Who has the obligation to submit an annual income tax return?
In principle, every individual who is deemed as a tax return filer and has income to declare in Malta, such as income from employment or business, interest, dividends, pensions, etc is obliged to file an income tax return on an annual basis. However, certain individuals are considered as non-filers and therefore are not required to file a tax return.
What is meant by the status of a non-filer?
A non-filer is an individual, whose data relating to his income, deductions and tax credits are already available to the Commissioner for Revenue.
An example of a non-filer would be an individual who is resident and domiciled in Malta, is in full-time employment, does not have any other income to declare in Malta, and any tax relating to his employment income is paid by the employer on his behalf through the final settlement system.
Another example of a non-filer would be an individual who solely derives pension income and does not have any other income to declare in Malta.
What is meant by self-assessment?
In 1999 the self-assessment system was introduced whereby every taxpayer who files a tax return is required to make his own assessment for tax meaning that the taxpayer calculates his own tax liability for the calendar year under review, therefore the onus of submitting a complete and true tax return and declare all relevant income which should be declared in Malta, lies upon the taxpayer.
Will the tax return be issued automatically by the Commissioner for Revenue?
It is standard practice that in the following situations the annual tax return is issued automatically when:
- Individuals are registered as self-employed with Jobsplus.
- Foreign individuals take up residency in Malta.
Depending on the information available to the Commissioner for Revenue, the Commissioner may exercise his rights and powers to issue a tax return to any individual as deemed fit.
What if a non-filer has other income to declare in Malta?
A non-filer will, on an annual basis receive a tax statement which will include all the information available to the Commissioner for Revenue with respect to the year of assessment under review. If such individual has other income to declare in Malta, he will not be in agreement with the tax statement received and will request an adjustment form to reflect any additional income which should be subject to tax in Malta.
The adjustment form and any tax due should be received by the Commissioner for Revenue within one month from the date of the tax statement.
Alternatively, if you are tagged as a non-filer and have income to declare in Malta you can request your annual tax return from the Commissioner for Revenue which would need to be submitted within the stipulated deadlines.
When is the tax return deadline and are there any late filing penalties?
Individual taxpayers are obliged to file their income tax return by 30th June of the following year, meaning that the tax return in relation to the basis year 2021 would need to be submitted by 30th June 2022. This is extended to 31st July 2022 if submitted online. Late filing penalties will be incurred depending on when the return is submitted, this varies between €10 and €500.
When is the tax settlement date and will interest be incurred for late payment?
The tax settlement date goes hand in hand with the deadline for the submission of the tax return i.e., 30th June of the following year if the tax return is submitted manually and 31st July of the following year if the tax return is submitted online. After this date any unpaid amount of tax will incur additional interest of 0.6% per month.
What are the different revenue streams that should be included in the income tax return?
The revenue streams may be split into two, namely income from emolument and business income and income from investments, capital gains, and any other income.
Emoluments and business income will include income from:
- Office (such as directors fees)
- Trade, Business or Profession which will include income from self-employment
- Pensions and
- Overseas Employment
Investments, capital gains and other income will include:
- Local and foreign investment income
- Rental Income
- Capital gains income
- Any other income which should be declared in Malta.
Can an individual claim any deductions against his income?
Yes, there are several deductions specifically allowed for in domestic legislation, these include:
- fees paid for childcare services
- fees paid for a residence in a private home for the elderly
- fees paid to a named private school for children either in kindergarten, primary school, or secondary education
- fees paid in respect to certain sports activities
- fees paid for the use of school transport
- fees for residency services in respite homes or centres or for community support services
The above fees will be capped at specific amounts as defined in the legislation.
Are there any tax credits available for the taxpayer, and which are the most applied?
Yes, the Commissioner for Revenue provides several tax credits that act as an incentive to the taxpayer. Such tax credits will reduce the tax leakage of the taxpayer for the respective year of assessment, through our experience the most commonly applied are:
- Persons Returning to Employment Tax Credit
- Get Qualified Scheme Tax Credit
The tax credit for persons returning to employment is a government incentive to encourage more persons to return to the labour market. Subject to certain conditions the taxpayer may benefit from a tax credit of up to €5,000.
The get qualified scheme is an initiative that supports the personal development of individuals for the achievement of qualifications and certifications required by industry. The incentive is applicable to individuals following a course of studies leading to a certification, diploma, degree, or post-graduate degree courses. Upon successful completion the student will benefit from a tax credit enabling them to recover up to 70% of the costs incurred.
Are there different tax rates applicable to determine the tax due for the respective year of assessment?
Yes, once the chargeable income of a taxpayer is determined, we would need to look at the tax rates provided by the CfR to ensure that the most suitable rates are used. These are:
- Single rates – applicable to all single, or married couples who are both in gainful employment.
- Married rates – applicable to married couples, however such rates are more beneficial when only one of the spouses is in gainful employment
- Parent rates – applicable to all parents
- Non-resident rates – applicable to individuals who are not resident in Malta but for one reason or another, have income to declare in Malta.
Are there any reduced rates of tax applicable to taxpayers?
Yes, in some instances an optional reduced flat rate is applicable on the following:
- Income from part-time work – 15% now 10%
- Income from over-time work – 15%
- Income derived from rental income – 15%
- Income derived from sports activities – 7.5%
- Income derived by artists – 7.5%
If an individual applies the reduced rate with respect to income from part-time work and rental income, one will need to submit different forms with the tax authorities the deadline of which is the 30th April of the following year. Subject to certain conditions such income does not need to be declared in the tax return.
How can Zampa Debattista assist?
Our tax specialists can assist with the whole process, starting from understanding whether a tax return is required, if that is the case we can assist with the compilation and submission of the income tax return for the respective year of assessment.