Malta’s Latest Tax Incentive Addresses Shortage


Many foreign investors have directed their attention towards Malta along recent years. This has enabled Malta’s economic growth to flourish following its success at attracting and retaining industries such as software development and igaming. Malta’s latest tax incentive is further aimed towards self-growth as it is set to address current labour market issues.

As a small island with an open economy, Malta faces various challenges such as the rapid innovation that is taking place and an increasing demand for human capital, particularly within knowledge-based industries. The issue of talent gap and a mismatch between the skills and talent that are readily available on the labour market and those required by the industry is being faced globally, not just in Malta.

Inevitably, rapid industry expansion will generate an increased demand for talented human resources. Malta is perhaps more hard-pressed by this issue due to its small size. According to the European Migration Network, Malta is currently experiencing shortages within the medical sector, the construction sector, IT and also gaming. However, the European Commission Country Report Malta 2015 still foresees a sound economic growth for the country, closely linked to a decade of foreign direct investment and a strong domestic demand.

Malta’s advantageous corporate tax system

Malta’s flexible regulatory framework, able work force and an advantageous corporate tax system have ensured this economic growth for Malta. The next step in this regard would be that of intensifying efforts on the front of labour market development.

Part of Europe’s 2020 strategy addresses the modernisation and participation on the labour market, the importance of matching demand with supply and the solution of facilitating economic migration by attracting talented third-country nationals to sectors where shortages exist.

Tax incentives

The Maltese government’s response to the issue of human capital shortage comes in the form of a tax incentive for EEA/Swiss or third country nationals who are employed in Malta and filling positions related to industrial research, product and process development, innovation or senior management roles. This temporary easing is meant to narrow the human shortage gap on the labour market as well as enhance competitiveness in niche markets.

The ultimate aim is to render the Maltese society a society par excellence through narrowing the skill mismatch bracket. Those who benefit from this scheme are entitled to a flat income tax rate of 15% on a minimum annual salary of €45,000. The scheme ends on the 31st December 2017, however it can be extended for a period of one year if employment commences between the 1st September and 31st December.

A qualifying income of €5,000,000 is exempt from taxation wheareas the scheme is applicable for a consecutive period of not more than 3 years.