Income tax in Malta

February 05, 2019

INDIVIDUAL TAXATION

Maltese residents pay income tax on their worldwide income. Resident foreigners are taxed on their income sourced in Malta. Married couples are assessed and taxed jointly.

INCOME TAX

The following income categories are taxed in Malta: (1) trade or business income; (2) professional or vocational income; employment or office income; dividends, interests or discount; (3) pensions, annuities or annual payments; (4) rents, royalties, premiums, and any other income arising from property; (5) certain capital gains; and (6) other income, gains, or profits.

Income is taxed at progressive rates. Different tax bands apply to married couples filing jointly and single taxpayers (including married couples electing to be taxed separately).

The income tax rates for 2015 are as follows:

INCOME TAX 2016 - SINGLE PERSONS

TAXABLE INCOME, (€)
TAX RATE
Up to €8,500 0%
€8,500 - €14,500 15% on the band over €8,500
€14,500 - €60,000

25% on the band over €14,500

Over €60,000 35% on all income over €60,000
Source: Global Property Guide

iNCOME TAX 2016 - MARRIED COUPLES (WITHOUT CHILDREN)

TAXABLE INCOME, (€)
TAX RATE
Up to €11,900 0%
€11,900 - €21,200 15% on the band over €11,900
€21,200 - €28,700 25% on the band over €21,200
€28,000 - €60,000 29% on band over €28,700
Over €60,000 35% on all income over €60,000
Source: Global Property Guide

iNCOME TAX 2016 - PARENTS

TAXABLE INCOME, (€)
TAX RATE
Up to €9,800 0%
€9,800 - €15,800 15% on the band over €9,300
€15,800 - €21,200 25% on the band over €15,800
Over €60,000 35% on all income over €60,000
Source: Global Property Guide

The income tax rates for 2015 are as follows:

INCOME TAX 2015 - INDIVIDUALS

TAXABLE INCOME, (€)
TAX RATE
Up to €8,500 0%
€8,500 - €14,500 15% on the band over €8,500
€14,500 - €19,500

25% on the band over €14,500

€19,500 - €60,000 29% on band over €19,500
Over €60,000

35% on all income over €60,000

Source: Global Property Guide

iNCOME TAX 2015 - MARRIED COUPLES (WITHOUT CHILDREN)

TAXABLE INCOME, (€)
TAX RATE
Up to €11,900 0%
€11,900 - €21,200 15% on the band over €11,900
€21,200 - €28,700 25% on the band over €21,200
€28,000 - €60,000 29% on band over €28,700
Over €60,000 35% on all income over €60,000
Source: Global Property Guide

iNCOME TAX 2015 - PARENTS

TAXABLE INCOME, (€)
TAX RATE
Up to €9,300 0%
€9,300 - €15,800 15% on the band over €9,300
€15,800 - €21,200 25% on the band over €15,800
€21,200 - €60,000 29% on band over €21,200
Over €60,000 35% on all income over €60,000
Source: Global Property Guide

The following can be deducted from a taxpayer´s annual gross income:

  • Alimony payments
  • School fees up to €2,300 for a child in secondary school, up to €1,000 for a child in primary school, and up to €1,300 for a child in kindergarten, and facilitator services up to €9,320
  • Child care fees up to €2,000
  • Payments to private homes in behalf of an elderly family relative up to €2,500
  • Fees for disabled dependents up to €2,500
  • Sports fees up to €100
  • Costs for cultural activities up to €100

RENTAL INCOME
Rental income is taxed at progressive rates. Taxable income is gross rent less the following:

  • Any rent or ground rent payable by the owners relevant to the property,
  • License fees related to the Malta Travel and Tourism Act,
  • Interest expense on housing loans, and an
  • Allowance of 20% on the gross income remaining after deducting the rent and the license fees. The standard 20% allowance covers maintenance costs, repairs, and other related expenses.

Capital Gains Tax

Malta hillside luxury houses

In Malta, Capital Gains Tax is actually a transaction cost and not a tax on capital gains. Capital Gains Tax is generally levied at a flat rate of 12% on the transfer value or the selling price. Only brokerage fees can be deducted from the selling price. During the sale, a provisional tax equal to 12% of the selling price must be paid to the notary public who will then pass it on to the Inland Revenue as payment of the tax liability.

If the seller has inherited the property before 25 January 1992, capital gains tax is levied at a flat rate of 7%.

If the seller is not involved in property trading, capital gains tax may be levied at a final withholding tax rate of 5% on properties that were sold within five years of acquisition.

If the seller has acquired the property prior to 01 January 2004, capital gains tax is levied at a final withholding tax rate of 10%.


PROPERTY TAX

There are no property taxes levied in the Islands of Malta.

CORPORATE TAXATION

INCOME TAX

Income and capital gains earned by companies are generally taxed at a flat rate of 35%. Income-generating expenses are deductible when calculating taxable income.

RESIDENCY
In line with the Republic of Malta´s accession to the European Union in 01 May 2004, the government has relaxed its immigration policies to further attract foreign investors.

The Residents Scheme Regulations of 2004 grants permanent residency to foreign nationals who have an annual income of at least €23,246 arising outside of Malta or hold capital assets worth at least €349,000. The given amounts are not required to be remitted to the country. However, documents must be presented to support this. The value of a property purchased in the country is credited to the capital requirement.

Upon approval of the application for the resident scheme, the holder must:

  • Purchase a local residence for a minimum of €69,000 for apartments or €116,000 for other types of residential property. Alternatively, a property may be leased for at least €4,185 per year
  • Have an annual income of at least €23,246 arising outside of Malta or hold capital assets worth at least €349,000
  • Remit an annual income of €13,950 and an additional €2,300 for each dependent

No minimum residence or stay is required when one receives permanent residence. However, he is expected to visit Malta within the first year to register as a Maltese taxpayer with the Inland Revenue and have his passport stamped. He must also fulfill the residence purchase requirement within the given year.

Take note: acquiring permanent residency in Malta does not grant permission to work in the Islands. One may only hold directorship in an International Trading or Holding Company or use the country as a base for freelance services directed overseas, but he is prohibited from offering his services in the local market. It is necessary to obtain a separate work permit for this.

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