Malta Personal Income Tax

Persons who are both ordinarily resident and domi­ciled in Malta are subject to tax on their worldwide income and chargeable capital gains. Persons who are either not ordinarily resident in Malta or not domiciled in Malta are subject to tax only on Maltese-source income and on foreign income that is remitted to or received in Malta.

In practice, individuals generally are considered resident in Malta if they spend more than 183 days in a calendar year in Malta. In divid uals are considered ordinarily resident if Malta is their habitual residence.

Article 29 (2) of the Income Tax Act provides that income derived by an owner, lessor or operator of an aircraft or aircraft engine engaged in the international transport of passengers or goods is deemed to arise outside Malta, regardless of the fact that the aircraft may have called at or operated from an airport in Malta.

Income subject to tax. The taxation of various types of income is described below.

Employment income. Taxable employment income consists of gains or profits from any employment or office, including direc­tors’ fees and fringe benefits provided because of an employment or office, such as the granting of the following:

  • The private use of a motor vehicle
  • The use of immovable and movable property
  • Other benefits granted as a result of the nature of the employ­ment or office

Article 56 (17) of the ITA provides for favorable tax treatment of employment income derived from activities carried on outside Malta. At the taxpayer’s option, income arising from employment exercised outside Malta is taxable at 15%. The scheme is avail­able to any individual. Specific conditions must be satisfied for the system to apply.

The beneficial tax treatment described in the preceding para­graph does not apply to income derived from services rendered on ships and aircraft owned by Maltese companies and to govern­ment services.

Income taxed under Article 56 (17) of the ITA is deemed to con­stitute “the first part of that individual’s total income for that year” for computational purposes. Under this measure, if the individual derives income from other sources, such income is taxed at the progressive rates applicable to the portion of the income in excess of the income taxed at 15% (that is, any surplus income is not taxed at the progressive rates beginning at 0%; instead, it is taxed at the higher progressive rates applicable to the subsequent tax brackets).

Article 56 (21) of the ITA creates a beneficial tax system for persons who receive emoluments payable under a qualifying em­ployment contract. This measure provides for a potentially favor­able tax rate of 15%, which can be applied at the option of the taxpayer. The 15% rate may be used both with respect to work duties carried out in Malta and work duties performed outside Malta in connection with work duties in Malta. Persons who may benefit from these rules are highly qualified individuals who re­ceive employment income of a minimum of EUR75,000 (exclu­sive of the annual value of any fringe benefits and as adjusted annually in line with the Rental Price Index) from an eligible office.

The tax benefit consists in the right to elect to pay tax at a rate of 15% on income from a qualifying employment contract. Income from a qualifying contract exceeding the sum of EUR5 million is exempt from tax. The rate of 15% applies without the possibility to claim any relief, deduction, reduction, credit or set off.

To benefit from the tax system described above, an individual must meet all of the following conditions:

  • He or she must derive income subject to tax under Article 4(1) (b) of the ITA, which are emoluments payable under a qualify­ing employment contract.
  • He or she is protected as an employee under Maltese law and has the required adequate and specific competence, as proven to the satisfaction of the Malta Financial Services Authority (in the case of financial services), the Malta Gaming Authority (in the case of gaming services) or Transport Malta (in the case of aviation services).
  • He or she proves to the satisfaction of the Malta Financial Services Authority (in the case of financial services), the Malta Gaming Authority (in the case of gaming services) or Transport Malta (in the case of aviation services) that he or she possesses professional qualifications and has at least five years of profes­sional experience.
  • He or she has not benefitted under Article 6 of the ITA, which provides for certain fringe benefit exemptions.
  • He or she fully discloses for tax purposes and declares emolu­ments received with respect to income from a qualifying employment contract.
  • He or she proves to the satisfaction of the Malta Financial Services Authority (in the case of financial services), the Malta Gaming Authority (in the case of gaming services) or Transport Malta (in the case of aviation services) the following:

— He or she performs activities of an eligible office (see below).

— He or she receives stable and regular resources that are suf­ficient to maintain himself or herself and the members of his or her family without recourse to the social assistance sys­tem in Malta.

— He or she resides in an accommodation that is regarded as normal for a comparable family in Malta and that meets the general health and safety standards in force in Malta.

— He or she possesses a valid travel document.

— He or she possesses sickness insurance with respect to all risks normally covered for Maltese nationals for himself or herself and the members of his or her family.

— He or she is not domiciled in Malta.

For purposes of the above beneficial tax system, the following offices with companies licensed and/or recognized by the Malta Financial Services Authority (in the case of financial services), the Malta Gaming Authority (in the case of gaming services) or Transport Malta (in the case of aviation services) are considered eligible offices:

  • Chief Executive Officer, Chief Risk Officer (including Fraud and Investigations Office), Chief Financial Officer, Chief Operations Officer (including Aviation Accountable Manager), Chief Technology Officer and Chief Commercial Officer
  • Portfolio Manager, Chief Investment Officer, Senior Trader/ Trader, Senior Analyst (including Structuring Professional), Actuarial Professional, Chief Underwriting Officer, Chief Insurance Technical Officer and Odds Compiler Specialist
  • Head of Marketing (including Head of Distribution Channels), Head of Investor Relations and Head of Research and Development (including Search Engine Optimization and Systems Architecture)
  • Aviation Continuing Airworthiness Manager, Aviation Flight Operations Manager, Aviation Ground Operations Manager and Aviation Training Manager

The benefit is also available to individuals employed as a Chief Executive Officer with an entity holding an aerodrome license.

