Tax in Malta 2021 | Income and Taxation

Tax in Malta

Griffiths + Associates provides a full range of tax compliance and tax advisory services on a individual and corporate level to both local as well as international clients.

It is our priority to deliver strong tax services to give our clients a competitive advantage and ensure they are fully compliant with the applicable legislation and regulations.

We will project tax liability ahead of time and review the situation to uncover tax minimization strategies that can reduce client’s current or future tax liabilities.

Also, we will prepare tax computation and take care of the whole tax filing procedure.

Tax services include:

Tax Advisory

Do you need tailor-made tax advice?

We are always ready to consult and provide solutions in order to assist you plan for your finances and be tax compliant within the terms of Maltese tax legislation:

›  Personal tax advisory

›  Inheritance tax

›  Corporate tax advisory

›  Capital gains and succession planning

›  Indirect tax advice

›  International Tax Structuring

›  Mergers and Acquisitions

›  Real Estate Compliance

Tax compliance

We act as the liaison of a client with the authorities, and also has the necessary expertise and knowledge to provide assistance in preparing and filing all the necessary documents and forms in order to be in line with the respective legal obligations.

Moreover, our firm can assist licensed online gambling operators, who are legally required to pay gaming taxes in Malta to the Malta Gaming Authority, to compute and prepare the respective forms and submissions to the said Authority.

›  Tax registration /deregistration with the state authorities for different taxes

›  Corporate income tax return and compliance

›  Excise taxes and Customs duty

›  VAT compliance

›  Payroll tax services for entities

›  Personal tax and social security compliance

Tax Preparation and Filing

Individual Tax Preparation and Filing

The Maltese tax year, for individuals, follows the calendar year and requires individuals to file their relative tax return and effect any income tax payments by not later than six months from the end thereof.

We can help collate the necessary information and carry out the necessary tax computations in order to arrive at the taxable income and relative tax due in Malta.

For persons who are residing in Malta in terms of a Scheme, we could also provide the relative assistance in completing and filing the required documentation and forms in order to be compliant from a tax point of view.

We shall guide the client in any tax deductions or savings which may be had by taking into account the client’s personal circumstances and basis of taxation.

Business Tax Preparation and Filing

Arriving at the tax base on which to calculate ones dues in taxes, requires skill and knowledge on the respective tax laws applicable.

International taxation

We perfectly understand, companies which have cross-border business activities and interests must be well advised on the potential pitfalls of international double or multiple taxation.

That is why Griffiths + Associates provides only high quality tax services to our clients involved in international trade and business transactions. Our purpose is tax optimization taking into account tax risks of the client and the jurisdictions within which he operates.

›  Advice on international taxation

›  Advice on the use of agreements on avoidance of double taxation

›  Support of the international transactions, due diligence

›  Consultations on legal cash and goods flow

›  Strategy and investment schemes country and dissipating of assets, development of the financing schemes, payment of dividends and royalties

›  Consultations on issues of confidentiality

Indirect tax services

One way or another, a large part of everyday transactions involves indirect taxes – VAT, customs duties, eco-contributions. The world of indirect taxes is complex and changing at a very fast speed, which needs specialists knowledgeable with the knowhow and experience to service a client operating internationally.

Our indirect tax services include:

›  Duty on documents and transfers

›  International trade advisory

›  Customs and excise duties

›  VAT advisory

›  VAT compliance

Our VAT team will assist in the process of VAT registration, as well as on-going VAT compliance including any necessary VAT refund application in terms of the 8th VAT Directive, Mini-One Stop Shop (“MOSS”) registration and filing requirements, as well as regular completion and filing of the Recapitulative Statements.

We will also deal, on behalf of the client, with the VAT Department in Malta in the event of any dispute or investigation.

Introduction to the Maltese Tax System and Tax rates

The Maltese tax system comprises two main taxes: Income Tax (direct tax) and Value Added Tax (indirect tax).

I. Indirect Taxes:

VAT

  • VAT is a turnover tax which is charged on the supply of certain goods and the supply of certain services;
  • VAT is a tax on consumption, paid in installments. It is a tax which is borne by the final consumer;
  • VAT is a self-assessment tax. The taxable person (registered person) collects VAT from the customer and passes it to the VAT Department. VAT is neutral to the registered person thanks to the input tax deduction mechanism;
  • VAT is administered by the Commissioner of VAT who exercises supervises the assessment system, raises assessments and collects unpaid VAT.

VAT Rates:

18% (Standard): all other taxable goods and services.

7% (Reduced): hotel accommodation; use of sporting facilities.

5% (Reduced): medical equipment for disabled persons; books (including e-books); newspapers and periodicals; admission to some cultural events; minor repairs of shoes and leather goods, bicycles, clothing, and household linens; domestic care services; supply of electricity.

0%: some supplies of food for human consumption (excluding some processed and pre-cooked foods); prescribed medicines; gold ingots and bars; live animals for human consumption; intra-community and international transport; domestic passenger transport (excluding road); cut flowers and plants for food production.

Import Duties:

Typically, import duties were mostly paid for by companies importing products from outside of the European Union.

Individuals too were subject to pay import duties, however only on importation of high value items from outside of the European Union.

Many small household items acquired over the internet such as many eBay purchases, books and other trivial items were exempt.

