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Under Maltese law, individuals who are domiciled and ordinarily resident in Malta pay income tax on their world-wide income.

To establish the exact tax situation of individuals in Malta both domicile (which can be described in simple terms as a person's permanent home) and residence (this being one's habitual home) are considered.

Individuals who are domiciled elsewhere, and who are resident but not ordinarily resident in Malta pay tax on their income arising in Malta, or remitted there. This rule however does not apply to capital gains (i.e. tax related to the transfer of property).

Individuals who are not considered to be resident in Malta are to pay tax only on any income gained in Malta , and local interest and royalties are moreover exempt from tax. This applies also to capital gains on holdings in collective investment schemes and securities based on non-Maltese immovable property.

Holders of Permanent Residence Permits - i.e. a permit issued for any person who provides proof of at least Lm150,000 or an annual income of Lm10,000 and who buys or rents property on the island - issued under the Immigration Act 1970 can pay tax at a reduced rate on income arising in Malta plus remittances of foreign income.