- Introduction on Maltese Income Tax System for Individuals
- Tax System for Employed Individuals
- Tax System for Self-Employed Individuals
- Minimum Tax for Resident non-Domiciled Individuals
- Final Withholding Taxes
1. Introduction on Maltese Income Tax System for Individuals
Malta claims taxing rights on individuals based on their residence, domicile and source of income. Individuals who are ordinarily resident and domiciled in Malta are taxed on their worldwide income being on all income and capital gains arising in Malta or not. On the other hand, individuals who are resident but not domiciled in Malta are taxable on their income and capital gains arising in Malta and on any foreign income arising outside of Malta that is remitted to Malta. Thus, any foreign capital gains derived by individuals resident but not domiciled in Malta will not be subject to income tax in Malta even if such capital gains are received in or remitted to Malta. In the case of an individual who is neither resident nor domiciled in Malta, the person will only be taxable on income arising in Malta.
In accordance with article 56 of the Income Tax Act (ITA), individuals resident but not domiciled in Malta have their income taxed in Malta on the basis of progressive rates, which rates vary from zero percent (0%) to a maximum of thirty five percent (35%), depending on their chargeable income and whether the individual is eligible to apply the single, parent or married rates (Refer to Annex 1). Moreover, since Malta has over seventy double tax treaties in force, individuals who take up residence in Malta will retain the right to request a claim for relief of double taxation in line with article 74 of the ITA.
2. Tax System for Employed Individuals
According to Maltese Legislation, every individual deriving income from employment in Malta is required to pay social security contributions and income tax to the Maltese Tax Authorities. Generally, the social security contributions on employment income are equivalent to ten percent (10%) of the gross income earned capped at a maximum of approximately €2,400 annually. With regards to income tax, as explained above, the progressive rates will apply. Such taxes will be deducted by the employer from the gross income earned by the individual which amounts will be settled to the Maltese Tax Authorities through the Final Settlement System (‘FSS’) on a monthly basis.
3. Tax System for Self-Employed Individuals
In the case of self-employed persons, the social security contributions are calculated at the rate of fifteen percent (15%) on the net income derived in the previous year capped at a maximum of approximately €3,600 annually. On the other hand, income tax is payable via three provisional tax payments on the 30 April, 31 August and 21 December of a calendar year. Any additional tax in excess of the provisional tax paid will be settled in June of the year after together with the submission of the income tax return. In the situation where the provisional tax paid exceeds the income tax due for that year, the Maltese Tax Authorities will refund back the difference within a six-month period subject to certain conditions.