A French national moving to Malta

Under Maltese law, tax residence is a question of fact. Presence in Malta for more than 183 days in a year is one way of establishing Maltese residence. A person who has come to settle there permanently may also be treated as resident from arrival, depending on the circumstances.

On the French side, it must be ensured that the taxpayer does not keep in France:

• their family home;
• their principal place of stay;
• their main professional activity;
• or the centre of their economic interests.

If both States treat the person as resident, the France-Malta tax treaty settles residence by examining in turn:

• the permanent home;
• the centre of vital interests;
• the habitual abode;
• nationality;
• then, if necessary, an agreement between the tax authorities.

In a comparable matter, we recommended genuinely moving the home to Malta, enrolling the children in school there, carrying on the new activities there, limiting stays in France and keeping evidence of presence and of everyday life.

A French national who becomes tax resident in Malta without being domiciled there within the meaning of Maltese law may, depending on their exact situation, fall under the remittance basis.

Under this regime:

• Maltese-source income is taxable in Malta;
• foreign-source income is taxable in Malta if it is received in or remitted to Malta;
• foreign-source capital gains are, as a rule, not taxable in Malta, even when remitted there.

It is therefore essential to distinguish and document:

• income;
• capital gains;
• capital built up before the move;
• gifts or inheritances received;
• the bank accounts from which Maltese expenses are funded.

The Maltese authorities generally presume that sums transferred to Malta to fund everyday expenses derive from income, unless proven otherwise. Precise bank traceability is therefore needed.

Under the ordinary remittance basis, a minimum tax of €5,000 per year may apply where foreign income reaches at least €35,000, subject to the applicable exceptions and tax credits.

As a national of the European Union, a French national may also consider the Maltese Residence Programme.

This regime is intended for nationals of the European Union, the EEA and Switzerland who are not permanent residents of Malta.

In its current form, it provides in particular for a 15% rate on certain foreign income remitted to Malta, subject to a minimum annual tax of €15,000 and compliance with the programme’s other conditions. Maltese-source income and capital gains may fall under a separate rate.

This regime is not automatically more favourable than the ordinary remittance basis. The following must be compared:

• the amount of foreign income that will be remitted;
• annual spending needs in Malta;
• the nature of the income and capital gains;
• the minimum tax under each regime;
• the tax credits available.

Once no longer tax resident in France, the taxpayer may still be taxed there on certain French income or assets, in particular:

• income from property located in France;
• French real estate capital gains;
• certain remuneration relating to an activity carried on in France;
• dividends or other French-source income, with the withholding taxes provided for by law and by the treaty;
• certain capital gains on substantial French shareholdings.

The France-Malta treaty allocates taxing rights between the two States and provides mechanisms to avoid double taxation. It also contains an anti-abuse clause denying a treaty benefit where obtaining it was one of the principal purposes of the arrangement.

Leaving France may trigger the exit tax under article 167 bis of the French Tax Code (CGI) if the taxpayer:

• has been tax resident in France for at least six of the ten years preceding departure;
• and holds shares representing at least 50% of a company’s profits or with an aggregate value exceeding €800,000.

The exit tax applies in particular to unrealised capital gains on shares and to certain capital gains already under tax deferral (report d’imposition), in particular those falling under article 150-0 B ter of the CGI.

As Malta is a member of the European Union, the taxpayer is, as a rule, entitled to a deferral of payment, but must comply with the reporting obligations and track subsequent transactions in the shares.

If the taxpayer effectively becomes non-resident in France, their exposure to the French real estate wealth tax (IFI) is, as a rule, limited to their real estate located in France, held directly or indirectly, where its net taxable value exceeds €1.3 million.

The following should in particular be examined:

• the French main residence retained and possibly let;
• second homes;
• SCIs (French property-holding companies) and other companies holding French real estate;
• debts that remain deductible;
• the characterisation of real estate holdings under the treaty.

The France-Malta treaty reviewed concerns taxes on income and on wealth. It does not deal with gifts and successions.

The following must therefore be analysed separately:

• the residence of the donor or the deceased;
• the residence of the children or heirs;
• their history of residence in France;
• the location of the assets;
• the matrimonial property regime and the law applicable to the succession.

Particular attention is needed where some children remain in France, as their French residence may preserve a French taxing right in certain configurations.

Finally, moving the registered office of a French holding company to Malta should not be automatic. The following must be examined:

• the tax consequences of the transfer;
• the location of effective management;
• the substance of the holding company;
• the treatment of deferred capital gains;
• the taxation of future distributions;
• whether the structure is consistent with reinvestment and succession plans.