The benefit applies for a specific number of years from the date of first election and it may be clawed back retrospectively if the expatriate’s stay in Malta is not in the public interest.

Self-employment and business income. Taxable self-employment and business income is based on accounting profits, adjusted for tax purposes. Tax adjustments include the addition of disallow­able expenses, such as accounting depreciation, amortization of good will, movements in certain corporate-related provisions, donations, stamp duty expense and start-up expense.

Taxable self-employment and business income is aggregated with other income and taxed at the rates set forth in Rates.

Investment income. Malta operates a full imputation system under which dividends paid by a company resident in Malta carry a tax credit equal to the tax paid by the company on the profits out of which the dividends are paid. Shareholders are taxed on the gross dividend at the regular rates, but are entitled to deduct the tax credit attaching to the dividend against their total income tax liability. The full imputation system applies to both residents and nonresidents. If a dividend is paid out of the Untaxed Account (the difference between tax and accounting profits), a 15% with­holding tax is imposed. This withholding tax does not apply to nonresidents. Dividends paid out of profits exempt from tax, which do not fall in the Untaxed Account, are not taxable in the hands of the shareholders.

Resident individuals may choose to pay a 15% withholding tax on bank interest. Interest, royalties, premiums and discounts paid to nonresidents are exempt from tax in Malta unless such income is effectively connected with a permanent establishment in Malta through which the nonresidents engage in a trade or business.

In general, rental income is taxed with other income at the rates set forth in Rates. However, individuals and companies deriving rental income from the leasing of residential and commercial tenements may choose to pay a 15% final withholding tax on the gross rental income received.

A special withholding tax rate of 5% applies if an individual rents immovable property to the Housing Authority for a period of not less than 10 years. The 5% tax is applied to the gross rental income received. It is considered a final tax and is not available for credit or set-off. The tax is withheld by the Housing Authority from payments made and remitted to the Commissioner of Inland Revenue by the 14th day following the end of the month in which the rent is paid.

Bank interest, license fees and rents payable may be deducted if incurred in the production of passive rental income. An addi­tional 20% maintenance allowance, calculated on the difference between rents receivable and rents and license fees payable, may be taken. Each property is treated as a separate source of income. Losses from one property may not offset income from another.

Tax scheme for high net worth individuals. In 2011, the Minister of Finance, the Economy and the Investment implemented laws providing for special schemes that contemplate the granting of “special tax status” to individuals who meet several conditions. Special tax status implies the right to pay tax at 15%. The 15% tax rate does not apply to local-source income and capital gains. An obligation to pay minimum tax applies.

European Union/European Economic Area and Swiss nationals. A European Union (EU)/European Economic Area (EEA) or Swiss national may benefit under this system if such person proves to the satisfaction of the Commissioner of Inland Revenue the following:

  • He or she holds a qualifying property (defined as owned prop­erty) of not less than EUR400,000 or rented property for which the rent is not less than EUR20,000 per year.
  • He or she does not benefit under the Residents Scheme Regulations or the Highly Qualified Persons Rules.
  • He or she is neither a Maltese national nor a third-country national. The special law contains a special definition of this term. For the purposes of this law, EEA and Swiss nationals are not considered third-country nationals.
  • He or she is in receipt of stable and regular resources that are sufficient to maintain himself or herself and his or her depen­dents without recourse to social assistance in Malta.
  • He or she is in possession of a valid travel document.
  • He or she is in possession of sickness insurance with respect to all risk across the whole of the EU that is normally covered for Maltese nationals for himself or herself and his or her dependents.
  • He or she is not domiciled in Malta.
  • He or she meets a fit and proper test.

Beneficiaries under the scheme have the right to pay tax at 15% on their foreign-source income subject to a minimum tax of EUR20,000 plus EUR2,500 per dependent (a term defined as spouses, civil partners, unmarried minor children, adopted minor children, and adult children who are unable to maintain them­selves as a result of a disability).

The law prescribes the following circumstances that would result in loss of status:

  • Transfer of qualifying property without substituting such prop­erty with an equivalent property
  • Lack of receipt of stable and regular resources that are suffi­cient to maintain the individual and his or her dependents
  • Inability to satisfy criteria relating to sickness insurance
  • Establishment of domicile in Malta
  • Acquisition of Maltese nationality or a third-country nationality
  • A stay that is not in the public interest
  • A stay in another jurisdiction for more than 183 days in a cal­endar year

Beneficiaries are subject to reporting obligations.

Global residence program for non-EU/EEA and non-Swiss nationals. The conditions and characteristics of the global resi­dence program for non-EU/EEA and non-Swiss nationals are almost identical to those under the tax scheme for high net worth individuals, subject to some exceptions. The most important of these exceptions is that under this scheme the individual must hold a qualifying property with the following lower value thresholds:

  • Owned property of not less than EUR275,000 for a property located in Malta or EUR220,000 for a property located in Gozo or in the south of Malta
  • Rented property of not less than EUR9,600 per year for a prop­erty located in Malta or EUR8,750 per year for a property located in Gozo or in the south of Malta

Beneficiaries under this scheme can also benefit from a 15% tax rate on income arising outside Malta, including foreign-source income that is received in Malta. Beneficiaries are liable to a minimum tax of EUR15,000 per year.

The law prescribes the following circumstances that would result in a loss of status under the scheme:

  • The individual becomes a Maltese, EU, EEA or Swiss national.
  • Qualifying property is transferred without the substitution of an equivalent property for such property.
  • The individual becomes a long-term resident.
  • The individual does not possess sickness insurance for himself or herself and his or her dependents after the appointed date.
  • The stay is not in the public interest.
  • The individual stays in another jurisdiction for more than 183 days in a calendar year.