However, recent changes which became effective as of 2021 will capture many other less valuable items.

Import duties are charged at the rate of 10%.

Excise Duty:

Excise Duty is a National tax, imposed by the Excise Duty Act – Chapter 382 of the Laws of Malta, on certain goods and commodities which are consumed or made use of, as in the case of a service, in Malta.

Certain goods such as spirits, wines, and manufactured tabocco products are “Harmonised Goods” which means that the excise duty is taxed on these type of products in all of Europe, albeit at different rates. Other goods (like tyres, cement, mobile telephone services, etc) classified as “Non Harmonised Goods”.

Stamp Duty:

The most common type of stamp duty is levied on insurance policies, transfer of capital assets which fall within the remit of the duty on documents and transfers act, chapter 364 of the laws of Malta  and transfers of immovable properties in Malta (5% for both residents and non-residents; a reduced rate of 2% in respect of transfers of immovable property situated in Gozo). The transfer of shares in Maltese companies are subject to stamp duty.

II. Direct Tax – Income Tax:

Tax on Income & profits and Passive Income:

Article 4(1)(a) to (g) – ITA:

ALL TYPES OF INCOME are subject to tax (Gains or profits from any trade, business, profession or vocation, Gains or profits from any employment or office, including the value of any benefit provided by reason of any employment or office, also including director’s fees or director’s salary; Passive income ‐ Dividends, premiums, interest or discounts; Any pension, charge, annuity or annual payment; Rents, royalties, premiums and any other profits arising from property).

Types of income expressly exempted by the ITA are not subject to tax (Article 12(1) –ITA).

Tax upon transfer of property:

Article 5A ‐ Governing only immovable property situated in Malta:

Tax at 8% withholding tax on the Transfer Value, being the greater of:

  • The consideration (transfer price); and
  • The market Value(irrespective of the gain made)

Exceptions:

  • Transfer of property (not forming part of a project) ‐ transfer is done within 5 years of acquisition ‐ 5% on value of property.
  • Promise of sale not registered before 17 November 2014 wrt property acquired before 1 January 2004 – 10% on value of property.
  • Transfer of ordinary residence within the first 3 years of acquisition ‐ 2% on value of property.
  • Transfer of property situated in Valletta acquired before 31 December 2018, which was restored and sold within 5 years from 31 December 2018 ‐ 5% on value of property.

Article 5 – Tax on Capital Gains:

  • The transfer of the ownership or usufruct of any immovable property or the assignment or cession of any rights over such property.
  • The transfer of the ownership or usufruct of or from the assignment or cession of any rights over any: Securities, Business, Goodwill, Business permits, Copyright, Patents, Trademarks & Trade names.
  • Gains or profits arising from a transfer of the beneficial interest in a trust.

III. Tax Rates on Chargeable Income:

Tax Rates on Chargeable Income
Tax Rates on Chargeable Income

Companies – Tax Rate – 35%. However, Malta allows shareholders to claim a tax refund on some of the dividends they receive from Maltese companies.

Bodies Corporate – no tax is charged upon preparation of the tax return.  Tax is charged at partner level Married persons filing jointly.

Individuals pay tax on income whether they are wage earners or self-employed. A person who meets the criteria to be considered a permanent resident, usually one who is resident for more than 183 days a year, will be taxed on their income in Malta and overseas. A foreign resident who is employed in Malta pays tax only on the income they earn in Malta.

As a general rule, a person employed but not residing in Malta and who spends a period of less than 183 days in Malta is taxed using non-resident rates.

Progressive tax rates are imposed on both residents and non-residents in Malta.

Employees earning less than €60,000 in a year should be granted tax refunds ranging between €45 and €95, depending on the amount of income earned.

Tax Rates on Chargeable Income - Resident Status: Basis 2021 – Year of Assessment 2022

Single Rates
(for single or married individuals who want a separate computation)

From (€) To (€) Rate (%) Deduct (€)
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
(for married persons filing jointly)

From (€) To (€) Rate (%) Deduct (€)
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

From (€) To (€) Rate (%) Deduct (€)
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 9,905

Tax Rates in Malta on Chargeable Income - Non-Resident Status

Non-Resident Rates

From (€) To (€) Rate (%) Deduct (€)
0 700 0 0
701 3,100 20 140
3,101 7,800 30 450
7,801 and over 35 840

Exceptions:

Applicable to EU/EEA Nationals only.
Resident rates also applicable to certain non-residents – 90% Income Test.

  • An EU/EEA National with at least 90% of his world wide income derived from Malta (even though not resident in MT) may apply the single rates.
  • An EU/EEA National and his spouse (both not resident in MT) with at least 90% of their world wide income derived from Malta may apply the married rates.

When the 90% test is not satisfied, tax will be paid in MT and capped as follows:

Tax Rates Malta - Non-Resident Status

Our company’s mission – to provide quality financial services to our esteemed local and international clients, keeping their needs at the centre of our ethos; going the extra mile to efficiently and effectively assist them in growing and fulfilling their business and personal needs.

Peter Griffiths – Managing and Tax Director
Peter Griffiths
Managing and Tax Director, Griffiths + Associates
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Our team of Tax specialists are knowledgeable in the various aspects of what is taxable, what is deductible, and the methodologies which allow one to arrive at the taxable income.