Maltese Retirement Trap

Categories : Financial, News
August 7, 2023

For Americans, the likely most familiar reference to Malta is from the 1941 movie, the Maltese Falcon. This fictitious tale of a stolen bejeweled statue was custom made for a classic mystery thriller in black and white. The story, from the imagination of Dashiell Hammett, featured his famous gumshoe character, Sam Spade. Today, Malta is a vacation destination for people around the world, and some choose to retire in the independent island nation.

A member of the European Union (EU), Malta is a cluster of 5 islands off the coast of Sicily in the Mediterranean Sea. Unknown to most Americans, Malta is the home of some of the world’s most ancient and best-preserved ruins.

While Malta welcomes tourism, it also caters to potential retirees, but with many strings attached. Residency is only open to self-sufficient foreign expats. For those who qualify, the Maltese Government has established guidelines for potential retirees, depending on their country of origin. People from other EU countries abide by one set of rules, while those from non-EU countries have different sets of rules.

Malta has a Tax Treaty with the U.S., strictly defining U.S. taxation for permanent residents in Malta. When there are Treaties and Tax Agreements, scammers follow. Scams attract IRS interest, and Malta poses no exception. In fact, Maltese Retirement Scams made the 2023 IRS “Dirty Dozen” Scams list.

The general nature of the Maltese Retirement Scam is to promise Americans they can donate appreciated assets to certain Maltese pension funds, and when the pension plan sells the assets, proceeds are distributed to the American donor, all tax-free. That sounds too good to be true; because it is.

Full disclosure – I have not been to Malta, and have no plans to visit. I checked with friends who have spent time there, and they do not feel the need to return. For those of you who do, prepare to experience beautiful scenery, mild weather, and many friendly expats. That information comes from Maltese officials, but appears to be fairly accurate. In addition to native Maltese, English is the accepted language on the islands. Anyone interest in a possible Maltese retirement should seek advice from other Americans, the Tourism Bureau in Malta, and qualified tax counsel here in the U.S.

This Blog is not intended as a travel tip bonanza. Our purpose here is to alert Americans about potential tax scams that can prove expensive if undetected. Go if you wish, but don’t believe that our IRS has a benevolent heart where Malta is concerned. IRS will always get their due. Right now, IRS is investigating taxpayers who fell for this, but they are truly only interested in catching the scammers. Help if you can.

Van Wie Financial is fee-only. For a reason.