Tel. Off. +356 2122 8889
CORRESPONDANTS DIPLOMATIQUES - CD
AUXILIO GENTIUM EXTRA NOSTRA LIMINA
WHY MALTA?
Capital City: Valletta
Population: 424,200 (as at January 2015)
Official Languages: Maltese and English
Currency: Euro - Malta joined the Eurozone on January 1, 2008
Religion: 98% - Roman Catholics. Other denominations have places of worship.
Location: 93 km south of Sicily (Italy); 288 km east of Tunisia
International Dialing Code: +356
Internet Domain: .mt
Area: Malta comprises three major islands: • Malta - 246 sq km (94.9 square miles)
• Gozo - 67 sq km (25.9 square miles)
• Comino - 3 sq km (1.1 square miles)
There are also some minor uninhabited islands.
Terrain: Mostly low, rocky, with dissected plains and many coastal cliffs
Climate: Mediterranean with hot dry summers and cool, short winters. Annual rainfall is 600mm (24 inches) and falls mostly between October and March.
Average temperature: • December - February 12º C (54ºF)
• June - August 31ºC (88ºF)
• Annual mean 18ºC (64ºF)
Administrative Divisions: The country is administered directly from the capital city, Valletta. However, there are 68 local councils.
Business Culture in Malta
A similar etiquette to that of the UK prevails, though retaining a Mediterranean flavour. Meetings and the way business is conducted may be less formal than in Northern Europe, however, appointments need to be scheduled in advance and punctuality is expected and appreciated.
Business attire is suits and business cards should always be presented; business people should be formally addressed, especially those in senior positions, until a relationship is established, where a first-name basis would then be appropriate. International Malta uses English as an official language, alongside Maltese. Use of English is universal, making Malta instantly accessible to anyone conversant in English. Many Maltese also speak a third language, usually Italian, German or French.
Business Hours in Malta
Offices are usually open between 08:00/09:00 and 17:00/18:00 from Monday to Friday although this can vary according to the industry. Most offices are closed on Saturdays and Sundays. In summer, most government offices work half days. Most banks are open from 08:00 to 14:00 from Monday to Friday, and Saturday until 12:00.
Retail outlets are typically open between 09:00 and 19:00 from Monday to Saturday although there are still certain outlets that do close for lunch between the hours of 13:00 and 16:00. Shops are generally not open on Sundays and public holidays though certain retail outlets are open in the main tourist centres. There are open-air markets in certain towns and villages as well as a daily street market in Valletta.
Government Regulation & Tax System
Malta is an independent parliamentary republic with a parliament-elected president as head of state, and a prime minister leading an elected government for five-year terms. The country has a long-established and strong democratic tradition with high levels of voter participation. It is a member of the European Union, the Council of Europe, the United Nations and the Commonwealth. The rule of law is respected in civil society and the power is smoothly transferred following, regular, fair and open elections. No one group or class dominates the society or the economy. The Maltese Government has a tradition of encouraging foreign investors to establish operations in Malta and has always adopted policies that favour an open economy and direct investment. In fact, Malta is one of the EU's most open economies as a traditional trading nation reliant on import and export.
Key Facts about Doing Business in Malta
• Short Travel Times: By air, main European hubs and North Africa can be reached in two to three hours.
• Excellent ICT Connections: Satellite technology and high capacity fibre-optic submarine cables link Malta with Europe.
• Major Transhipment Centre: Malta Freeport is a main regional hub.
• EU Member State: Passporting rights for services and companies.
• Regional Ties: Malta has cultural and historic connections to countries in North Africa and the Middle East.
• CET Time Zone: One hour ahead of GMT.
• Schengen Zone: Malta is part of the Schengen area, which allows travel between member states without internal border controls.
People & Language
English, a joint official language with Maltese, is universally spoken and written and is the language of education and business in Malta. Many Maltese are fluent in Italian, and also speak German and French with major world languages easily sourced due to the influx of foreigners settling in Malta.
The high education and training level of the Maltese labour force is a key competitive factor. The Maltese have a very high regard for education and some 60 per cent of students remain in education to tertiary level with many opting to follow post-graduate courses both at the University of Malta and at foreign universities. The University of Malta is the oldest in the Commonwealth outside Britain, and enjoys an excellent reputation worldwide.
