Malta

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Tax Policy

TAX POLICY

Malta Income Tax Rate 35%

Malta Corporate Tax Rate 35%

Malta Sales Tax / VAT Rate 18%

Personal Income Tax

Individual income tax rates is Malta are progressive up to 35%.

Tax rates for Singles

Chargeable Income €

Tax Rate

Deduct €

0 - 8,500

0%

0.00

8,501 - 14,500

15%

1,275.00

14,501 - 19,500

25%

2,725.00

19,501 &over

35%

4,675.00

Tax Rates for Married

Chargeable Income €

Tax Rate

Deduct €

0 - 11,900

0%

0.00

11,901 - 21,200

15%

1,785.00

21,201 - 28,700

25%

3,905.00

28,701 &over

35%

6,775.00

The following tables should be used by taxpayers not residing in Malta for computing the amount of tax on their chargeable income in the respective basis year.

Non-Resident Tax Rates

Chargeable Income

Tax Rate

Deduct

0 - 700

0%

0.00

701 - 3,100

20%

140

3,101 - 7,800

30%

450

7,801 &over

35%

840

Malta has a permanent Resident Scheme which offers the following incentives to settlers provided certain conditions are met:

- a flat tax rate of 15% is charged on all income received in or remitted to Malta from either local or foreign sources (subject to a minimum payment of € 4,193 pa)

- exemption from customs duty / VAT on used household and personal effects, furniture including one private motor vehicle

- repatriation of capital and income. This applies to the unspent remainder of capital brought in to Malta including any income that has accumulated abroad e.g. on the proceeds on sale of own property or investments

- no death duties are payable in Malta.

Personal income tax is paid on all income accruing in or derived from Malta and on income accruing in, or delivered from, abroad by persons domiciled and ordinarily resident in Malta.

Income arising outside Malta to a person who is not ordinarily resident in Malta or not domiciled in Malta will be taxed only if it is received in Malta.

Income taxable in Malta includes gains and profits from any trade, business, profession or vocation; gains or profits from any employment or office; dividends and interest; pensions, annuities or other annual payments; and rents, royalties or other profits derived from ownership of property.

Other taxes on individuals:

Capital duty – No

Stamp duty – Stamp duty is generally levied on documents evidencing transfers of immovable property at a rate of 5% of the higher of the consideration and the real value (with reduced rates applicable to dwelling houses and transfers causa mortis), and upon a transfer of marketable securities at a rate of 2% of the higher of the consideration and the real value, although a 5% rate applies to transfers of marketable securities in a company where 75% or more of the company's assets consists of immovable property. An exemption from duty may apply.

Capital acquisitions tax – No

Real property tax – There is no real property tax, but tax is generally due on any gain on the transfer of immovable property (see "Capital gains").

Inheritance/estate tax – No, but see "Stamp duty".

Net wealth/net worth tax – No

Social security contributions – Social security is compulsory for all persons gainfully occupied in Malta between the ages of 16 to 65, including nonresident persons working in Malta. A full-time employee must generally contribute 10% of his/her basic weekly wages (the employer contributes an equal amount) subject to a minimum and a maximum contribution, which are updated annually on the basis of the cost-of-living increase awarded by the government.

Administration and compliance:

Tax year – Individuals are subject to tax on income arising in a calendar year, i.e. the basis year, which is assessed to tax in the year following the year in which it arises, i.e. the year of assessment.

Tax Filing and tax payment – Individuals are taxed on a preceding year basis. Individuals must make 3 provisional tax payments that must be effected before 30 April, 31 August and 21 December, respectively, of each basis year (except for income on which tax was withheld at source, e.g. employment income). The balance must be paid by 30 June of the year of assessment.

Penalties – Penalties may be imposed, interalia, for making incorrect tax returns.

Company Tax

Malta company tax rate is 35%.

Company tax is payable by all companies registered or resident in Malta at 35% with no threshold for reduced rates of taxation (subject to the reduced rates depending on shareholder residency and company operations specified below).

The rate of tax on resident companies listed on Malta Stock Exchange is reduced as follows:

From

To

Percentage of shares offered to public

35%

33%

20% to 30%

35%

31.5%

31% to 40%

35%

30%

41% onwards

The reduction in the tax is also passed to shareholders when dividends are paid out.

Collective investment schemes

Withholding tax on such funds varies between 10% and 15% depending on the type of income. Tax at 15% will be withheld on the capital gains realised by resident investors on disposal of non-prescribed funds (i.e. funds whose assets are non-Maltese). Dividends paid by a non-resident non-prescribed fund to a resident investor carry a final 15% withholding tax. Dividends paid to non-resident investors are exempt from withholding tax.

Local taxes

Stamp Duty on property transfers is 5% of which 1% provisional tax is paid upon the entering of a promise of sale agreement. The transfer of unlisted shares is charged at 2% to 5% on market value. Stamp duty on property transferred between family members is to be calculated on its cost value.

Other taxes

Both resident and non-resident companies pay Social Insurance Funds contributions. Both the employer and the employee pay 10% on the weekly basic pay (excluding bonuses, overtime etc). They are accounted for on a monthly basis.

Value added tax

The standard VAT rate in Malta is 18%. When Malta joined the European Union, various changes to the VAT Act became necessary. The changes relate mostly to intra-Community and international operations as well as changes to the reporting system.

A 5% VAT rate continues to apply to accommodation in hotel and other licensed premises. It will, additionally, apply to the supply of confectionery and similar items, medical accessories and printed matter.

Every taxable person who makes intra-Community supplies of goods to businesses registered in other EU Member States is required to make a quarterly VAT statement.

The information on this statement will be shared with the authorities of other Member States and is designed as a means of controlling supplies that are exempt in one Member State and are reported and taxed as acquisitions in another Member State.

Entities established in the European Union but not established in Malta may qualify under the Special Refund Scheme. Maltese VAT incurred on services received by persons established in the EU but not in Malta, or goods supplied to persons established in the EU but not in Malta, or charged on the importation of goods into Malta may be refunded to such persons under the same conditions as those that govern the right of a taxable person registered for VAT in Malta to deduct Input VAT.

Schemes apply for reduced VAT rates on leasing of yachts. For sailing boats or motor boats over 24 metres in length there is a 30% reduction in the effective VAT rate subject to certain terms and conditions.

The Government has announced that VAT refunds will be available from 2010 for research projects, as well as restoration projects and expenses for the construction of Church Schools.

Furthermore, no refund on VAT will be given if there are pending VAT returns.

Taxable transactions – VAT is levied on the supply of goods and services in Malta, the intra-Community acquisition of goods in Malta and the import of goods into Malta from outside the EU.

As from 1 January 2010, additional registration requirements apply to businesses supplying and receiving services in a crossborder context.

Filing and payment – Input VAT is set off against output VAT, and the balance is accounted for every 3 months (quarterly).