Malta

In Malta, employers have various tax obligations, including social security contributions, income tax withholding, and value-added tax (VAT).

Social Security Contributions

Both employers and employees contribute to social security. As of 2025, each contributes 10% of the employee's salary. For employees born on or after January 1, 1962, whose annual salary exceeds €28,303, a fixed weekly contribution of €54.43 also applies. The self-employed contribute 15% of their previous year's net income, capped at €81.64 per week for those born on or after January 1, 1962. These rates are subject to annual revisions, typically upwards.

Income Tax Withholding (PAYE)

Employers withhold income tax from employees' salaries under the Pay As You Earn (PAYE) system. The withheld amount is remitted to the Inland Revenue Department quarterly, within the first 15 days of the month following the quarter's end. Malta's income tax system is progressive, with rates ranging from 0% to 35% for 2025. The 35% rate applies to chargeable income exceeding €60,000.

Value-Added Tax (VAT)

Businesses registered for VAT must charge 18% on most goods and services. Certain goods and services qualify for reduced rates. Small enterprises whose primary activity involves supplying services, with an annual turnover not exceeding €35,000, may not be required to charge VAT, however they may still have registration obligations unless the services are fully exempt. VAT returns, along with payments, are due quarterly. For the quarter ending December 2024, the deadline is February 15, 2025.

Other Employer Obligations

Employers are also responsible for submitting various forms to the authorities, including FS3 and FS7 by February 15th and FS5 by the end of the following month, along with relevant payments.

Minimum Wage and Cost of Living Adjustment

As of January 1, 2025, the minimum wage is €221.78 per week for those aged 18 and over, €215.00 for 17-year-olds, and €212.16 for those under 17. The cost of living adjustment (COLA) is €5.24 per week for full-time employees and €0.13 per hour for part-timers.

Part-Time and Overtime Taxation

Part-time employment income is taxed at a flat rate of 10% up to €10,000 annually. Income exceeding this threshold is subject to standard income tax rates. Non-managerial full-time employees earning a basic weekly wage of €375 or less are taxed at 15% on the first €10,000 of overtime pay annually. Any overtime beyond that amount is taxed at standard rates.

Other Taxes

While there is no payroll tax, capital duty, real property tax, or transfer tax in Malta, employers should note other applicable taxes, such as stamp duty on specific documents and transfers, and customs and excise duties on certain goods.

This information is current as of February 5, 2025, and may be subject to change.

In Malta, employee tax deductions are determined by income tax brackets, social security contributions, and specific allowable deductions.

Income Tax

• Tax Bands: For 2025, the first €12,000 of annual income is tax-free. Income tax is then calculated on the remaining income based on progressive tax bands. These bands are subject to change annually, so it's essential to refer to the latest official rates.
• Rates: General income tax rates range from 15% to 35%. A reduced rate of 7.5% applies to registered professional football or water polo players, athletes, or licensed coaches. Certain individuals meeting specific employment conditions may qualify for a 15% tax rate. These conditions include having an employment contract subject to Maltese law for genuine and effective work in Malta, possessing professional qualifications, and having at least five years of professional experience.
• Final Tax: Some income sources, like dividends, might be subject to a final withholding tax, which the taxpayer can opt for. This means no further tax is due on that specific income.
• Filing and Payment: Tax on employment income is deducted directly from wages under the Final Settlement System (FSS). The employer remits these deductions to the tax authorities.

Social Security Contributions

• Employee Contribution: Both employers and employees contribute to social security. For 2025, the employee's contribution is generally 10% of their salary. For those born on or after 1 January 1962 and earning over €28,303 annually, the contribution is a fixed rate of €54.43 per week.
• Employer Contribution: Employers also contribute 10% of the employee's salary, capped at the same levels as the employee's contribution.
• Self-Employed: Self-employed individuals contribute 15% of their annual net income from the previous year, up to a maximum of €81.64 per week for those born on or after 1 January 1962.
• Deduction: Social security contributions are deducted directly from the employee's salary, similar to income tax.