Malta’s comparatively low ancillary labour costs, an excellent work ethic and a highly-motivated workforce make it a very cost-effective location. Salaries average out at one-third to half of those found in the EU of 12 countries. There is a large pool of professionals with Law, Business & Management, Communications and Medicine being the dominant courses read at university.
Public Holidays in Malta
New Year’s Day (1 January); Feast of St Paul's Shipwreck (10 February); Feast of St Joseph the Worker (19 March); Good Friday (changes annually)
Freedom Day (31 March); Labour Day (1 May); Commemoration of the 1919 Uprising (7 June); Feast of St Peter and St Paul (29 June);
Feast of the Assumption (15 August); Nativity of Our Lady (8 September); Independence Day (21 September); Feast of the Immaculate Conception (8 December); Republic Day (13 December); Christmas Day (25 December); Malta Lifestyle.
More than just a smart place to invest, Malta is a multi-faceted jewel shining at the centre of the Mediterranean. This small, friendly and welcoming island contains everything you could want to strike that perfect balance between business and pleasure.
Malta - A Cosmopolitan Lifestyle in the Med
A Short Flight Away
As a leading finance centre, Malta is well connected. Malta International Airport, the island’s only airport, is just two or three hours flying time from most European cities. Several airlines operate regular flights to the island including Air Malta, Lufthansa, Emirates, British Airways, Air France, Alitalia, Scandinavian Airlines, Ryanair, EasyJet, Turkish Airlines and Air Berlin.
Mediterranean Luxury
Determined to uphold its reputation as a five-star destination for high-end travellers and the global business elite, Malta features a number of international and luxury hotels such as the Hilton, Excelsior, Radisson, Intercontinental, Westin Dragonara, Corinthia and the Hotel Phoenicia. Superior accommodation is also offered at the boutique hotel Xara Palace Relais & Chateaux.
Gastronomic Delight
When it comes to dining, Malta is an island of staggering options. The food scene is defined by an eclectic mix of Mediterranean cooking with strong Italian influences, fuelled by rich ingredients fresh from farm and sea. There are also many restaurants offering international specialities, and the choice is wide, from smart city restaurants in Baroque palaces and family-run trattorie to seafront fish restaurants.
The World’s Best Climate
With an average of 300 days of sun a year, expatriates in Malta often become the envy of friends back home. Hot, dry summers and mild winters have earned Malta the title of world’s best climate by ‘International Living’ magazine. Even in winter Malta enjoys an average of 5 to 6 hours of sunshine and more than 12 hours a day in summer.
Universal Use of English
As an official language of Malta, English is spoken by nearly everyone. English is so prevalent in Malta that thousands of foreign students travel from all over the world to learn English on the island. It is the main business language, while laws and regulations are published in both Maltese and English. Maltese is a unique language with Arabic roots and speckled with Italian, French and English words. Many Maltese are multilingual and also fluent in Italian, German or French.
A Home in the Sun
For those looking for something more permanent, Malta boasts a wide range of properties available to rent or purchase, from furnished apartments to farmhouses, villas with pools, and even palazzos, all at competitive prices. Finding a good property close to amenities is fairly easy. Most notable properties include five-star apartment complexes built in Tigne and Portomaso.
Cosmopolitan, but not Costly
Whether choosing a modest apartment or a luxury villa, costs in Malta are very reasonable. Malta comes close to having the lowest cost of living in Europe, while still catering to all lifestyles. Moreover, the island offers highly sophisticated and reliable banking, taxation, insurance, social security and communications services
The End of Long Commutes
In Malta the trip to work is a breeze, as it takes only 45 minutes to cross the entire island. Malta’s public transport system covers every corner of the two main islands. Water taxis are a scenic way to jump between the capital Valletta and the nearby headlands of Sliema to the west and the Three Cities to the east.
Family Life
Malta has a highly family-oriented culture. Almost all restaurants and public places are family-friendly, while nurseries are free and the Government offers working families subsidies to cover the cost of day-care. Older children can be enrolled in one of many excellent international private or local public schools, nearly all of which teach in English. Tertiary education is offered through the University of Malta and other institutes and private colleges.
First Class Healthcare
Malta has some of the best healthcare in the world, which is offered free to EU nationals residing in Malta, while foreign residents are advised to take out private medical insurance. As well as local clinics in each town, Malta has a large and modern public hospital, Mater Dei, while also being home to the renowned St James private hospital.
