Malta offers a number of residence schemes to foreigners wishing to relocate in order to combine a Mediterranean lifestyle, lots of sunshine and a tax-friendly environment in a location close to the rest of Europe, Africa and the Middle East.
Malta levies income tax on the basis of residence and source. Income tax is levied on both income (active and passive) and capital gains (i.e. gains from the transfer of certain capital assets).
Persons who are both resident and domiciled in Malta are taxed on their worldwide income and capital gains. On the other hand, persons who are either ordinary resident or domiciled in Malta are taxed on income and capital gains arising in Malta and on any foreign income that is received in Malta. This means that any foreign capital gains derived by persons who are either resident or domiciled in Malta, will not be subject to tax in Malta even if such gains are received in Malta. Persons who are neither resident nor domiciled in Malta are only subject to tax in Malta on any income and capital gains arising in Malta.
In practice, a person is deemed to be resident in Malta if he/she spends at least six months (one hundred and eighty three days) in a calendar year in Malta.
Individuals are taxed at progressive rates of income tax starting from 0%, with 35% being the highest rate of tax.
More information about taxation can be found on the Commission for Revenue website.
Taxable income (€) | 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 |
Taxable income (€) | 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 |
Taxable income (€) | 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 | 9,050 |
The tax rates can be seen from here.
The fiscal year for individuals in Malta is the calendar year. All individuals who are liable to pay tax in Malta must pay their income tax by the 30th June of the following year. In case of late payment of tax, taxpayers will be liable to interest at the rate of 0.75% of the tax due for every month or part thereof.
Employees will have their tax on the employment income deducted at source by their employer. A system referred to as ‘The Final Settlement System’ (FSS) has been designed to ensure that the employer will deduct the correct amount of tax so that no further tax will be due by the employee at the end of the year. An employer has the duty and obligation to deduct the correct amount of tax at source from the employee’s income in terms of the FSS system. Employees do not have the option to pay the tax on their employment income, other than through the FSS system.
The Department of Social Security in Malta collects all relevant personal information to provide its services to individuals who qualify for assistance, allowance or non-contributory pensions in accordance with the Social Security Act (Cap 318).
All persons who are over the age of sixteen (16) and who have not yet attained retirement age of 65 years, and who are in insurable employment, are liable to pay Social Security Contributions. Social Security contributions are paid in weekly rates, and each year of gainful occupation will carry 52 or 53 social security contributions (depending on the annual number of Mondays) on the payee’s contribution record.
There can only be one insurable employment at the same time, and in case of more than one concurrent employments, the insurable employment will be that which provides the highest income or earnings.
Insurable employments are classified into 3 categories:
1. Employed Persons (employed with a provider of employment or employer);
2. Self Occupied Persons; and
3. Self Employed Persons.
All full-time or part-time employees who are employed for less than eight (8) hours in any one calendar week are not considered as being in insurable employment for Social Security Contribution purposes.
Social Security Contributions by Employed persons are called Class 1 Contributions and are paid by direct deductions from the same employees’ wages/salary. In a normal case scenario, an equivalent rate paid or deducted from the employee’s wage/salary, is also paid by the employer.
The Social Security Contribution rate due is based on earning derived from the Basic Weekly Wage. The basic weekly wage does not include allowances, bonuses, and/or overtime earned in a particular week.
Part-time employees who therefore work less than 40 hours per week and who earn less than the National Minimum (weekly) Wage, can opt to have their share on social security contributions, paid at the rate of 10% of their basic weekly wage. This contribution rate is called the Pro-rata rate and does not apply to the employer’s share who has to pay the full applicable weekly rate. One should also consider that when paying social security contributions by 10% pro-rata, these will not be considered as one contribution per week for records purposes, but carry a lesser albeit proportional weight against the applicable full weekly rate.
Both employer and employee’s share of social security contributions are paid to the Commissioner of Inland Revenue in monthly payments by the employer.
For more information, visit the Office of the Commisioner for Revenue website.
A self-occupied person is one who:
- is not an employed person;
- is excepted under Part II of the First Schedule of the Social Security Act;
- is engaged in any activity through which earnings exceeding €910 per annum are being derived.
Full-time or part-time employees who are employed for less than eight (8) hours per week but earn more than €17.50 per week (€910 per annum); are considered as Self Occupied persons for Social Security Contribution purposes.
The Social Security Contribution rate due is based on income derived from the net annual income from trade or profession; earned during the previous calendar year of that of payment.
Part-time Self Occupied Females who earn less than €9,869 per annum (2015 threshold), can opt to have their share on social security contributions, paid at the rate of 15% of their basic weekly income. This contribution rate is called the Pro-rata rate. One should also consider that when paying social security contributions by 15% pro-rata, these will not be considered as one contribution per week for records purposes, but carry a lesser albeit proportional weight against the applicable full weekly rate.
Self occupied persons’ social security contributions are paid to the Commissioner of Inland Revenue every four months; namely in April, August and December respectively.
For applicable rates due for Class 2 contributions kindly visit the folllowing link.