Individual investor program. Under Legal Notice 47 of 2014, Malta grants naturalization by investment to reputable individu­als and their families who make a significant contribution to the social and economic development of the country. Malta grants citizenship under this program after a thorough and strict due diligence process. For a person to be a main applicant for citizen­ship under the program, he or she must satisfy the following requirements:

  • He or she must be at least 18 years of age.
  • He or she must to make a contribution as indicated in the sched­ule of fees and contribution requirements, which is appended to the Individual Investor Programme Regulations.
  • He or she meets the application requirements that include the purchase of property in Malta with a minimum amount of EUR350,000 or lease a property in Malta with a minimum amount of EUR16,000.
  • He or she commits himself to provide proof of residence for a period of 12 months before taking of the oath of allegiance in Malta as provided in the regulations.
  • He or she commits himself or herself to invest to an amount of EUR150,000 in, among other items, stocks, bonds, debentures or special-purpose vehicles or to make other investments as provided from time to time by Identity Malta by means of a notice in the Government Gazette and holds such investment for at least five years.

Qualifying Employment in Innovation and Creativity Rules. In 2013, the Minister of Finance implemented the Qualifying Employment in Innovation and Creativity (QEIC) Rules and the Repatriation of Persons Established in a Field of Excellence (RPEFE) Rules. The QEIC Rules are described below, and the RPEFE Rules are discussed in the next section.

The QEIC Rules apply to non-domiciled individuals who earn income from selected activities. They are effective until 31 December 2017.

These rules provide for a potentially favorable flat rate of tax of 15% on income from a qualifying employment contact. The minimum amount of income that is chargeable to tax at the reduced rate is EUR45,000. If income from a qualifying employ­ment contract exceeds EUR5 million, no further tax is charged on income from a qualifying employment contract in excess of EUR5 million. The rate of 15% applies without the possibility to claim any relief, deduction, reduction, credit or set off.

The QEIC Rules apply to employment income derived by a ben­eficiary from a qualifying employment contract with a minimum of EUR45,000, consisting in emoluments from an eligible office. A beneficiary is an individual who meets all of the following conditions:

  • He or she is an individual who derives income subject to tax under Article 4(1)(b) of the ITA, which consists of income and emoluments payable under a qualifying employment contract and received with respect to the following:

— Work or duties carried out in Malta

— A period spent outside Malta that is related to such work or duties

— Leave during the carrying out of such work or duties

  • He or she is protected as an employee under Maltese law, regardless of the legal relationship, for the purpose of exercis­ing genuine and effective work for, or under the direction of, someone else, is paid, and has the required adequate and spe­cific competence, as proven to the satisfaction of the Malta Enterprise Corporation.
  • He or she proves to the satisfaction of the Malta Enterprise Corporation that he or she possesses a qualification or relevant experience with respect to the eligible office.
  • He or she fully discloses for tax purposes and declares income and emoluments received from his or her employer or a person related to his or her employer with respect to a qualifying employment contract to be chargeable to tax in Malta.
  • He or she proves to the satisfaction of the Malta Enterprise Corporation that he or she performs activities of an eligible office.
  • He or she proves to the satisfaction of the Malta Enterprise Corporation the following:

— He or she receives stable and regular resources that are suf­ficient to maintain himself or herself and the members of his or her family without recourse to the social assistance sys­tem in Malta.

— He or she resides in an accommodation that is regarded as normal for a comparable family in Malta and that meets the general health and safety standards in force in Malta.

— He or she possesses a valid travel document.

— He or she possesses sickness insurance for himself or herself and the members of his or her family with respect to all risks normally covered for Maltese nationals.

— He or she is not domiciled in Malta.

A contract is considered a qualifying employment contract if the employment activity contemplated in the contract is an eligible office.

An “eligible office” is employment in a role directly engaged in the development of innovative and creative digital products, as listed in the Schedule to the QEIC Rules and ascertained by the Malta Enterprise Corporation.

Guidelines issued by the Malta Enterprise Corporation define an “eligible office” as covering employment in a role directly engaged in the following:

  • Industrial research
  • Experimental development
  • Product development
  • Product and process innovation
  • Senior management roles (several exceptions apply)

The rules apply for a consecutive period of not more than three years beginning from the year preceding the first year of assess­ment in which the individual is first liable to tax.

Rights acquired under the QEIC Rules are deemed to be with­drawn with immediate effect if the grant of benefits under these rules and the beneficiary’s stay in Malta are not in the public interest.

Repatriation of Persons Established in a Field of Excellence Rules. The Repatriation of Persons Established in a Field of Excellence (RPEFE) Rules prescribe that an individual who is established in a field of excellence and returns as an ordinary resident in Malta may elect to have his or her income from employment exercised in Malta charged to tax at a flat rate of 15%.

A person may benefit under this system if all of the following conditions are satisfied:

  • His or her income is derived from a qualifying employment contract.
  • He or she is an eligible person who receives employment income and emoluments (exclusive of the annual value of any fringe benefits) of EUR75,000 or more and is the beneficiary of such items.

A qualifying contract is an employment contract approved in writing by the Malta Enterprise Corporation.

An eligible person is an individual who is established in a field of excellence and returns as an ordinary resident in Malta if he or she had been ordinarily resident in Malta for at least 20 years but has not been ordinarily resident in Malta for the 10 consecutive years before his or her return to Malta.