Work and Live Visa Free
As a member of the Schengen Zone, Malta attracts thousands of professional EU nationals every year, who are free to reside and work on the island. Non-EU citizens can find details about visa-exempt countries and visa application procedures on the website of the Ministry for Home Affairs and National Security (www.mhas.gov.mt). Third-country nationals require work permits, and the granting of these is subject to a labour market test.
Outdoor Malta
Malta’s Mediterranean climate lends itself to a year-round outdoor lifestyle of water sports, golfing, hiking, fishing, horse riding and more. The conditions for scuba diving and snorkeling are excellent, particularly as the sea temperature never drops below 13C (55F). Malta has one golf course, located at the Royal Malta Golf Club, and gyms, football or water polo clubs can be found all over the island.
Active in Malta
The sea, cafés, restaurants, clubs, cinemas, theatres, sports clubs or gyms are almost always within a walking distance of office complexes or residential areas. Malta also hosts many great festivals of culture and art. Each town or village has its own annual feast and parade for their patron saint. For those in need of some retail therapy, Malta is home to shopping malls for big brand names and markets for local goods.
Centuries of Captivating History
Heritage forms an important part of island life. With 7,000 years of history and many remains visible to this day, Malta can be described as an open-air museum. Megalithic temples, medieval towns and massive bastions have all been declared as UNESCO World Heritage Sites. These formidable structures regularly provide the backdrop for events listed in Malta’s packed cultural calendar such as concerts, plays or art exhibitions as well as its thriving film industry.
Tax in Malta - Malta's Tax System
The Malta tax system and its extensive double tax treaty network means that, with proper planning and structuring, investors can achieve considerable fiscal efficiency using Malta as a base.
Malta is a preferred choice of domicile for companies for various reasons, including:
• Only EU member state with full imputation system;
• Extensive network of double taxation treaties, plus benefits even when no bilateral treaty in force;
• Refundable tax credit scheme - on revenues as dividends to shareholders, resident & non-resident;
• Ideal tax residency status for individuals.
• Compliant with EU non-discrimination system
• Gained approval from OECD
Malta Corporate Tax Rates
Malta has a corporate income tax rate of 35% but, as with all imputation systems, shareholders receive full credit for any tax paid by the company on distributed profits. This means that profits taxed at a corporate level are not subject to further tax in the shareholder's hands, and, depending upon the rate of tax applicable to the recipient of dividends, may trigger off the entitlement to a tax refund in the hands of the recipient. As a result, shareholders of a Maltese company should, upon a distribution of profits, be entitled to claim a tax refund of 6/7ths of the relevant tax paid in respect of trading income and 5/7ths of the relevant tax paid in the case of passive interest and royalties. The refund is reduced to 2/3rds where the distributing company claims double taxation relief. Income and gains from a participating holding (where a company holds directly at least 10% of the equity shares of a non-resident company, or meets certain other criteria) are exempt from tax. Alternatively, instead of claiming this exemption, a company can choose to pay tax at the normal tax rate and then receive a full refund of the tax paid upon a distribution of dividends.
Malta Double Taxation Treaties
Malta grants relief from double taxation under the credit method on source-by-source and country-by-country bases. The Maltese tax regime governing double taxation relief includes not only treaty relief but also unilateral relief, and thereby ensures that income arising from overseas is not subject to double taxation, even if there is no double taxation agreement in existence.
In terms of domestic legislation, no withholding taxes are imposed on dividends, interest and royalties paid to non-residents, as long as various conditions are complied with. In addition, no Maltese tax is imposed on gains realised from transfers of corporate securities by non-residents, again as long as the relevant conditions are complied with, particularly that the sole or main assets of the company whose securities are being transferred do not consist of Maltese immovable property.
