Let's Break It Down: What's Active vs. Passive Income
Anyway?
Before diving into tax rates and treaties, let's start with
the basics. Think of passive income like a hammock – it's
income that comes in while you're mostly relaxing (at least in
theory). You're not grinding day to day for it. Interest from
bank accounts, rent from a property, or royalties from an old
invention fall into this category.
Active income, on the other hand, is when you roll up your
sleeves. You're lending money as a business, licensing software
while offering support, or managing IP portfolios across borders.
You're actively running a show – and the taxman sees it
differently.
Why does this matter? Because in Malta, the distinction
isn't just academic – it affects how much tax your
company pays. And those numbers can swing between 10%
(passive), 6.25% (passive with
structure), and 5% (active). That's a
pretty big spread.
