Personal Taxation in Malta

Zampa Debattista
Posted on 12th April 2019
Personal-Taxation-in-Malta.pdf (100 downloads) - 4 MB

 

Contents

  1. Introduction on Maltese Income Tax System for Individuals
  2. Tax System for Employed Individuals
  3. Tax System for Self-Employed Individuals
  4. Minimum Tax for Resident non-Domiciled Individuals
  5. Final Withholding Taxes

1. Introduction on Maltese Income Tax System for Individuals

Malta claims taxing rights on individuals based on their residence, domicile and source of income. Individuals who are ordinarily resident and domiciled in Malta are taxed on their worldwide income being on all income and capital gains arising in Malta or not. On the other hand, individuals who are resident but not domiciled in Malta are taxable on their income and capital gains arising in Malta and on any foreign income arising outside of Malta that is remitted to Malta. Thus, any foreign capital gains derived by individuals resident but not domiciled in Malta will not be subject to income tax in Malta even if such capital gains are received in or remitted to Malta. In the case of an individual who is neither resident nor domiciled in Malta, the person will only be taxable on income arising in Malta.

In accordance with article 56 of the Income Tax Act (ITA), individuals resident but not domiciled in Malta have their income taxed in Malta on the basis of progressive rates, which rates vary from zero percent (0%) to a maximum of thirty five percent (35%), depending on their chargeable income and whether the individual is eligible to apply the single, parent or married rates (Refer to Annex 1). Moreover, since Malta has over seventy double tax treaties in force, individuals who take up residence in Malta will retain the right to request a claim for relief of double taxation in line with article 74 of the ITA.

2. Tax System for Employed Individuals

According to Maltese Legislation, every individual deriving income from employment in Malta is required to pay social security contributions and income tax to the Maltese Tax Authorities. Generally, the social security contributions on employment income are equivalent to ten percent (10%) of the gross income earned capped at a maximum of approximately €2,400 annually. With regards to income tax, as explained above, the progressive rates will apply. Such taxes will be deducted by the employer from the gross income earned by the individual which amounts will be settled to the Maltese Tax Authorities through the Final Settlement System (‘FSS’) on a monthly basis.

3. Tax System for Self-Employed Individuals

In the case of self-employed persons, the social security contributions are calculated at the rate of fifteen percent (15%) on the net income derived in the previous year capped at a maximum of approximately €3,600 annually. On the other hand, income tax is payable via three provisional tax payments on the 30 April, 31 August and 21 December of a calendar year. Any additional tax in excess of the provisional tax paid will be settled in June of the year after together with the submission of the income tax return. In the situation where the provisional tax paid exceeds the income tax due for that year, the Maltese Tax Authorities will refund back the difference within a six-month period subject to certain conditions.

4. Minimum Tax for Resident non-Domiciled Individuals

With effect from 1st January 2018, individuals and married couples resident but not domiciled in Malta deriving foreign source income in excess of €35,000 and which is not remitted to Malta, shall be subject to a minimum annual tax liability in Malta of €5,000 unless they fall in the scope of a special tax scheme.
Should the income chargeable to tax in Malta result in a tax liability (before taking into account any relief) which is less than the minimum tax, then the taxpayer shall be deemed to have received in Malta additional income arising outside Malta such that the total tax liability on the total income would amount to the minimum tax of €5,000.

5. Final Withholding Taxes

a. Part-time Employment and Self-Employment

Individuals earning income from part-time work may qualify for a reduced tax rate of fifteen percent  (15%) subject to certain conditions. The income that can be taxed at fifteen percent (15%) is capped at €10,000 per annum for part-time employment and €12,000 per annum for part-time self-employment. Any income over and above such capped amounts will be added to the other sources of income of the individual and will be taxed at the progressive rates. Taxpayers may opt not to avail of this final withholding tax, in which case, tax on such income will be charged at the progressive rates.

b) Rental Income

Persons in receipt of rental income from property situated in Malta can opt to apply the final withholding tax rate of 15% on the rental income earned.

c. Registered Players, Athletes or Licensed Coaches

Individuals who are registered players, athletes or licensed coaches deriving income from full-time or part-time sports activity can opt for a reduced income tax rate of seven point five percent (7.5%).

Annex 1 -Individual Resident Tax Rates for Basis Year 2019

SINGLE  RATES
Chargeable Income Tax Rate Deduction
0 – 9,100 0% 0
9,101 – 14,500 15% 1,365
14,501 – 19,500 25% 2,815
19,501 – 60,000 25% 2,725
60,001 and over 35% 8,725
MARRIED RATES
Chargeable Income Tax Rate Deduction
0 – 12,700 0% 0
12,701 – 21,200 15% 1,905
21,201 – 28,700 25% 4,025
28,701 – 60,000 25% 3,905
60,001 and over 35% 9,905
PARENT RATES
Chargeable Income Tax Rate Deduction
0 – 10,500 0% 0
10,501 – 15,800 15% 1,575
15,801 – 21,200 25% 3,155
21,201 – 60,000 25% 3,050
60,001 and over 35% 9,050

 

Annex 2 – Individual Non-Resident Tax Rates for Basis Year 2019

SINGLE  RATES
Chargeable Income Tax Rate Deduction
0 – 700 0% 0
701 – 3,100 20% 140
3,101 – 7,800 30% 450
7,801 and over 35% 840

 Should you require any assistance please contact: Matthew Zampa (Partner) on [email protected] or Markita Zampa (Tax and Corporate Supervisor) on [email protected].

download the article: Personal Taxation in Malta

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