Taxation of Key Vehicles in Malta
• Banks and Financial Institutions & Fund Managers/Fund Administrators: Taxed like all companies registered in Malta;
• Insurance Companies: Special provisions apply to the determination of total income from the business of insurance;
• Insurance Managers: Taxed like all companies registered in Malta. Each cell in a PCC or an ICC is treated as separate company for tax purposes,
• Investment Funds: Malta-domiciled funds are, as a general rule, exempt from Maltese income and capital gains tax as long as they do not have over 85% of their assets situated in Malta,
• Trusts: When all the beneficiaries of a trust are not domiciled/resident in Malta and where the trust assets are situated outside Malta, no Maltese income tax (or transfer duty) is payable;
• Foundations: A foundation may be treated as a Maltese company and benefit from Malta's full imputation system. Foundations may also opt to be taxed in the same manner as a trust;
• Retirement Schemes: Licensed retirement schemes are exempt from tax on income and capital gains but this does not apply to immovable property situated in Malta,
• Individuals: Charged on their income at progressive tax rates up to a maximum rate of 35%.
Tax Incentives for Highly Qualified Professionals in Malta
To attract highly qualified personnel to the financial services industry, Malta introduced an incentive scheme in 2011 targeting well-paid foreign executives. Individuals who have their domicile outside of Malta and are employed in senior positions with a company licensed or recognised by the MFSA to conduct financial business in or from Malta, can benefit from a flat personal income tax rate of 15% on income up to €5 million. Any income over €5 million will be tax-free. To qualify for this tax incentive the employee must earn a minimum of €81,205 (basis year 2014) per year, among other criteria.
VAT in Malta
Value-added tax (VAT) applies to most transactions. The standard rate is 18 per cent with reduced rates for some products and services. Most financial services are not subject to VAT and for clients outside the EU VAT does not apply.
Value added tax (VAT) in Malta was first introduced in 1995, and has undergone various changes since then. When Malta became an EU member in 2004, VAT in Malta was harmonized with the EU’s Council Directive regarding VAT.
VAT in Malta is applied to all goods and services imported by Maltese companies and it is collected by the Comptroller of Customs. Products and services made in Malta are also subject to VAT. Taxable goods and services in Malta extend to the leasing or hiring of products or services, or attributing or rendering a right. In order to avoid double taxation, Malta has signed numerous double taxation treaties with over 70 different countries.
The following article answers queries related to VAT Registrations in Malta, VAT Registration Types in Malta, VAT Rates in Malta, VAT Declarations and Returns in Malta, De-registering from VAT in Malta, Tax Credits and Refunds, Tax Documentation in Malta.
VAT Registrations in Malta
If you are a person performing an economic activity, whatever the result or scope of that activity, then you are considered as a taxable person. Under normal circumstances, you are required to register for VAT Malta under article 10. If your annual turnover does not exceed the established threshold (see below) then you may opt to register under article 11 as an exempt person.
A copy of the I.D Card/Passport of the applicant or in the case of a Limited Liability Company, of the authorised representative vested with the legal representation must be presented at the time of VAT registration. In the case of a limited liability company or a registered partnership, a copy of the Memorandum and Articles of Association should be produced.
There are three types of Registrations for VAT Malta as follows:
a) If you are supplying goods or services and your annual turnover exceeds the established exempt threshold below, you have to register for VAT under article 10, by which you would be liable to charge VAT on your taxable supplies and you could claim back the VAT you incur in the course of your taxable activity under certain conditions.
A person registered under article 10 would:
• have a VAT number with the prefix MT
• have to issue fiscal receipts or tax invoices, as the case may be, on all supplies made by him
• normally submit a VAT return for a tax period of three months by the not later than 6 weeks after the end of the tax period, or as directed by the Commissioner.
b) If you are supplying goods or services and your annual turnover does not exceed the established entry threshold (see below), you may register for VAT as exempt under article 11. You will not charge VAT on your supplies and will not be able to claim back the VAT you incur in the course of your economic activity. However, you may instead opt to register for VAT under article 10 to charge VAT and claim a deduction of the VAT incurred in the normal way. If you decide to opt for the latter option, then you are required to remain under article 10 for a minimum of thirty-six months. It is only after that period that you would be able to register under article 11 and provided that the exit threshold is not exceeded.
A person registered under article 11 would
o have an identification number without the MT prefix
o have to issue fiscal receipts or tax invoices, as the case may be, on all supplies made by him
o submit a declaration (simplified tax return) at the end of each calendar year which must be submitted by the 15th March of the following year.
c) If you are a non-taxable legal person or a taxable person not registered under article 10, and you make intra-community acquisitions of goods in Malta the value of which exceed €10,000 since the start of the year, then you are liable to register for VAT under article 12 and pay VAT in Malta each time you make such intra-community acquisitions.