A field of excellence is an area of professional competence in which an eligible person has excelled that is relevant for the manufacturing and research and development sectors, as defined in guidelines that may be issued by Malta Enterprise Corporation in accordance with the Malta Enterprise Act.

A beneficiary is an eligible person who, to the satisfaction of the Malta Enterprise Corporation, meets all of the following condi­tions:

  • He or she is an individual who derives income subject to tax under Article 4(1)(b) of the ITA, which consist of income and emoluments payable under a qualifying employment contract and received with respect to the following:

— Work or duties carried out in Malta.

— A period spent outside Malta that is related to such work or duties.

— Leave during the carrying out of such work or duties.

  • He or she proves to the satisfaction of Malta Enterprise Corporation that he or she possesses educational and/or profes­sional qualifications that are relevant in the profession or sector specified in the binding job offer or in the qualifying employ­ment contract, as may be further defined in guidelines issued by the Malta Enterprise Corporation in accordance with the Malta Enterprise Act.
  • He or she is protected as an employee under Maltese law, regardless of the legal relationship, for the purpose of exercis­ing genuine and effective work for, or under the direction of, someone else, is paid, and has the required adequate and spe­cific competence, as proven to the satisfaction of the Malta Enterprise Corporation.

Taxation of employer-provided stock options. The exercise by an employee of a share option is taxable as a fringe benefit. When an employee exercises the option to acquire shares in a company in which the employee is employed, the taxable value of the fringe benefit equals 42.85% of the excess, if any, of the market value of the shares on the date of the exercise of the option over the option price of such shares.

Capital gains. Capital gains derived from the transfer of the fol­lowing capital assets are taxable:

  • Immovable property
  • Securities
  • Business
  • Goodwill
  • Business permits
  • Copyrights
  • Patents
  • Trademarks and trade names
  • Beneficial interests in trusts
  • A full or partial interest in a partnership

In certain cases, share dilutions and degroupings result in deemed transfers of securities in a company and are subject to tax.

In addition, if a person acquires or increases a partnership share, a transfer of an interest in the partnership to that partner from the other partners is deemed to occur and accordingly is subject to tax.

Taxable capital gains are included with other income and taxed at the rates set forth in Rates.

Capital losses may not offset trading profits; however, capital losses may be carried forward for offset against future capital gains. Trading losses may offset capital gains.

Individuals who are not ordinarily resident in Malta are exempt from tax on gains derived from disposals of shares in Maltese property companies.

In the course of a winding up or distribution of assets of a com­pany, the transfer of property by a company to a shareholder who owns 95% of the share capital of the company, or to an individu­al related to the shareholder, is exempt from tax, provided certain conditions are satisfied.

Property transfer tax. In general, the transfer of immovable prop­erty in Malta is taxed at a rate of 8% on the higher of the consid­eration or market value of the immovable property at the date of the transfer. No deductions may reduce the tax base, except for agency fees subject to value-added tax (VAT). However, different tax rates apply in certain circumstances, which are described below.

If the property transferred was acquired before 1 January 2004, the seller is taxed at a rate of 10% of the transfer value.

A 5% tax rate applies in either of the following circumstances:

  • The property is transferred before five years from the date of acquisition.
  • The transferred property is a restored property.

A 2% rate applies to a transfer of property owned by an individ­ual (or co-owned by two individuals) that was deemed to be the transferor’s sole ordinary residence. The transfer must be made not later than three years after the date of acquisition of the property.

For a transfer of immovable property acquired through a donation made more than five years before the date of the transfer, a 12% rate applies on the difference between the relevant transfer value and the relevant acquisition value.

For a transfer of property that was acquired by the transferor by inheritance before 25 November 1992, the tax equals 7% of the transfer value. If the property was acquired by the transferor by inheritance after 25 November 1992, the tax equals 12% of the difference between the transfer value and the value declared when the property was inherited by the transferor.

For the transfer of property that is not part of a project, the tax rate is 5% of the transfer value if the transfer is made before five years after the acquisition date.

Nonresidents may opt out of the 8% final withholding tax regime if they produce a statement signed by the tax authorities of their country of residence confirming that they are resident in that country and that any gains or profits derived in Malta are being taxed in their country of residence. In such circumstances, the tax on the capital gain derived from the sale of immovable property in Malta is calculated by reference to the difference between the consideration and the cost of the property. Tax is calculated at the nonresident rates. However, these nonresidents must pay a 7% provisional tax payment on the transfer of property, which is not available for refund.

Deductions

Deductions from employment income. The following deductions from employment income are expressly allowed:

