Maltese-domiciled residents are liable to Maltese taxes on their worldwide income and gains.

A retired married man from the UK would pay more tax in Malta if his pension income was under £75,000 than if he stayed put- David Franks

In many countries, foreign nationals living there also have to pay tax on their worldwide income and gains, but Malta offers a favourable tax regime for non-domiciled resident individuals, depending on the manner in which residence is taken up.

The High Net Worth Individuals Scheme was introduced on September 14. It is a replacement for the old Residence Scheme which was suspended early this year, but unfortunately it is not as favourable for most retired people.

The tax rate for overseas earnings remitted to Malta is fixed at 15 per cent.

High net worth individuals need to pay a minimum €20,000 in tax per annum, plus €2,500 for each dependent, including their spouse.

Under the old scheme, it was €4,200 minimum.

Under this scheme, people must either own a property worth at least €400,000 if purchased after September 14, 2011, or €116,000 if purchased before, or rent a property for minimum of €20,000 per annum.

The property must be the principal place of residence and only the individual and his or her family can reside in it. Under the old scheme it was €69,000 for a flat, €116,000 for a house or annual rental of €4,150.

The scheme rules stipulate a person must reside in Malta for a minimum of 90 days each calendar year, and cannot spend more than 182 days a year in any other single jurisdiction.

You will have to pay a non-returnable application fee of €6,000, and complete an annual declaration of compliance. Previously there was no fee.

I have looked at the tax calculations. A retired married man from the UK would pay more tax in Malta if his pension income was under £75,000 than if he stayed put.

Only if his pension exceeded, say, £100,000 would Malta’s tax start to look sufficiently attractive to encourage him to move over here. So the scheme is not attractive for most retirees, but could be worthwhile for very wealthy people, though there are other countries vying for their business.

Her Majesty’s Revenue and Customs will only exempt your UK pension from UK PAYE if you can demonstrate that it has been remitted to Malta and taxed. If, however, the fund is transferred to a qualified registered overseas pension scheme (QROPS) in the right jurisdiction, it is outside of the UK PAYE system and only that portion remitted to Malta would be taxable.

The Maltese government has said it is looking at different schemes in addition to the new HNWI one.

A scheme for the retirees who are not necessarily wealthy could rejuvenate Malta as a destination.

Rules for non-EU or non-EEA nationals stipulate they either have to deposit at least €500,000 or apply for a visa under the immigration rules. Their minimum amount of tax is €25,000 per annum, plus €5,000 per dependant.

But there is an attractive alternative, often overlooked – simply paying tax under general tax law without needing any scheme. This is similar to the UK’s non-UK domicile rules.

As a non-Maltese domicile, you pay tax on income arising in Malta, on any overseas income that is remitted to Malta, and on any capital gains arising in Malta.

The highest tax rate is 35 per cent, though if you work in the financial services industry you may qualify for a 15 per cent rate on your Maltese earnings, subject to other conditions (under the Highly Qualified Employed Persons tax rules).

Income arising overseas is not taxable, provided it is not remitted to Malta. Overseas capital and overseas capital gains are not taxable even if remitted. You may work in Malta under this method.

There are no minimum taxes to pay, nor any property requirements. There are no requirements, and for most EU nationals – who have the right to reside in Malta anyway if they are economically self-sufficient – it may prove simpler and more effective to pay tax under general tax law rather than apply for the HNWI scheme.

Each situation is different, however, so people must seek advice to determine which method works best for them.

Blevins Franks will be discussing these alternatives along with the new UK residence tax rules at its seminar on November 22.

See www.blevinsfranks.com for details.

Mr Franks is chief executive of Blevins Franks.