US Expat Taxes for Americans Living in Malta – What You Need to Know

expat filing taxes in malta

It has been estimated that there are several thousand Americans living in Malta.

Living in Malta is an incredible experience for a number of reasons, including the friendly locals, the climate, the relaxed pace, the beaches, the history, and quick access to the rest of Europe. As an American expatriate living in Malta though, what exactly do you need to know regarding filing US expat (and Maltese) taxes?

All US citizens and green card holders who earn a minimum of around $10,000 (or just $400 for self-employed individuals) anywhere in the world are required to file a US federal tax return and pay taxes to the IRS, regardless of where in the world they live or their income is generated.

The good news is if you are paying income tax in Malta, there are various exclusions and exemptions available to prevent you paying tax on the same income to the IRS too.

US taxes – what you need to know

If you earn over US$10,000 (or just $400 of self-employment income), wherever the income originates in the world you have to file IRS form 1040. While any US taxes due are still due by April 15th, expats get an automatic filing extension until June 15th, which can be extended further on request until October 15th.

If you have overseas assets worth over US$200,000 per person, excluding your home if it is owned in your own name, you also have to file form 8938 to declare them.

If you had a total of at least US$10,000 in one or more foreign bank and/or investment accounts at any time during the tax year, you also have to file FinCEN form 114, otherwise known as a Foreign Bank Account Report or FBAR.

“Any person who is not ordinarily resident or domiciled in Malta is taxable only on income arising in Malta and on any foreign income remitted to Malta. However, as of basis tax year 2015, where the spouse is ordinarily resident and domiciled in Malta, then a worldwide basis of taxation should apply for the other spouse.”
– PricewaterhouseCoopers

If you pay income tax in Malta, there are several exemptions that allow you to pay less or no US income tax on the same income to the IRS. The main one is the Foreign Earned Income Exclusion, which lets you exclude the first around US$100,000 of foreign earned income from US tax if you can prove that you are a Maltese resident, and the Foreign Tax Credit, which gives you a $1 tax credit for every dollar of tax you’ve paid in Malta. These exemptions can be combined if necessary. Remember though that even if you don’t owe any tax to the IRS, if your income is over US$10,000 (or $400 if you’re self-employed) you still have to file a federal return.

The US and Maltese governments share taxpayer info, and Maltese banks pass on US account holders’ account info to the IRS, so it’s not worth not filing or omitting anything on your return. The penalties for incorrect or incomplete filing for expats are steep to say the least.

If you’re a US citizen, green card holder, or US/Maltese dual citizen, and you have been living in Malta but you didn’t know you had to file a US tax return, don’t worry: there’s a program called the IRS Streamlined Procedure that allows you to catch up on your filing without paying any penalties. Don’t delay though, in case the IRS comes to you first.

Maltese taxes – what you need to know

Maltese residents are taxed on their worldwide income on a progressive scale from 0% to 35%. There’s a special program for expats though which taxes income from outside the EU remitted to Malta at a flat rate of 15%.

Foreigners living in Malta are considered a resident for tax purposes if their permanent (main) home is in Malta.

The Maltese tax year is the same as the US, which is to say the calendar year. Tax returns are due by June 30th. The Maltese tax authority is called the Inland Revenue Malta.

We strongly recommend that if you have any doubts or questions about your tax situation as a US expat living in Malta that you contact a US expat tax specialist.

Insight meets inbox

Quarterly insights and articles directly to your email inbox. Our newsletter offers substance (over spam). We promise.