  • Individuals may deduct certain alimony payments including alimony payments ordered by foreign courts.
  • Women who have not yet attained the statutory retirement age and who return to employment on or after 1 January 2005 after having been absent from any gainful occupation for at least five years immediately preceding the date of the income tax return (30 June) benefit from a tax credit of EUR2,000. This tax credit is set off against the tax on gains or profits from the employ­ment and may be claimed for two consecutive years beginning in the year of assessment in which the employment begins. In certain cases, a tax exemption for employment income in the year of the beginning employment may be claimed.
  • School fees paid to schools specified by the Minister of Finance and fees with respect to a registered private kindergarten are deductible to persons paying such fees on behalf of their children. The maximum amounts deductible are EUR2,300 for each child attending secondary school and EUR1,600 for each child attending primary school plus EUR1,300 for kindergar­ten. Fees paid to one of the spec ified schools for a facilitator with respect to a child with special needs may be deducted up to an amount of EUR9,320 if a board established by the Minister of Finance for this purpose determines that a facilita­tor is necessary.
  • Individuals who prove to the satisfaction of the Commissioner of Inland Revenue that they have paid fees for child care ser­vices for their children who were below the age of 12 to bona fide child care centers may claim a deduction for such pay­ments confirmed by official receipts, up to a maximum deduc­tion of EUR2,000.
  • Fees paid for the use of school transport are deductible to per­sons paying such fees on behalf of their children younger than 16. Up to a maximum of EUR150 for each child may be claim­ed as a deduction.
  • Individuals who prove to the satisfaction of the Commissioner of Inland Revenue that in the year preceding a year of assess­ment they have paid fees on their own behalf or on behalf of family members with respect to a residence in a private home for the elderly and/or disabled may deduct such fees up to a maximum amount of EUR2,500. The proof must consist of information provided by the operator of the private home for the elderly.
  • Individuals may claim a deduction for fees paid on behalf of their children younger than age 16 for attendance at sports activities approved by the Kunsill Malti ta’ l-Isport, up to a maximum deduction of EUR100 for each child. Individuals may also claim a deduction for fees paid on behalf of their children younger than 16 for cultural activities, also up to a maximum of EUR100 per child.
  • Individuals who prove to the satisfaction of the Commissioner of Inland Revenue that they have paid fees with respect to their studies at recognized tertiary education institutions, located in Malta or abroad, may claim a deduction against their income with respect to such fees in such manner and subject to such conditions as may be prescribed.
  • Under the Donations (National Heritage) Rules, 2006, individ­uals may claim deductions for donations of not less than EUR2,320 to Heritage Organisations. The donations may be made in cash or in the form of any other asset, excluding immovable property, to the Superintendent of Cultural Heritage, Heritage Malta, Fondazzjoni Patrimonju Malti or a non-govern­ment cultural heritage organization. Deductions for such dona­tions are subject to the following conditions:

— A signed certificate for such donation must be issued by one of the above organizations and attached to the donor’s income tax return for the relevant year.

— The donation must be made for the purpose of research, conservation or restoration, education or exhibition of the cultural heritage, and such purpose must be indicated in the certificate mentioned above.

— For a donation made to a non-governmental cultural heritage organization, the organization must not be related to the donor.

Business deductions. Self-employed individuals may deduct all expenses incurred wholly and exclusively in the production of income, including capital allowances (tax depreciation) at speci­fied rates. In addition, a deduction of up to EUR935 per child may be claimed for payments by an employer to a licensed or registered child care center with respect to child care services ren­dered to children of employees.

Electrical vehicle deduction. If a qualifying person incurs quali­fying expenditure on an electrical vehicle in the year preceding the year of assessment, a deduction equal to 125% of the cost incurred may be claimed as a deduction in such year of assess­ment. The total deduction claimed may not exceed EUR25,000 with respect to each electrical vehicle. If a deduction is claimed, no deduction with respect to wear and tear may be claimed for the same electrical vehicle.

Rates

Residents. The following tables present the progressive tax rates for the 2016 basis year for married persons filing jointly and single persons and married persons filing separately.

Married persons filing jointly

Taxable income Tax rate Tax due Cumulative tax due
EUR % EUR EUR
First 12,700 0 0 0
Next 8,500 15 1,275 1,275
Next 7,500 25 1,875 3,150
Next 31,300 25 7,945 11,095
Above 60,000 35

Single persons and married persons filing separately

Taxable income Tax rate Tax due Cumulative tax due
EUR % EUR EUR
First 9,100 0 0 0
Next 5,400 15 810 810
Next 5,000 25 1,250 2,060
Next 40,500 25 10,215 12,275
Above 60,000 35

A person is exempt from income tax if his or her income satisfies all of the following conditions:

  • It is derived solely from employment (including statutory bonuses).
  • It is taxed using the single rates of tax (the rates in the second table above).
  • It does not exceed the minimum wage.

In addition, permanent residents and persons who are granted special tax status are taxed at a flat rate of 15% on income that is remitted to Malta. The minimum tax liability for these residents, after double tax relief (see Section E), is EUR4,193 for each year of assessment.

Individuals who qualify as full-time employees for the purposes of the law or are married to full-time employees may elect to have their part-time income taxed at a flat rate of 15% instead of at the progressive rates listed above. The maximum income to which this special rate may be applied is EUR10,000 (EUR12,000 for income derived from a self-employment activity).

Nonresidents. Nonresidents, regardless of whether they are mar­ried or single, are subject to tax at the following rates on income arising or received in Malta.

Taxable income Tax rate Tax due Cumulative tax due
EUR % EUR EUR
First 700 0 0 0
Next 2,400 20 480 480
Next 4,700 30 1,410 1,890
Above 7,800 35

In general, if taxable income is paid to a nonresident (other than a company), a 25% withholding tax must be deducted at source and remitted to the Inland Revenue Department within 30 days. Any tax withheld is credited to nonresident taxpayers in full against their final tax liability for the year. This withholding tax does not apply to dividends paid out of previously taxed profits (see Investment income), to income previously subject to with­holding under the FSS (see Section D), or to interest and royalties.

