non-Dom status" and the "Remittance Basis" of taxation.

The Definition of "Income" is Crucial

On paper, the Non-Dom status and Remittance Basis sound like a dream: you don't pay tax on money you don't bring into Malta. However, there is a massive catch that often gets lost in translation. It lies in the Maltese legal definition of INCOME.

Maltese tax law states that a resident non-domiciled person "shall only be taxable on income received in / remitted to Malta, and on any income arising in Malta."

That last part—income arising in Malta—is where people get into trouble. Over the coming weeks, I want to debunk the most common myths surrounding this.

Myth 1: The "Passive" Private Investor

Let's look at a classic scenario. A private investor (often called a Privatier in German) moves to Malta. They have a substantial investment portfolio held in a broker account abroad—perhaps in the UK, Switzerland, or an offshore jurisdiction. They assume that as long as they don't transfer the profits to their local Maltese bank account, they are tax-free.

Here is the reality:

This approach can work in exceptional cases—for example, if you hold 50% of a company you built years ago and are simply holding the shares passively. However, in my experience, most "private investors" are actually active traders. They have a broker account, they buy and sell with some regularity, they watch the markets, they analyse charts, and they rebalance their portfolio.

If you are doing this from your laptop in Malta, you are, likely without realising it, running a commercial asset management business.

Because the activity (the trading decisions, the clicks, the analysis) happens in Malta, the income is deemed to be "arising in Malta."

It does not matter if the money never physically touches a Maltese bank account. The tax authorities consider the income to be "here" because it was generated by your labour here. Consequently, you should have registered a business.

The Financial Consequence

If you are caught doing this as an individual, you are taxed at personal income tax rates, which go up to 35%.

If you had set this up correctly as a Malta Limited, you could have optimised this significantly. While a company comes with accounting costs and administrative effort, the effective tax rate can be reduced to 5% via the refund system. The cost-benefit analysis almost always favours the company structure for active traders.

The "Badges of Trade"

Maltese tax law uses a concept derived from UK law called the "Badges of Trade" to determine if an activity is passive investment or active trading. These are specific markers or characteristics of your activity. If you tick enough of these boxes (frequency of transactions, motive of profit, nature of the asset), you are considered to be trading commercially.

You can read more about the technical details here: ACCA (Association of Chartered Certified Accountants) on Badges of Trade

CRS: The End of Financial Secrecy

This rule isn't new. I'm sure there are plenty of "private investors" currently living in Malta who haven't registered their trading activities and haven't been bothered by the tax man—yet. Historically, the Maltese Commissioner for Revenue might not have had the resources or the data to track this effectively.

But be warned: The game has changed.

With the Common Reporting Standard (CRS), the automatic exchange of information is in full swing. Maltese tax authorities now receive data on foreign investment and broker accounts automatically. It is highly likely they will start following up on this data more aggressively.

Furthermore, tax authorities talk to each other. I can easily imagine a scenario where a foreign tax authority (perhaps the HMRC or the German Finanzamt, who are very proactive) notices a citizen living in Malta with high trading volume and tips off their Maltese colleagues that this person is obviously trading commercially but paying no tax anywhere.

My Recommendation: Structure It Correctly

If you know that your activity falls under the definition of commercial trading or asset management, do not rely on the "Remittance Basis" loophole. It doesn't exist for income arising here.

I strongly recommend setting up a company immediately to benefit from the favourable corporate tax rates. You cannot fix this retroactively. If you are audited later, you will pay the full personal rate plus penalties. Incidentally, this principle of "management and control" applies similarly in the UK, Ireland, and Switzerland.

If you are unsure whether your trading activity counts as a business, please reach out. We can review your setup and help you establish a compliant Malta Company that protects your assets and keeps your tax bill efficient.