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British Pensioners in Malta/Gozo

tax on pensions for permanent residents

Many of our members are pensioners, so here's a place to discuss the relevant issues.

tax on pensions for permanent residents

Postby raph » Fri 13 Oct 2006 01:52 GMT

Hallo
can anyone plse tell me whether the rate wd be 15%?
Also, are spouses taxed ointly, separately, or can they choose?
many thanks
rapho
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Postby gozomark » Fri 13 Oct 2006 06:12 GMT

yes, 15%, but maybe double taxation offset (and subject to Lm 1,800 min tax)

spouses - are you both EU citizens ?

sorry to push the point, but are you sure you want to be "permanent" residents ? Many EU citizens who had it before, gave it up after Malta joined the EU and the min tax went up. If its only for the low tax rate, remember Malta only taxes foreigners on income they bring into Malta, not on capital, and income becomes capital once past the 31/12. Many foreigners pay almost no tax at all, by delaying bringing in their income until the new year
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tax on pensions

Postby raph » Fri 13 Oct 2006 14:08 GMT

yes-British & Belgian.
well one has to be resident somewhere!
at the moment we are residents of Cyprus as of 2 June 2006. We have applied for a 5-year rsidence permit which will take 5-8 months to process, said the Cypriot immigration authorities.
Whereupon we can import one car each free of duty.
Here on Cyprus, 5% is levied on pensions above CYP2,000 (= about 2,500 GBP), and 10% tax on any svings.

I think I need to consult an acountant on this to give me concrete figures on tax liability on Malta and then cn compare with Cyprus.

However another considerationis that on Cyprus health cover is supposedly means tested and iftotal pensions above a certain level, then noentitlement to health cover=no free medications which for roberto wd be serious since he has to have a host of medication daily for heart condtn.

So at this stage I am contiuing to research the subject.

If we donot become permanent residents of Malta inlieu of Cyprus, then where are weresident? we hve no ties anywhere else. no property owned anywhere..

thanks for being so outstandingly helpful. greatly appreciated.

rgds
rapho
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Postby gozomark » Fri 13 Oct 2006 15:23 GMT

you can be a permanent resident for residency purposes, without being a "permanent "resident - most foreigners living in Malta on a long term basis are not "permanent" residents as defined in terms of their tax status. Being permanently resident in Malta doesn't mean the same as being a "permanent" resident - indeed some people are "permanent" residents, but live most of the year outside of Malta.

You need to take advice what to do, and it comes down to your financial circumstances - things like

are you living of a pension or off capital - where is your pension paid, and is it paid net or gross. Can you delay receiving any income until the next calendar year ? What are implications of one of you being Belgium (no idea, but the Belgium tax authorities might have global taxation even if you are non-resident ??)

I presume you are domiciled but non-resident UK citizen ??

as you can see, its very difficult to advise you without knowing your circumstances - you really need to talk to an accountant in Malta - KPMG are probably the most popular one in Malta for foreigners.
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tax on pensions

Postby raph » Fri 13 Oct 2006 17:03 GMT

Well that was myh conclusin-seek professional advice.
without going into all the ins and outs, suffice it to say that my Belgian pension is paid intoa a ban acct in Spain because the Belgian cannot pay it to Greece/Cyprus/UK or Malta but only to a series of countries (Lxmbg, Belgiukm France, German, Ital, Spain & Ptgl) owing to my "English" (sic) nationality1
Rbto's pensions are paid into an acct in Belgium I think. Certainly one is. the other one may be paid into an acct in France, his last place of residence.

He was taxable in France where he had permanent residence. For the purposes of Belgian taxes, he is taxable in his countr of residence which is now Cyprus but hitherto had been France (fr the past 12 yrs anyhow).

I am told by financial expert in Pafos, CY, that spending 184 days on Cy makes one liable for Cy income tax which is fine by us.

anyhow, we are staying on Cyprus for the moment, the medical issue having suddenly been resolved.

If we find as we go along that there are sudden unexpected obstalces, then we wd consider Malta but for the moment we are putting it on the back burner.

thanks for all your help.
rgds
rapho
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tax in Malta

Postby raph » Sun 15 Oct 2006 15:09 GMT

I found a very useful site malta-law which sets out clearly the pros and cons of ordinarily resident and permanent resident, so matters are now much clearer in my mind now.
It is to Robto's advantage to be a perma res but for me to be ordinarily resident only!