Parental rates. Parental computation applies to a parent who maintains under his or her custody a child, or pays maintenance in respect of his or her child, and such child is not over 18 years of age (or not over 21 years if receiving full-time instruction at a tertiary education establishment) and not gainfully occupied, or if gainfully did not earn income in excess of EUR2,400. Under parental computation, parents are entitled to be taxed at the fol­lowing rates:

Taxable income Tax rate Tax due Cumulative tax due
EUR % EUR EUR
First 10,500 0 0 0
Next 5,300 15 795 795
Next 5,400 25 1,350 2,145
Next 38,800 25 9,805 11,950
Above 60,000 35

Tax credits with respect to personal retirement schemes. Maltese residents who save for their pensions by investing in personal retirement schemes may benefit from a tax credit that is set off against the individuals’ income tax chargeable in Malta for the year. Such credit applies to persons who make contributions to qualifying personal retirement schemes or pay premiums on pri­vate long-term insurance policies.

Qualifying Maltese resident persons over 18 years of age may claim a tax credit of 15% of the total contributions paid during the year to personal retirement schemes. The maximum amount that can be claimed as a tax credit is EUR300.

Relief for losses. Individuals may offset any losses incurred in a trade, business, profession or vocation against other income. These losses may be carried forward for offset against future years’ income. Losses may not be carried back. Unabsorbed capital allowances may be carried forward indefinitely to offset income from the same source.

Estate and gift taxes

Malta does not impose estate or gift taxes. However, duty on documents is imposed on heirs upon inheritance of immovable property at a rate of 5% and on shares at a rate of 2%. The same rates of duty apply to transfers of real immovable property and shares, including transfers through gifts. Duty on documents at a special rate of 5% is imposed on the transfer of shares of a com­pany if 75% or more of the company’s assets consist of immov­able property or rights over immovable property.

Social security

Social security is provided by a system of social insurance and a system of social assistance regulated by the Social Security Act.

Contributions. All employed and self-employed persons must pay social security contributions. Employers make social security con­tributions at a rate of 10% of the basic wage paid to their employ­ees, subject to a minimum amount of EUR16.80 and a maximum amount of EUR34.49 for persons born up to 31 December 1961 or EUR42.57 for persons born from 1 January 1962 onward, per week per employee. Employees make a 10% contribution, subject to the same minimum.

Employees aged 18 years and older earning less than EUR168.01 per week may elect to pay 10% of their weekly gross wage. How­ever, if the employee makes such election, he or she is entitled to pro rata contributory benefits.

Employers deduct the social security contributions before paying the net salary to the employee. The minimum amount for persons under 18 years old is EUR6.62 per week. The employer must remit the amount due to the Commissioner of Inland Revenue by the end of the following month in which the wages or salaries are paid.

The Social Security Act defines the following two categories of persons that are required to pay Class Two contributions:

  • Self-occupied persons are those who earn income in excess of EUR910 per year from a trade, business, profession, vocation or any other economic activity.
  • Self-employed persons are those who receive income from rents, investments, capital gains or any other income.

Rates for Class Two social security contributions are based on the annual net profit or income for the year preceding the contribu­tion payment year.

For self-employed persons whose income during the calendar year immediately preceding the contribution year was less than EUR9,960, a weekly contribution of EUR28.73 applies.

For persons born on 31 December 1961 or earlier, and whose income in the preceding year exceeded EUR9,961 but did not exceed EUR17,933, the weekly contribution is 15% of annual net earnings. If income in the preceding year exceeded EUR17,934, the weekly contribution is EUR51.73.

For persons born 1 January 1962 or later, and whose income in the preceding year ranged from EUR9,961 to EUR22,138, the week­ly contribution is 15% of annual net earnings. If income in the preceding year exceeded EUR22,139, the weekly contribution is EUR63.86.

A separate rate applies to single persons who are self-employed but not self-occupied (self-occupied individuals are individuals rendering independent personal services). For these persons, if income in the preceding year ranged from EUR1,005 to EUR8,409, the weekly contribution is EUR24.52.

Coverage. Maltese citizens receive free services and financial aid benefits for unemployment, illness, work injury, disability, old age, early retirement (at 61 years of age), marriage, maternity, children, widowhood and medical care. All employees who pay a mini­mum amount of social security contributions are entitled to a basic pension on retirement.

Totalization agreements. To prevent double taxation and assure benefit coverage, Malta has entered into social security totaliza­tion agreements with Australia, Canada, Libya, the Netherlands and the United Kingdom.

As a member of the EU, Malta is governed by EU Regulations 883/04 and 987/09 regarding the social security exemption system.

Tax filing and payment procedures

The year of assessment (tax year) is the calendar year. In the year of assessment, income tax is charged on income earned in the preceding calendar year (the basis year). Recipients of specified types of income are not required to file regular tax returns, but they receive a tax statement with respect to the basis year in ques­tion. The taxpayer needs to review the tax statement. If the tax­payer does not agree with the amount, a form attached to the tax statement must be completed and sent to the Commissioner of Inland Revenue. Subsequently, the taxpayer may be asked to file a special tax return by 30 June of the year following the basis year. The following are the specified types of income subject to the above rule:

  • Employment income subject to withholding under the final settlement system
  • Pensions and other social benefits
  • Dividends from resident companies
  • Investment income on which final tax is withheld at a rate of 15%
  • Income of up to EUR10,000 per year from part-time self-employment activities on which tax is withheld at a rate of 15%

All other individuals must file a self-assessment tax return and pay all tax due by 30 June of the year following the basis year.

In addition, if a person has received a tax refund that is not wholly or partly due to him or her, repayment must be made to the Commissioner of Inland Revenue within 30 days from the date of the receipt of the refund. Interest is charged if such pay­ment is not made within the stipulated time.

Tax liability for employees is paid through the Final Settlement System (FSS) of withholding on salaries and wages.

