Tax In Malta

It is important for all individuals to be tax compliant at all times. In such a fast moving business world, tax rules are likely to regularly change. We understand that this may seem like a difficult task for some individuals and families and we are therefore here to assist with our expertise in this field. 

Personal Taxation Services

Our personal tax services including:

Income Tax Rates

What Income is Taxable?

In Malta, taxable income extends beyond basic salary and overtime earnings to encompass various sources. The Maltese tax framework incorporates fringe benefits into an individual's assessable income, making them liable to taxation. Fringe benefits, which can include perks such as company cars, housing allowances, or other non-monetary advantages provided by employers, are subject to taxation. Furthermore, income arising from employee share schemes is also included in the taxable bracket. When employees receive shares or stock options as part of their compensation, the market value of these shares at the time of acquisition becomes taxable income. It is imperative for individuals in Malta to be cognisant of these intricacies in income taxation, as adhering to comprehensive reporting and compliance with tax regulations is essential for maintaining fiscal responsibility.

Part-Time Employment Tax Rates

A person employed on a part-time basis is subject to a flat 10% tax rate, and this tax is conclusive. Consequently, the earnings from part-time employment do not need to be disclosed in the yearly income tax filing since they are not liable for additional taxation.

The 10% tax rate is applicable up to a maximum amount of €10,000 per year for part-time employment, and for part-time self-employment, the maximum limit is €12,000 per year.

Should the part-time earnings surpass these figures, it becomes necessary to report the surplus in your tax filing.

The 10% tax rate may apply to the following categories:

• Full-time employees
• Pensioners
• Full-time students (including apprentices)

Meeting this fundamental condition is essential; failure to fulfill it renders one ineligible for this tax rate.

Tax Computation

Malta imposes taxes on individuals who are both domiciled and ordinarily residing in Malta, encompassing their global income. If a person is ordinarily residing in Malta but not domiciled there, they are only taxed on income generated within Malta and any foreign income brought into Malta (i.e., income and chargeable gains originating in Malta and income earned outside Malta but received within the country). Such individuals are not liable for taxation in Malta on income generated outside Malta if it is not received in the country, as well as on capital gains occurring outside Malta, regardless of whether they are received in Malta or elsewhere.

However, individuals married to someone who is both ordinarily residing and domiciled in Malta are subject to global taxation (not limited to a source and remittance basis).

For non-resident individuals, taxation applies solely to income and chargeable gains arising within Malta.

Taxation for individuals is based on income generated in a calendar year (the basis year), which is then assessed in the following year (the year of assessment).

Earnings are subject to progressive taxation, with rates increasing gradually from 0% to 35%. The 35% tax threshold is applicable to annual chargeable income exceeding EUR 60,000.

Your tax bracket is determined by your filing status, whether you're an individual, a couple, or a parent. Under specific conditions, married rates are also applicable to single parents, widows/widowers, and separated parents.

Parent rates can be claimed by individuals responsible for a child under their custody or paying maintenance for their child, given that the child is below 18 years of age (or between 18 and 23 years if in full-time education). The child should not be gainfully occupied, or if employed, should earn less than EUR 3,400 per year. Parent rates offer more favourable tax bands compared to single/separate tax rates.

Individuals who, according to Maltese tax laws:

• are considered ordinarily resident but not domiciled in Malta (thus subject to income tax based on source and remittance),
• are not subject to any other minimum tax threshold under Maltese law, and
• during the preceding calendar year, earned (along with their spouse, for married couples living together) income outside Malta amounting to at least EUR 35,000 or its equivalent, which was not fully received in Malta, are required to pay a minimum tax in Malta of EUR 5,000 for that particular year.

Social Security Contribution

Individuals who are 16 years or older but have not reached the retirement age of 65, and are engaged in insurable employment, must contribute to Social Security. These contributions are made on a weekly basis, with each year of employment contributing 52 or 53 times, depending on the number of Mondays in a given year, to the individual's contribution record.

In the year 2023, both the employer and the employee must each contribute 10% of the individual employee's salary towards social security, with fixed weekly rates of EUR 51.60 applicable to annual salaries surpassing EUR 26,832, provided the employee was born on or after January 1, 1962.

For individuals who are self-employed, social security contributions equate to 15% of the net income earned in the previous year. The highest contribution for individuals born on or after January 1, 1962, is EUR 77.40.

It's important to note that these rates are typically adjusted upwards at the commencement of each calendar year.

Tax Refunds

In Malta, tax refunds are subject to specific criteria that individuals must meet to qualify for reimbursement. One common scenario for tax refunds is related to overpaid income tax, typically arising from excessive tax deductions or miscalculations. Individuals may also be eligible for a tax refund if they have overpaid their provisional tax. Additionally, certain tax credits and incentives, such as those related to investments in qualifying assets, may lead to a refund if the credits exceed the taxpayer's liability. It is crucial for individuals to keep accurate records of their financial transactions, including receipts and documentation supporting their claims for deductions and credits. Compliance with tax regulations and timely filing of tax returns are essential for ensuring eligibility for tax refunds.

Tax Residence

Tax residence in Malta is determined by the number of days an individual spends in the country, as well as by specific criteria outlined in the Income Tax Act. Individuals who reside in Malta for more than 183 days in a calendar year are considered tax residents. However, even if the physical presence threshold is not met, an individual may still be deemed a tax resident if the person has a "durable connection" with Malta. This connection is evaluated based on various factors, including the location of a person's permanent home, the center of vital interests, and habitual abode. Malta's tax residency status is significant as it determines the scope of income subject to taxation in the country. Tax residents are generally liable for tax on their worldwide income, while non-residents are only taxed on income arising in Malta. Individuals seeking clarity on their tax residency status in Malta should refer to the specific guidelines and regulations provided by the Maltese tax authorities or seek professional advice to ensure compliance with the applicable rules.

What Expenses Can Be Deducted From Income Tax?

In Malta, individuals and businesses may be eligible to deduct certain expenses from their income tax, thereby reducing their taxable income. Common deductible expenses for individuals include fees paid to private independent schools, private childcare services and tertiary education, fees payable for the services of a facilitator, fees paid for approved sports activities, fees paid for private homes for the elderly or disabled, fees paid for approved creative or cultural courses and school transport fees. Business expenses that can be deducted include costs associated with generating income, such as rent, utilities, and employee salaries. Furthermore, capital allowances may be claimed on eligible assets, providing a means to recover the cost of acquiring or improving qualifying business assets over time. It is crucial for taxpayers to stay informed about the latest tax regulations and consult with a professional tax advisor to ensure accurate and compliant deductions.

Foreign Workers & Double Taxation Relief

Malta provides relief from double taxation for foreign workers through its network of Double Taxation Agreements (DTAs). These agreements are established to avoid the situation where an individual is taxed on the same income in both their home country and Malta. Foreign workers in Malta can benefit from these agreements, which typically determine the taxing rights of each country on various types of income, such as employment income, business profits, and dividends. The relief is often provided through a tax credit or an exemption, ensuring that individuals are not subject to the burden of paying taxes twice on the same income. This not only encourages international mobility but also promotes a fair and efficient tax system.

How Can We Assist?

The first step would be to understand the primary objectives of our clients, whether it is to assess any implications of tax on capital gains, international tax planning or family succession planning or simply personal tax advisory and compliance services. Protecting your wealth is a primary concern and effective tax planning has a large part to play in this process. Once the commercial objective is established, we will then be able to use our expertise to assist in finding the most efficient way forward. We will then guide you and ensure that one remains compliant with all personal tax obligations. 

We assist self employed individuals, business owners along with individuals deciding to reside in Malta.