Income vs Capital

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Income vs Capital

Postby Moodyblue » Fri 16 Mar 2007 10:40

Hi everyone. What a great site this is! I have read lots of threads about capital and income and how income becomes capital after 31 Dec. This is where I am confused, but then, I am easily confused! So, I transfer money to Malta on 1 Jan and it is capital. Great. What happens to that money in Feb, Mar, Apr etc? Do I have to put it into an account called 'Capital'? Grateful for an answer that will really help me understand this. Keep up the good work. :D
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Postby peterj » Fri 16 Mar 2007 12:50

Hi

As far as I understand, the important thing is to be able to demonstrate that the money you have transferred into Malta was, for the want of a better term, in your possession (I would have said earned, but I'm not at all sure that original source of the money matters) before the end of the previous financial year.

This may obviously be easier to demonstrate on Jan 1, then the following December, and I guess that some people may be tempted to transfer a years living expenses on January 1 for this reason.

Keep in mind however, that the normal tax free allowance is reasonably generous - Lm6500 for a couple electing to be taxed as two singles. In our case that is more than we are likely to spend in a year, making the whole issue a non event for us at least.

It is also worth noting that we are presently earning a 5% premium in an overseas on call account over that which we can get here for a term deposit. That alone makes me think twice about transferring large sums. I will admit that I transferred 6 months living expenses last year, but that was to manage what I thought was a reasonable chance of the (Australian $) exchange rate going badly against us. This didn't eventuate by the way.
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Postby gozomark » Sat 17 Mar 2007 06:44

spot on Peter !

once its capital, it remains capital, although any interest earnt on it is income until the next 1st of Jan, so in calculating your declarable income you also have to remember interest income earnt in Malta on your capital.
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Income vs Capital

Postby Moodyblue » Mon 25 Jun 2007 14:27

Hi everyone. An update. I have just been in Malta for 3 weeks sorting out a place to live. I also arranged an appointment with a very well known international financial house to talk tax issues. I mentioned the 'remitting capital after 31 Dec' and received a very negative response. They said I should be very wary as the Malta tax authorities can demand an explanation of why the sum was capital and not income at any time up to 3 years after the event. A bit worrying. The also explained the double taxation treaty: effectively (they said), I take my gross income (UK govt pension taxed at source) and the gross interest from any UK investments (taxed at source). If the tax paid on those sums in UK is higher than the tax I would have paid in Malta, then no tax in Malta.

We are moving over in Sep/Oct this year to settle in Attard.... Can't wait! :D
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Postby gozomark » Tue 26 Jun 2007 13:38

Hi

as long as you abide by the rules, then them demanding an explanation should be straightforward - just a matter of showing flows on a bank account for that year - if there is no income coming into that account that calendar year, then it must be capital, under their definition

the definition of double taxation is correct
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