Estate Planning in Malta

But there are other taxes to think about as well, particularly if you are buying property in Malta, perhaps retaining some UK assets and you want to make provision for your spouse (and vice versa) and children should you pass away.  You will specifically need to understand the succession rules in Malta, as well as what estate, inheritance or gift taxes might be due on your own or your spouse’s passing.

‘Forced Heirship’

In the UK, you are generally free to distribute your estate as you please by setting out your wishes in a will. Under Maltese succession law, there is a reserved portion for the spouse and children, which varies depending on how many children you have. If you have four or less children, you must leave them one-third of your estate and if you have five or more, it is one half.  

The reserved portion for the spouse varies depending on whether there is children. Apart from the reserved portion, the surviving spouse also has the right of occupation of the main home. The residue of the estate outside the reserved portion may be freely disposed of.

Maltese succession law applies to real estate situated in Malta, regardless of the nationality or place of residence of the property owner. It also applies to the moveable assets of those who are domiciled in Malta, regardless of where the assets are located.

The EU introduced a new Succession Regulation in August 2015, which is also known as ‘Brussels IV’. Whilst the UK did not sign up to this legislation, and the UK is no longer a member of the EU, it remains relevant where a UK national either owns property in Malta and/or moves there.

What about your will?

A will made overseas is valid and effective in Malta, but it must follow the form prescribed by the law of the country where it is made. The rules regarding the reserved portion are considered to be public policy, and therefore any dispositions contrary to such rules contained in a will made outside Malta will not be given effect in Malta if such a will is challenged, unless it is made subject to the EU Succession Regulations.

A UK will may be effective in Malta, but a major disadvantage is that it will have to go through the UK probate process. This will inevitably create long delays and high costs, as well as having to be notarised. It would therefore be advisable to make a Maltese will to deal with your Maltese assets.

If you still have assets in the UK, you can have two wills, one for each country. Be aware that it is possible to revoke an earlier UK will in writing a new Maltese will.  It is the practice in the UK to include a provision to automatically revoke all earlier wills, so if you change your UK will subsequent to making a Maltese will, make sure your solicitor does not inadvertently revoke the Maltese will in the process.

The new law confirms the default position as the succession law of your country of residence, but where you possess the freedom to nominate the relevant national law – in this case the ‘home’ country of the UK you are national of – and override Maltese forced heirship.  This needs to be expressly stated in your will or similar legal document.

Maltese succession and gift tax

You may be pleased to know that Malta does not have any succession, inheritance or gift tax.  It does have a transfer tax, or stamp duty payable on transfers on death of Maltese real estate at 5%, and on certain shares in Maltese companies at 2%, but this is only chargeable where an indirect relative inherits property.

UK nationals who remain UK domiciled will still be liable to UK inheritance tax on their worldwide assets, unless a new domicile of choice outside of the UK has been established – please note, it is notoriously difficult to lose your domicile. The Maltese domicile rules are similar to the UK, and it is tax advantageous to remain non-Maltese domiciled.

UK inheritance tax

British expatriates will therefore generally remain liable to UK inheritance tax even after living in Malta for many years. This is likely to result in UK inheritance taxes of 40% (after applicable reliefs and exemptions) on your worldwide assets.

There is a lot to take in and be aware of and these are really only examples. Good planning can ensure you minimise the tax that impacts you and your family and it helps to do so with specialists in this area. 

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.