Deductible Expenses and Allowances

• Limited Deductibility: While certain business expenses are deductible for self-employed individuals and business owners, employee expense deductions are limited to costs "wholly, exclusively, and necessarily" incurred in performing job duties. This means the expense must be directly related to work, not also for personal use, and essential for doing the job. Reimbursed expenses are typically not taxable unless they result in a gain for the employee.
• Specific Deductions: Some specific deductions are available for individuals, including:
  • Fees for private independent schools, childcare, and tertiary education
  • Facilitator services fees
  • Approved sports activities fees
  • Fees for private homes for the elderly or disabled
  • Approved creative or cultural course fees
  • School transport fees
• Pension Income Exemption: For 2025, 80% of pension income, up to €13,309, is exempt from taxation for pensioners who continue working.
• Alimony Payments: Alimony paid to an estranged spouse is deductible for the payer and taxable for the recipient.

General Information

• Tax Year and Assessment: The tax year in Malta is the calendar year. Income earned in a given year is assessed and taxed the following year. For example, 2025 income is assessed in 2026.
• Registration: Employees must register with the Inland Revenue Department and obtain a tax number for their employer to process payroll correctly.

This overview provides a general summary of employee tax deductions in Malta. Tax laws are complex and can change, so it's always advisable to consult with a tax professional for personalized advice.

In Malta, Value Added Tax (VAT), known as It-taxxa fuq il-valur mizjud, is levied on most goods and services.

VAT Rates

• Standard Rate: 18% (applicable to most goods and services)
• Reduced Rates:
  • 12% (certain health services, pleasure boat hire, credit management)
  • 7% (licensed hotel accommodation, sports events and related services)
  • 5% (domestic electricity, medical supplies, labor-intensive supplies like repairs and domestic cleaning, works of art, print and electronic publications, certain confectionery)
• Zero Rate (0%): Foodstuffs (with some exceptions), prescribed medicines, intra-community supplies, exports, and international passenger transport.
• Exemptions

• E-learning activities: Educational supplies are exempt.
• Gambling activities: Services by gaming operators are exempt.
• Other: Public radio and television activities (non-commercial).

VAT Registration

• Thresholds:
  • €35,000 for goods (local businesses)
  • €30,000 for services (local businesses)
  • €10,000 for EU cross-border digital services and goods
  • No threshold for non-resident businesses supplying taxable goods/services in Malta.
• Small Enterprises: Businesses with an annual EU turnover up to €100,000 can opt for VAT exemption as of January 1, 2025.

VAT Filing and Returns

• Frequency: Typically quarterly (monthly upon request).
• Deadline: 22nd day of the second month following the reporting period. A 7-day extension applies for electronic filing and payment from January 1, 2011.
• Late Submission Penalty: The higher of €20 or 1% of the VAT due monthly.

Exempt Goods and Services

• Real estate (exceptions apply, e.g., licensed tourist accommodation)
• Insurance and financial services
• Cultural and religious facilities
• Lottery and gambling
• Postal services
• Educational services
• Health facilities (some exceptions apply, see 12% reduced rate)
• Water supply by authorities

Additional Information

• Reverse Charge Mechanism: Applies to intra-community supplies from non-resident, unregistered suppliers.
• Electronic Invoicing: Permitted with proper signatures and recipient agreement.
• Simplified Invoices: Allowed for amounts up to €100.

This information is current as of February 5, 2025, and is subject to change. Always consult with a tax professional for personalized advice.

Malta offers a range of tax incentives for both businesses and individuals. These incentives are designed to attract investment, promote economic growth, and support specific sectors. As of today, February 5, 2025, the following incentives are applicable, keeping in mind these details may change in the future.

Business Incentives

• Business Development Scheme: Provides aid in the form of tax credits and/or cash grants up to €300,000, covering up to 75% of eligible costs for value-added projects such as setting up, expanding, or modernizing facilities.

