Employers in Malta have several tax responsibilities, including contributing to the country's social security system. Both employers and employees contribute to this system, with the employer's contribution rate being the same as the employee's rate – currently 10% of the employee's gross salary. There's also a fixed weekly rate for higher earners.

Social Security Contributions

Employers must also contribute to the Maternity Fund, which provides benefits for maternity leave. The current employer contribution rate is 0.3% of the employee's basic weekly wage.

Maternity Fund Contribution

In addition to these contributions, employers may have other potential contributions. For instance, they must pay an annual bonus determined by the government. This is paid in installments throughout the year. If an employer provides fringe benefits (e.g., company car, health insurance), additional taxes may be applicable depending on the nature of the benefit.

Other Potential Employer Contributions

Employers are also responsible for the administration of these contributions. They must deduct employee social security contributions from their wages, along with their own matching contributions. Both employer and employee contributions must be remitted to the Inland Revenue Department on a regular basis, usually monthly.

Administration of Employer Contributions

In Malta, employees are taxed at progressive rates, meaning the percentage of tax you pay increases with higher income levels. The country operates a Pay-As-You-Earn (PAYE) system where your employer deducts the required income tax from your salary before you receive it.

Types of Employee Tax Deductions

The main tax deduction for employees in Malta is the income tax, which is based on your annual income. Another significant deduction is the Social Security Contributions (SSC). Both employers and employees contribute to social security, providing various benefits like pensions and healthcare. The weekly contribution for employees is generally 10% of the gross salary, with contribution caps depending on your year of birth.

Allowable Deductions

Malta offers some deductions to reduce your taxable income. If expenses are directly and solely related to generating income from your employment, they may be deductible. Additionally, alimony payments to an estranged spouse are deductible for the payer and taxable income for the recipient.

Tax Calculations and Filings

Under the Final Settlement System (FSS), employers calculate your tax deductions throughout the year. Usually, no further yearly tax return is needed for employees. However, if you have additional income sources or particular situations, you may need to file a tax return.

Double Taxation Treaties

Malta has an extensive network of double taxation treaties to prevent you from getting taxed on the same income twice in different countries. If you earn income abroad, you might benefit from these treaties.

In Malta, VAT laws align with the EU VAT Directive, ensuring consistency across member states. VAT applies broadly to the supply of goods and services made in Malta by a taxable person carrying out a business activity.

VAT Registration

Registration for VAT is mandatory if your taxable supplies in Malta in the past year exceed €35,000. You can voluntarily register even if your turnover is below this threshold. To register, you need to contact the Maltese VAT Department for information on the registration process and required documentation.

VAT Rates

Malta's standard VAT rate is 18%. Certain services qualify for reduced VAT rates. For instance, hotel accommodation and use of sporting facilities are taxed at 7%, while the supply of electricity, specific medical accessories, and printed matter are taxed at 5%. Some services are exempt from VAT, including financial services, insurance, educational services, and healthcare services.

Charging and Invoicing VAT

If you're a registered taxable person, you must charge VAT on the services you supply in Malta. You are also required to issue valid VAT invoices that must include specific details like VAT numbers, descriptions of the service, and the VAT rate applied.

VAT Returns and Payments

VAT returns are generally filed quarterly, although the frequency can vary based on your turnover. You must submit VAT returns and any applicable VAT payments by the deadlines specified by the VAT Department.

VAT on Imported Services

If you receive services from suppliers outside of Malta, you may be responsible for accounting for VAT under the "reverse charge" mechanism.

VAT on Cross-Border Services

Rules determine where a service is considered to be supplied for VAT purposes. This affects whether you need to charge VAT and potentially register for VAT in other countries.

Special VAT Regimes for Services

The Tour Operators Margin Scheme (TOMS) can simplify VAT accounting for tour operators.

Malta's tax system is known for its attractive features that can result in very low effective corporate tax rates for shareholders of Maltese companies. One of these features is the unique tax refund system. Additionally, Malta offers a participation exemption regime, which can significantly reduce or eliminate taxes on dividends and certain capital gains from qualifying shareholdings. Furthermore, Malta has a wide network of double taxation treaties to prevent businesses from paying tax on the same profits in multiple countries.

General Tax Incentives

Malta provides several general tax incentives. These include Investment Aid Tax Credits (ITCR) which provide tax credits or cash grants to support businesses undertaking investments or creating new jobs. Specific rates and conditions apply. Another incentive is the Micro Invest Scheme, designed for smaller businesses, this scheme offers tax credits based on qualifying investments and wage costs.

Industry-Specific Incentives

Malta also offers industry-specific incentives. These include Research & Development (R&D) Incentives, which offer tax credits and cash grants for eligible R&D activities. Malta also provides attractive incentives for film and television productions, such as cash rebates and tax credits. The competitive landscape for gaming in Malta includes tax benefits specifically geared towards the iGaming sector.

Accessing Incentives

To access these incentives, Malta Enterprise, a government agency, is usually the point of contact. It is also advisable to consult specialized tax professionals for the most up-to-date and tailored advice regarding applicable incentives.