If you are registered under article 11 as an exempt taxable person and you intend to make Intra-Community Acquisitions and pay VAT thereon in Malta, then you need to register also under Article 12 to obtain a valid identification number for this purpose and qualify for such an arrangement.
Entry and exit thresholds
The entry threshold is the amount of turnover per annum under which a person could opt to register as an exempt person under article 11 (see above). This threshold depends on whether you are supplying goods, services with high value added, or services with low value added. The exit threshold is applied in the case where a person who is registered under article 10 would change his registration to article 11 (exempt).
Services with low value added are those services where the value of the service includes goods which are incorporated in the value of that service, e.g. an electrician or catering services. Other services are services usually with high value added where the value of the service has a very high content of value added, i.e. the value of the goods incorporated with the supply are minimal, e.g. services of an accountant or a lawyer.
VAT Rates in Malta
In Malta, goods and services are generally taxable at a standard VAT rate of 18%.
However, certain goods and services have a reduced rate of 7% or 5% or 0%.
Supplies that are taxable at 7% are:
• Accommodation in a hotel or guest house
• Accommodation in any premises, where for the purpose of that accommodation, it is required that the premises be licensed in terms of the Malta Travel & Tourism Act.
Supplies that are taxable at 5% are:
• Supply of electricity
• Confectionery and other edible items
• Medical Accessories
• Printed Matters
• Certain Items for the exclusive use of the disabled
• Minor repairing of bicycles, shoes and leather goods, clothing and household linen (including mending and alteration)
• Domestic care services such as home help and care of the young, elderly, sick or disabled
• Admission to museums, art exhibitions, concerts and theatres.
The following supplies are rated at 0% (i.e. Exempt with credit, where no VAT is charged on the value of the supply but the registered person is entitled to claim back input VAT incurred in the provision of that supply)
• Food for human consumption
• Pharmaceutical products
• Scheduled bus service (tal-linja)
• Domestic inter-island sea passenger transport
• International passenger transport
• Exports
• Intra-community supplies of goods
(Please note that this information does not replace the provisions of VAT legislation. This list is not exhaustive and reference to VAT legislation would be appropriate)
The following supplies are exempt without credit, where no VAT is charged on the value of the supply but the supplier is not entitled to claim back input VAT incurred in the provision of that supply. In this case the supplier is not required to register with the Department.
• Supply of water by a Public Authority
• Supply of buildings and building land
• Supply of Health and Welfare services
• Supply of insurance and financial services
• Letting of immovable property is exempt without credit except in the following situations:
• Letting for the purposes of accommodation in any hotel or guest house or similar establishment or in any holiday camp or camping site (at 7%)
• Letting of accommodation in holiday flats required to be licensed in virtue of the Malta Travel and Tourism Act (at 7%)
• The letting of immovable property by a limited liability company to a registered person for the economic activity of that registered person (at 18%)
(Please note that this information does not replace the provisions of VAT legislation. This list is not exhaustive and reference to VAT legislation would be appropriate)
VAT Declarations and Returns in Malta
• The electronic process for VAT Declaration / Return takes approximately 15 minutes to complete.
• The process of vetting and processing of the submission takes a maximum period of 90 working days. If a refund due to you is not paid to you in time, you will be paid interest of 0.75% per month
• The electronic process for VAT Refund (8th Directive) takes approximately 20 minutes to complete.
• The process of vetting and processing of the submission VAT Refund (8th Directive) takes a maximum period of 4 months. If a refund due to you is not paid to you in time, you will be paid interest of 0.75% per month
Tax Returns
The fiscal year is the calendar year. Malta operates a self-assessment tax system. Taxpayers are required to declare their income and calculate their tax, taking into account payments in advance and any other tax credits. The tax payable must be settled at the time that the self-assessment is filed. For individuals, the deadline is 30 June each year. For companies, the tax return date is nine months after the financial year-end (ten months if the return is filed electronically), but not earlier than 31 March of each year. Companies’ tax returns must be accompanied by an auditor’s certificate. Revenue assessments may be raised when a return is not filed or where the Commissioner of Revenue disagrees with the self-assessment.
Change in Tax Status
If you are operating below the threshold and you have opted to be classified as an exempt person, you are duty bound to inform the Department that you no longer qualify to be classified as exempt as soon as it becomes evident that you will exceed the applicable threshold.