Self-employed individuals make advance payments of tax, known as provisional tax, in three installments on 30 April, 31 August and 21 December. The three installments must equal specified percentages of the total tax liability shown on the last return submitted to the Commissioner of Inland Revenue. The follow­ing are the percentages:

  • First installment, 20%
  • Second installment, 30%
  • Third installment, 50%

The provisional tax payments are credited against the total tax liability for the year in which they are paid.

Married persons may elect separate taxation, but must nonethe­less appoint one spouse to be the responsible spouse for income tax purposes. Any investment or other passive income is included in the taxable income of the spouse with the higher earned income, regardless of which spouse is designated as the respon­sible spouse.

Double tax relief and tax treaties

Most of Malta’s treaties are based on the Organisation for Economic Co-operation and Development (OECD) model con­vention. The treaties with Qatar and the United Arab Emirates incorporate elements of the United Nations’ model. Malta’s double tax treaties eliminate double taxation through the credit method.

Malta has entered into double tax treaties with the following jurisdictions.

Albania                          India                             Portugal

Australia                        Ireland                          Qatar

Austria                           Isle of Man                  Romania

Bahrain                          Israel                            Russian

Barbados                       Italy                              Federation

Belgium                         Jersey                           San Marino

Bulgaria                         Jordan                          Saudi Arabia

Canada                           Korea (South)              Serbia

China                             Kuwait                         Singapore

Croatia                           Latvia                           Slovak Republic

Curaçao*                       Lebanon                       Slovenia

Cyprus                           Libya                            South Africa

Czech Republic              Liechtenstein                Spain

Denmark                        Lithuania                      Sweden

Egypt                             Luxembourg                Switzerland

Estonia                           Malaysia                      Syria

Finland                          Mauritius                     Tunisia

France                            Mexico                         Turkey

Georgia                          Moldova                      Ukraine*

Germany                        Montenegro                 United Arab

Greece                           Morocco                      Emirates

Guernsey                       Netherlands                  United Kingdom

Hong Kong SAR           Norway                        United States

Hungary                        Pakistan                       Uruguay

Iceland                           Poland

* This treaty is not yet in force.

Other available relief includes commonwealth income tax relief, unilateral relief and a flat-rate foreign tax credit.

Temporary visas

Citizens of the following jurisdictions do not require visas to enter Malta:

  • Commonwealth countries
  • United Kingdom dependencies
  • Member countries of the Council of Europe

Citizens of the following jurisdictions require visas to enter Malta.

Afghanistan                Georgia                           Philippines

Albania*                     Ghana                              Qatar

Algeria                       Grenada                           Russian

Angola                       Guinea                             Federation

Armenia                     Guinea-Bissau                 Rwanda

Azerbaijan                  Guyana                            St. Lucia

Bahrain                       Haiti                                St. Vincent

Bangladesh                 India                                and the

Belarus                       Indonesia                         Grenadines

Belize                         Iran                                  Samoa

Benin                          Iraq                                  São Tome

Bhutan                        Jamaica                            and Príncipe

Bolivia                        Jordan                             Saudi Arabia

Bosnia and                 Kazakhstan                      Senegal

Herzegovina*             Kenya                              Serbia*

Botswana                   Kiribati                            Sierra Leone

Burkina Faso              Korea (North)                  Solomon Islands

Burundi                      Kosovo                            Somalia

Cambodia                   Kuwait                             South Africa

Cameroon                   Kyrgyzstan                      Sri Lanka

Cape Verde                Laos                                Sudan

Central African           Lebanon                          Suriname

Republic                     Lesotho                           Swaziland

Chad                           Liberia                             Syria

China                          Libya                               Tajikistan

Comoros                    Macedonia*                     Tanzania

Congo                        Madagascar                     Thailand

(Democratic                Malawi                            Timor-Leste

Republic of)               Maldives                         Togo

Congo                        Mali                                 Tonga

(Republic of)              Marshall Islands              Trinidad and

Côte d’Ivoire              Mauritania                       Tobago

Cuba                           Micronesia                      Tunisia

Djibouti                      Mongolia                         Turkey

Dominica                    Morocco                          Turkmenistan

Dominican                  Mozambique                   Tuvalu

Republic                     Namibia                           Uganda

Ecuador                      Nauru                              Ukraine

Egypt                          Nepal                               United Arab

Equatorial                   Niger                               Emirates

Guinea                        Nigeria                            Uzbekistan

Eritrea                         Oman                              Vanuatu

Ethiopia                      Pakistan                           Vietnam

Fiji                              Palau                               Yemen

Gabon                        Papua New Guinea         Zambia

Gambia                       Peru                                 Zimbabwe

* Nationals of these jurisdictions holding a biometric passport are exempt from the visa obligation.

Types of visas. Single-entry visas are normally granted for one month to those who require visas either for tourist purposes or to attend specific events. They entitle a single uninterrupted stay during the period stipulated in the visa, which may not exceed three months.

Multiple-entry visas are issued for periods of 3, 6 or 12 months. Similar permits are normally granted by the Commissioner of Police to individuals who come to Malta frequently, including individuals trying to establish businesses in Malta. They entitle multiple stays during the period stipulated in the visa. The sum of the periods of stay may not exceed three months within a half-year.

Students are issued visas if the Commissioner of Police is confi­dent that they are attending school full-time in Malta. The visa is issued for the length of the academic year.

Transit visas are issued to nationals of states that require visas if the nationals have confirmed tickets to another destination and if they remain in Malta no longer than 24 hours.