• Smart and Sustainable Investment Grant Scheme: Offers tax benefits to eligible undertakings operating in specific industries.

• Start-Up Finance Scheme: Supports new businesses with potential tax benefits.

• Green Mobility Scheme: Provides tax benefits for eligible undertakings operating in the green mobility sector.

• Tax Refund for Dividends: Maltese companies distributing dividends to shareholders can receive a refund on the tax paid on the profits from which the dividends are derived.

• Participation Exemption: Exemption from taxation on profits derived from participating holdings or gains from disposing of shares.

• Unilateral Relief: Provides relief for foreign tax paid by Maltese companies and individuals earning income outside Malta. This relief is also available for companies domiciled but not registered in Malta.

• Flat Rate Foreign Tax Credit: Available for Maltese-incorporated businesses receiving specific types of income (foreign investments, royalties, interest, rental income, dividends) falling under the Foreign Income Account for Maltese Tax Accounting regulations.

• Reduced Stamp Duty for Family Businesses: A reduced stamp duty rate of 1.5% applies to inter-family transfers of shares or qualifying family businesses.

Individual Incentives

• Personal Income Tax Adjustments: Widened income tax brackets offer potential annual savings between €345 and €675 for taxpayers.

• Tax Relief for Pensioners: Pensioners who continue working can exclude 80% of their pension income from taxation.

• Increased Deductions for Private Education: Parents of children in private education can benefit from increased tax deductions.

• Residence Programmes: Various residence programmes offer a flat tax rate of 15% on remitted foreign-sourced income and a minimum annual tax liability. These programmes include:

  • The Residence Programme
  • The Global Residence Programme
  • The Malta Retirement Programme

• Qualifying Employment in Innovation and Creativity: Eases tax expenses for non-residents employed in roles not readily filled by the local labor market. Contact Business 1st on 144 for more information.

• Repatriation of Persons Established in a Field of Excellence Rules: Provides a framework for individuals seeking eligibility under these rules.

• Qualifying Employment in Aviation: Offers a 15% tax rate on employment income for eligible individuals working in the aviation sector, subject to certain conditions, including a minimum annual income of €45,000.

• Private Retirement Scheme (PRS) Tax Credit: Individuals contributing to a PRS can receive an annual tax credit of 25% of the total qualifying contributions, up to a maximum of €750.

• Exemptions for Investment Services and Insurance Expatriates: Specific exemptions apply, subject to certain conditions.

Property Transfer Incentives

• First-Time Buyer Exemption: Exemption from property transfer tax for first-time buyers, applicable for transfers made up to December 31, 2025, with documentation due by February 28, 2026.

• Second-Time Buyer Refund: Refund of duty on the first €86,000 for second-time buyers using the property as their sole residence, applicable for acquisitions up to December 31, 2025, with documentation due by February 28, 2026.

• Exemption for Vacant/Urban Conservation Area Properties: Exemption on the first €750,000 of the transfer value for vacant properties or those located in urban conservation areas, valid until December 31, 2025. Note that storage properties are excluded from this relief as of January 1, 2025.

• Relief for Garages: Relief is available for garages transferred with a residential property under specific conditions.

• Tax Relief for Properties with Traditional Maltese Features: Relief is available for properties intended for development with traditional Maltese features, valid until December 31, 2025, with documentation due by January 31, 2026.

Electric Vehicle Incentives

• Grants for Electric Vehicles: Grants of up to €8,000 for electric cars and vans and €2,000 for electric motorcycles are available.
• Tax Exemptions for Electric/Hybrid Vehicles: Electric and plug-in hybrid vehicles with a 50km+ electric range are exempt from registration tax and annual circulation tax for five years from the registration year.
• Car Scrappage Scheme: Receive €1,000 for scrapping old cars and vans (increased by €1,000 for old vehicles registered in Gozo).

For detailed information and specific eligibility criteria, it's recommended to consult official government sources or seek professional tax advice.