This can be arrived at by calculating the annual turnover for the previous twelve months at the end of each calendar quarter. When it results that the applicable threshold is exceeded, you should inform the Department within thirty days of occurrence, and VAT has to be collected immediately after the lapse of this period.
Passing on/selling a business together with the VAT registration number - is this possible?
If you are a sole trader then you are required to de-register your business while a new application for VAT registration shall be drawn up by your son or any person who takes over your business, unless that person is already registered for VAT.
However, if the business is a limited liability Company, then the transfer has to be carried out through the Malta Financial Services Authority (MFSA), and the VAT Department must be advised as to the change in the Directors and Shareholders of the Company, by means of a certified copy of the memorandums supplied by the same MFSA.
De-registering from VAT in Malta
In order to de-register from VAT you are required to call at the Customer Care Unit of the Department to complete the appropriate form. An application for de-registration cannot be processed unless you have all VAT returns and payments up to date, and any pending matters settled with the Department.
It is pertinent to point out that if you are registered as non-exempt (under article 10) you shall be deemed to have supplied to yourself all remaining business assets belonging to your business, immediately before the cancellation of your registration. In this regard, you must therefore account for the VAT due thereon in your last VAT return.
Input and Output Tax in Malta
Input tax is the VAT that is paid by the business operator for goods and services he receives in the course of his economic activity. Output tax is the VAT that is charged by the business operator when he himself supplies goods or services to his customers.
VAT Return - Services made outside Malta
In order to determine whether input tax incurred on supplies made outside Malta may be claimed back or not, one must establish whether they would, had they been made in Malta, be treated as taxable supplies or exempt with credit supplies. In the affirmative, the value of these supplies is to be included in the VAT return as exempt with credit supplies. If no right to claim back input tax exists, their value is to be included in the VAT return as exempt without credit supplies.
Credit/refund of Input VAT in Malta
Persons who are registered with the Department under article 10 (i.e. they have not opted to be classified as exempt persons) are entitled to claim back so much of the input tax as is attributable to taxable supplies, exempt with credit supplies and supplies made outside Malta which, had these been made in Malta, would have been classified as taxable supplies or exempt with credit supplies.
Where the economic activity of a registered person consists in a mixture of taxable/exempt with credit supplies and exempt without credit supplies, input VAT would have to be apportioned by using either the direct method of attribution or the partial attribution method. Where the above methods do not give a fair and reasonable result, the Commissioner is empowered to decide on the percentage of attribution. However, under the provisions of legislation, certain input VAT incurred on certain supplies is blocked and cannot be claimed back even when incurred on expenses relating to the economic activity.
Blocking of Input VAT
Persons who provide exempt without credit supplies (e.g. insurance companies and education and health and welfare services), and persons who are classified as exempt persons cannot claim back input VAT incurred on purchases relating to their business.
No input VAT can be claimed on the following supplies even when such supplies are purchased in connection with the economic activity of a registered person, namely input VAT incurred on:
• Tobacco or tobacco products, unless purchased for resale
• Alcoholic beverages, unless purchased for resale
• Works of art and antiques, i.e. paintings, drawings and pastels executed by hand, other than hand-painted or hand-decorated manufactured articles; original engravings, prints and lithographs; original sculptures and statuary, in any material; antiques of an age exceeding one hundred years; collections and collectors' pieces of zoological, botanical, mineralogical, anatomical, historical, archaeological, palaeontological and ethnographic interest, unless purchased for resale
• Motor vehicles, vessels or aircraft, excluding vessels and aircraft acquired for the purpose of being provided under a charter or hire agreement, unless purchased for resale or unless acquired and used for the purpose of the carriage of goods or passengers for a consideration.
• Goods and services for the purpose of repairing, maintaining and keeping motor vehicles, vessels or aircraft and fuel used therein.
• Car leasing by a lessee, including VAT incurred on fuel
• The supply of any goods and services used in the provision of receptions, entertainment or hospitality except where that supply is made in the normal course of an economic activity
• The supply of goods and services used in the provision by a person to his employees of transport or entertainment, except where the transport is provided on vehicles with a seating capacity of not less than seven.