Application procedure. A visa application form may be obtained from Malta’s diplomatic missions and consular posts or down­loaded online, and must be completed and submitted to the Principal Immigration Officer within three months before the planned trip. Applications are in most cases reviewed within 7 to 15 days. In individual cases, the review period can be extended up to 30 days and in exceptional cases up to 60 days. It is advis­able that a visa application not be filed later than 15 days before the planned trip. The following documents are required with the submission of an application:

  • A valid passport
  • Two passport-size photographs that are in color and taken against a white background, with the face clearly visible
  • The visa fee

Visas are granted at the discretion of the Principal Immigration Officer, who evaluates any special circumstances at the time of application. Ownership of assets in Malta is not a determining factor when a foreign national applies for a visa but, at the discre­tion of the Principal Immigration Officer, may be considered an advantage.

Visas are issued on the condition that applicants do not engage in any professional activity in Malta.

Work permits

To take up employment in Malta, a foreign citizen must obtain an employment license and a residence document. The Department of Citizenship and Expatriate Affairs issues work permits in Malta. EEA and Swiss nationals and their third-country family members or dependents are not required to obtain an employment license to work in Malta. For non-EU citizens, work permits are normally granted only to individuals who are able to provide skills or expertise not available in the local market. The Maltese Immigration Police issues a residence document on presentation of the employment license.

Applications for work permits are considered on a case-by-case basis. Work permits are generally valid for one year and are re newable. It takes approximately two to six months for an employment license to be issued.

Residence permits

An EU citizen may enter, remain and reside in Malta and seek and take up employment or self-employment in Malta.

Subject to limitations based on the grounds of public policy, public security or public health, an EU citizen may enter and exit Malta on the production of a valid identification document and move freely within Malta for a period of three months (or such other period, as may be prescribed), beginning on the date of entry.

If the period of residence of an EU citizen exceeds three (extend­able to six) months, or if during such period, he or she takes up employment in Malta, he or she must apply for a residence docu­ment. Subject to certain exceptions, the Principal Immigration Officer must issue to the citizen and his or her dependents a residence document.

A national of a state that is not a member of the EU or the EEA may not enter Malta for a visit with a duration exceeding three months unless he or she satisfies all of the following conditions:

  • He or she holds a valid passport.
  • He or she holds a valid visa, as required by the Common Con­sular Instructions.
  • Before entry into Malta, he or she submits documents substan­tiating the purpose and the conditions of the planned visit.
  • He or she has sufficient means, both for the period of the plan­ned visit and the return to his or her country of origin, or for traveling to a third state into which his or her admission is guaranteed, or is in a position to acquire such means legally.
  • He or she has not been reported as a person to be refused entry.
  • He or she is not considered to be a threat to public policy or national security.

Exceptions to the above rules apply if any of the following cir­cumstances exist:

  • The Principal Immigration Officer considers it necessary to admit the individual on humanitarian grounds, in the national interest or in honor of international obligations of the govern­ment of Malta.
  • A third-party national holds a uniform residence permit or a re-entry visa, or both as may be required, issued by an EU mem­ber state. In such case, he or she is permitted to enter Malta for the sole purpose of transit.
  • An individual holding a Schengen visa when entering Malta from a Schengen state is returning to a Schengen state, and the validity of the visa covers the period to be spent in Malta and the period for his or her return to the Schengen state from which he or she arrived.
  • An individual not returning to a Schengen state has sufficient means and documents to cover his or her stay in Malta and his or her onward journey.

A residence document is valid for a period ranging from one to five years from the date of issuance and, in normal circumstanc­es, it is automatically renewable.

A residence document must specify whether the individual is taking up residence in Malta for a long-term or permanent stay in Malta, work, study or another purpose.

The provisions of the Immigration Regulations do not override the provisions of any law regulating the acquisition of property in Malta by non-Maltese nationals, and a residence document does not, by itself, grant rights to the holder to acquire or own property in Malta over and above the rights granted by the Immovable Property (Acquisition by Non-Residents) Act.

Family and personal considerations

Family members. The spouse and dependents of a working expa­triate must obtain separate work permits to be employed legally in Malta.

Family members of a working expatriate need work permits to reside in Malta.

Marital property regime. Couples married in Malta are subject to Malta’s community property regime, unless they elect otherwise in an agreement by public deed. Couples who marry outside Malta and subsequently establish a marital domicile in Malta are sub­ject to the community property regime with respect to property acquir ed after their arrival in Malta.

Under the regime, property acquired before marriage remains sep arate property, although proceeds from the sale of property acquired before marriage are community property.

Forced heirship. Under Malta’s succession law, a testator who has no ascendants, descendants or spouse may freely dispose of his or her estate. Other testators are required to leave a specified portion (one-fourth, one-third or one-half, depending on the relationship between the deceased and beneficiary and on the number of the heirs) to the above-mentioned heirs.

Driver’s permits. Expatriates may drive legally in Malta with their home country driver’s licenses for three months. Endorsement of their licenses in Malta enables drivers to drive for one year or for the validity of the foreign licenses.

Malta has driver’s license reciprocity with all countries signatory to the Geneva Convention on Road Traffic, 1949.

Returning emigrants who wish to obtain a driver’s license in Malta must take a medical exam, and must provide a Maltese passport (or proof of dual citizenship), and a birth certificate from the public registry department in Valletta.

All other foreigners must have work permits, residence permits and freedom of movement to obtain driver’s licenses. A license is granted after the applicant passes a physical driving test and a verbal test. Applicants holding valid foreign licenses are not re quired to take the tests.