However, in all this I do have to wonder about elgibility to the Maltese NHS system if one is only ordinarily resident?
thks
rapho
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Postby gozomark » Sun 15 Oct 2006 16:05 GMT

Now that Malta is in the EU, "permanent" residency is about tax, not about eligibilty to the health system - as an EU citizen, it comes down to your national country - they are the ones who would pay your bill to the Maltese NHS. As for Malta-law website, it states the 7 reasons given below - bear in mind, these lawyers want you to be a "permanent" resident as they can charge fees for your application - of the 7 reasons, other than 7, they all apply to non "permanent" residents as well, if you are an EU citizen. This list is more about the benefits to a foreigner about living in Malta NOT about whether to be a "permanent" resident or not - ie its the truth, but not the whole truth. This list DOES NOT set out clearly the pros and cons of ordinarily resident and permanent resident"
PERMANENT RESIDENCE SCHEME (from the website)

Benefits of PR Permits

1. Complete freedom of movement

2. Low Tax & Extensive Tax Treaty Network

3. Repatriation of Capital & Income

4. Freedom to rent out Maltese Property

5. No Death & Donation Duties

6. Importation of Personal Household Possessions

7. Importation of Cars
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Postby gozomark » Sun 15 Oct 2006 16:28 GMT

why is it beneficial for your partner to be a "permanent" resident ? In fact, if you are married, I'm not sure if only one of you could be a "permament" resident.

The three key things are

1. "permanent" residency is about tax
2. the Maltese definition of income - it becomes capital on 31/12
3. its only applied to income brought into or earnt in Malta

unless as a couple you are bringing in more than about Lm 11,000 per annum of that calendar year's income, I see no point in being a "permanent" resident
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residence & health care

Postby raph » Mon 16 Oct 2006 04:52 GMT

I shall consult an accountant abut this - Maltese law in rather different from the law here on Cyprus.
Here one has to apply for an alien's residence permit, valid 5 yers renewable, beyond a 3 month stay. The permit takes 5-8 months to come through said the immigration officials, and i hae heard of one year! One is taxed on worlwide income. Pensions are taxed at 5% with a non-taxeable first band of CYP 2000. Iterest from savings is taxed at 10%.
Admission to health care cover is subject to showing receipt for applctn for res permit as also utilities bill or lease. It can take 10 months to get a Cy medical card! although got ours in 2 1/2 weeks
The crux question is how much would one need to live nicely in Malta year round? Rentals are about 40% cheaper than Cyprus from what I can make out. ...
What about food, utilities, petrol, clothese, shoes...

Point taken abut ordinarily resident, GozoMark. Thanks.

Not sure of the meaning of capital as opposed to income (?).

Have you been living there a long time?
rgds
raph
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Postby gozomark » Mon 16 Oct 2006 05:47 GMT

Hi

I've been in Malta 4 years.

"Here one has to apply for an alien's residence permit, valid 5 yers renewable, beyond a 3 month stay. The permit takes 5-8 months to come through said the immigration officials, and i hae heard of one year! basically the same here

Admission to health care cover is subject to showing receipt for applctn for res permit as also utilities bill or lease. It can take 10 months to get a Cy medical card! although got ours in 2 1/2 weeks - you do not get admission to health care simply by being a resident (except for UK citizens - are you aware of the bilateral agreement ?) - its dependent on having a European Health Card - if you have one then its free, if not, you pay, so very different

capital v income - capital is money in the bank or in shares or the value of your house, income is the interest, the dividend or rent you earn. Salary and pensions are income, BUT under Maltese tax law, any income becomes capital after the end of the year. Under UK law income becomes capital after you've paid tax on it.

cost of living (prices are all in Maltese £ and c) - overall, my wife and I live very well on Lm 1,000 a month - some live happily on half that ( bear in mind, average Maltese income is only only about Lm 6,000/year), others spend alot more - that doesn't include rent as we own our house. No idea compared to Cyprus, but compared to UK, nearly everything is either cheaper or the same. There is no council tax, and income tax can be minimal

utilities -
electricity - 8c/Kwh - expensive as from oil
gas - bottled only - Lm 2-2.50/bottle
water Lm 1.80/m2 - this is expensive as mainly desalinated, so expensive to produce

petrol 46c/litre
clothes and shoes - cheap
food -
bread 20c
milk 26c/litre
pork or chicken Lm 1.50-2/kilo
eating out - typically Lm 10/head incl wine for a nice meal - the most I've ever spent on a meal in Gozo was Lm20/head and that was at Ta Frenc, a stunningly good restaurant - cheapest ? probably superb pizzas for Lm 1.50

what is cheap is using manual labour -

car service Lm 15
builder Lm 20/day
haircut Lm 1.50

broadband - Lm 13/month
alcohol - beer very cheap 20-30c /half litre, spirits nearly the same as UK
cigarettes Lm 1.50/ pack

whats more expensive ?

