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Money matters

Cost of living

No, really... it does!
But does it matter more in Malta than at home?

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Postby gozomark » Fri 26 Dec 2008 16:21 GMT

I think your concern is very valid, and for some lifestyles, Malta is no longer cheaper than the UK, especially those living in Malta on UK income which they can't avoid UK tax on
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Postby doc » Fri 26 Dec 2008 16:48 GMT

About buying different brands, local produce, adapting to the different food items for sale - with you 100% on that I have little brand-loyalty and a penchant for finding value for money/working the system. Someone with 5 children learns to buy in bulk and learns what products are value for money fast :)

I think my take away from this thread is food in malta should be about the same cost if you are a bit flexible in what you buy (even at GBPEUR 1.05).

About taxes yes it is a huge advantage. Here are some very rough calculations from going from normal to CEO levels (*):

before.....after tax...........after tax...........tax..........uk income needed
tax.............in uk..............in malta.........saving......for same after tax
....................................................................................................
€10k.....€8.4k (16%)....€8.5k (15%).....€100....10.3k (2.5% advantage)
€20k.....€15k (25%)......€17k (15%)........€2k......€23k (15% advantage)
€40k.....€29k (28%)......€34k (15%)........€5k......€49k (23% advantage)
€60k......€40k (33%).....€51k (15%)......€11k......€78k (30% advantage)
€80k.....€52k (35%).....€68k (15%)......€16k....€107k (34% advantage)
€100k...€64k (36%).....€85k (15%)......€21k....€135k (35% advantage)
€150k...€94k (37%)...€128k (15%).......€34k...€208k (39% advantage)
€200k..€123k (39%)..€170k (15%)......€47k....€280k (40% advantage)
€250k..€153k (39%)..€213k (15%)......€60k....€352k (41% advantage)
€500k..€300k (40%)..€425k (15%)...€125k....€712k (42% advantage)
€1mil....€595k (41%)..€850k (15%)..€255k...€1.43 mil (42% advantage)

So using the above and the 12.5% PPP cost advantage of malta (with GBPEUR at 1.05 as of dec 2008) you could see for €40k after tax you have €34k in malta but due to PPP that is worth €38k (what you'd spend in the UK to buy the comparable PPP basket of goods) and to earn €38k after tax in the UK you'd need to earn €56k before tax. And comparing to the original €40k thats 71%. So you only need to earn 75% of UK to live seems a good estimate And the tax advantage varies according to income. eg if you earned €30k thats €26k after tax, with PPP value of
€29k and to earn that after tax in UK would need to earn €40k so thats need to earn 75% of UK on the nail!

(Modulo the gross inaccuracy from PPP, inflation and individual spending habits).


(*) I used the 15% permanent resident tax option in these calculations - in fact for 10k and maybe 20k it might be cheaper to use the ordinary resident option as there is no tax exemption on the permanent resident option.

And this is on earned in malta or remitted income - the tax advantage on nvestment income can be even greater - no tax at all - as long as you stay the right side of the remitting capital only rules.

So clearly Malta is a net win if your income is unaffected by your location - only need to earn about 75% as much as in the UK to live the same.

For people who's income is affected by where they live - ie have to find a job in Malta, whether this works out or not depends on how much saving you make on investment income offsetting how much less you are paid in malta relative to UK salary/wages.

Also the tax advantage is about to get larger, due to huge public sector debt in the UK, tax rates are expected to increase to 45% for the 40% bracket and some stealth increases for the 20% tax bracket also.

And longer term (in my opinion - like 4-6 year range) the GBPEUR should move back towards the PPP inferred exchange rate of about 1.25 making Malta a further 20% cheaper if your income is is paid in GBP. At GBPEUR of 1.25 and need to earn about 60% of UK to live the same, Malta is a win for even more peoples circumstances. Gozomark's 1.30 is an equally plausible number.

If one was feeling adventurous one could borrow EUR against assets to buy GBP (at GBPEUR 1.05) use the GBP buy some mid-term GBP investment, and then buy the EUR back in some years hopefully at 1.30 instead of 1.05.

(Or analogously borrow EUR on a second mortgage in malta to live on and invest your GBP income to defer transfering later at better exchange rates - and as a plus this UK income would then qualify as capital and be tax free).

You can also do quite high leveraged currency speculation but thats even higher risk!

Maybe we'll yet hit the psychological GBPEUR parity yet in the short term.


This tax planning/type of income/currency of income/expectations about future exchange rates/cost of living/malta planning is complicated enough that it could maybe use a "malta calculator" web page - there isnt a one size fits all answer (something to work on if I get bored some time).

-Doc
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Postby gozomark » Fri 26 Dec 2008 16:53 GMT

and of course Malta is a far nicer place to live, especially if you choose Gozo, which won't fit into any spreadsheet calculations :D

I'd live in Gozo even if it was more expensive than the UK - the fact its cheaper is an added bonus
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Postby doc » Fri 26 Dec 2008 20:20 GMT

Hmm for correctness in case people are looking at that table in future I missed out social security tax for the malta part (but included social security/NI in the UK part) If the income is from employment that would be an additional 10% tax on €10k ie €1k so the after tax would be €7.5k which is a net disadvantage. And then social security is capped at €1660/year for €16,660 a year or more.

If you're self employed its 15% tax on €10k ie €1.5k so after tax that would be €7k. And then social security is capped (for self employment) at €2490/year.

The social security payments make most % tax difference in the €10k-€30k income range, and then you should be better off not using the permanent resident (flat 15%) tax status anyway as its better to make use of the exemptions and pay tax as an ordinary resident.

For investment income there is no social security tax.

-Doc
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Postby elmacca » Mon 26 Oct 2009 10:54 GMT

Hello

I'm brand new to this forum so apologies if this has been answered elsewhere.

I'm moving to Malta in January and am curious about the 15% tax band that is mentioned in the table above; is this a rate open to new residents who will taking income from employment in Malta?

I had previously seen a table (in addition to the one on this site) that said all income is taxed at 35% above a certain level.

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Postby gozomark » Mon 26 Oct 2009 11:06 GMT

Hi elmacca, and welcome to the forum :D

The 15% refers to permanent residents (PR) - this status is generally only suitable for non-EU citizens. You cannot work if you are PR.

Assuming you are an EU citizen, you will almost certainly want to apply for ordinary residency (OR), and you will pay tax on employment income according to the income tax tables
The tax tables are on the following
http://www.britishexpat.com/expatforum/ ... hp?t=20622

A good starting point is the following thread

EU citizen moving to Malta Q&A
http://www.britishexpat.com/expatforum/ ... hp?t=21114
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Postby elmacca » Mon 26 Oct 2009 11:44 GMT

Many thanks for your help, I'll check out that thread.
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Postby gozomark » Mon 26 Oct 2009 12:03 GMT

A pleasure to help. As you are going to be moving to Malta, you may want to consider joining our "recommended suppliers" (RS) boards, which amongst other things, includes shipping companies and estate agents recommended by our members. It costs £25 to join, with 50% going to help the animals at Gozo SPCA. There is no compulsion to join, and we will all be happy to help you where we can whether you join or not. However, we only allow companies to be recommended on the RS boards.

details on recommended suppliers boards
http://www.britishexpat.com/expatforum/ ... =suppliers
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