electricity and water as above
cars - very high tax
breakfast cereal
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tax, health entitlement et al

Postby raph » Mon 16 Oct 2006 09:09 GMT

thanks for the further mail gozoMark
There is a lot of meat in it.
No of course health care entitlement is not simply based on residence.
however one needs to be resident somewhere to go beyond the stage of the EHIC card which Rbto had from France and I had from the UK and which serviced admirably while living temporarily in Greece.
Here on CYprus we took out private medical insurance to speed up the residence permit procedure pending arrival of E121 forms.
Once we had the E121 forms we could applyh to the Cyprus MOH for a Cy medical card. however, on the basis purely of E121 that card would never have been issued.
here they require in addition proof of residence.
That is the point I was trying to make.

We now have the Cyprus medical crd, issued lst week, and last Friday I hand carried an appliction for Cyprus EHIC cards together with photocopies of Cyprus medical card and of passport. On this basis the Cyprus MOH will issue EHIC cards.

So if/when we come to Malta we can use the EHIC cards initially pending acquiring cover under Maltese ?NHS for which we shall have applied for new E121 forms in due course.
But you can't have E121 forms until you have a proper address of course.

thanks v much indeed for the clarification about capital.
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Postby gozomark » Mon 16 Oct 2006 09:16 GMT

E121 - isn't this is issued by your home country ? If so, can't you use the same one you used in Cyprus ?? I think thats right, but not sure - UK citizens can check with the UK authorities on this website

http://www.dwp.gov.uk/international/sa29/
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E121

Postby raph » Mon 16 Oct 2006 12:35 GMT

E121 issued by home country-Yes indeed, but nly once n the country of chose residence and drawing a (in my case) UK pension. Since I hae deferred my UK pension, I do not qualify.
however, I AM drawing a BELGIAN pension.Therefore I qualify for a Belgian pension. I submited a request and was issued with a Belgian E121 form.

It is valid for Cyprus only because it indicteds date of arrival on Cyprus and gives my address on Cyprus.

On laeving to Cyprus I have to aply for a new E121 form from the Belgian authorities once have an adress on Malta. Armed with that, i go o the Maltese MOH who apparently issue e with the appropairate paperwork for medical care in Malta.
That is how the system works.
And the EHIC card issued by Cyprus will cover me during the bridge period between leaving Cyprus and arriving in Malta, prior to a new E121
beng issued by Belgium
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cost of living in Malta for retirees

Postby raph » Tue 17 Oct 2006 05:06 GMT

Hall again
Just re-read your posting about cost of living. You say you & your wife liv comfortably o ML 1,000/month which seems to be equilvanet of some EUROS 2,300 which is astronomical since excludes rent!
We wd rent, not buy, so wd need to add rental of about 120 ML/month at least for a 3 b.r. flat/house whatever as far as I can glean..

Already we are finding Cyprus considerably more expensive than Greece but for far higher standrd of living so we are happy to pay for that. ccommodation here is aprticularly comfortable.

A financial adviser tells me Maltese tax laws are expected to change. I wonder when and in what way?!
thanks again
raph
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Re: cost of living in Malta for retirees

Postby gozomark » Tue 17 Oct 2006 05:17 GMT

raph wrote:.

A financial adviser tells me Maltese tax laws are expected to change. I wonder when and in what way?!
thanks again
raph


I've no idea - didn't the financial advisor give any more details ? Are they based in Malta ? Are they trying to scare you off Malta ??

tax laws change all the time - if a UK advisor told me "UK tax laws are expected to change", it would be of zero help, as they are always changing !

I doubt the Maltese Govt would tighten up significantly on the tax perks for foreigners living here, as many would leave if they were taxed to the same degree as locals.


ps there is a budget tomorrow
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