Tax Documentation and Records in Malta
You need to keep the following records and documents:
• Copies of Fiscal Receipts issued Fiscal cash register FCR Z Readings
• All Customs import/export documentation
• Purchases and Sales Invoices
• Debit and Credit Notes
• Cash Books and Petty Cash Books
• Day Purchases and Sales Ledger
• Value Added Tax Account and Annual VAT Account
• Bank Account connected with the business
• Any other records and documents relevant to your economic activity
You are obliged to retain these records and documents for six years as the Department may request them for inspection.
However, in cases where the provisions for adjustment of input tax on capital goods and on immovable property applies, the six years shall start to run from the end of the five-year period or twenty years’ period respectively as the case may be.
VAT Department Inspections in Malta
Inspections by the VAT Department are intended to:
• Educate registered persons about their rights and obligations vis-a-vis VAT;
• Check the tax liability of a registered person to ensure that the right amount of tax is being collected and submitted to the Department;
• Examine and verify claims for refunds made by registered persons;
• Exercise control on the business activity of registered persons by examining their business records and books of account to ensure that no under-declaration of output tax and/or over-declaration of input tax is being made;
• Spot-check registered person's establishments to ensure that fiscal receipts are being issued to clients on sale of a product/service;
• VAT and Non-profit Making Organisations;
Services made to members of non-profit making organisations are exempt without credit and the organisation is not required to register for VAT.
However, where the organisation provides other services against payment, each supply will have to be considered in the context of VAT legislation.
The following are some examples where a non-profit organisation will be required to register with the Department, and subject to its right and option to be classified as an exempt person, charge and collect VAT:
• operating a bar for its members
• renting of space to third parties to be used as a bar
• selling of advertising space in its magazine
Fund raising activities, except were the beneficiary of such activities will be a health, welfare or education institution. In such cases the Department's prior permission for the exemption will be required.
If a non-profit making organisation is required to register with the Department and does not opt to be classified as an exempt person, its right to claim input tax is limited to the supplies on which VAT is collected, either by directly attributing its inputs or by partially attributing such inputs.
For further details about VAT please contact the VAT Department. If you are interested in setting up a company in Malta, you may write our General Counsellor for service providers:
Source: VAT Department - Malta
The information provided in the answers should serve only as guidance and does not have any legal force.
Income Tax in Malta
In Malta, the taxation of an individual's income is progressive; i.e. the higher an individual's income, the higher the tax paid.
Malta Tax Rates
Below are the tax rates in Malta for 2016, based on the status of the individual: Single; Married; Parent.
Malta Income Tax for an Individual
Income tax Malta varies according to one’s residency status in Malta.
• An individual who is a Maltese Resident pays tax on his/her income as a wage earner or as a self-employed person.
• A person who meets the criteria of a ‘permanent resident’ (usually, a stay of more than 183 days a year) will be taxed on his/her income in Malta and overseas.
• A foreign resident who is employed in Malta pays tax only on the income s/he earns in Malta.
An employer is obligated to deduct at source, each month, the amount of tax payable on a wage.
Certain payments are deductible from the taxable income of an individual that are allowable for tax purposes. You can read more about fringe benefits here.
Separate calculations - A couple, each with separate sources of income, may report separately on their income; however, one of the couple must be nominated as the ‘representative partner’ for the purposes of the tax authorities.
Passive income, such as rental of an asset, is attributed to the person (within the couple) having the higher income.
Tax Reporting Dates for an Individual in Malta
• The tax year in Malta is the calendar year ending on December 31.
• The date for filing an annual return in Malta is August 30.
During the year, a self-employed person must make 3 equal advance payments on April 30, August 31 and December 31. The advance payment is based on the taxable income for the previous year.
Should there still be tax payable, it should be paid by the August 31 following the end of the tax year.
An employed person whose employer has deducted monthly tax from his salary is not bound to file an annual return. Nevertheless, an employed person must submit a declaration by June 15.
A similar declaration must be filed by an individual in respect of his/her income from a pension, dividend from a local corporation, and income from an investment in respect of which tax at 15% was deducted at source.
Reporting and Payment Dates for a Limited Company in Malta
The date for submitting a report is June 30. In practice, a report may be submitted up until September 30. Advance payments for a company must make 3 equal advance payments on April 30, August 31 and December 31. The advance payment is based on the taxable income for the previous year.
Annual tax differentials must be paid by September 30.
Malta Corporate Tax
Malta Corporate tax rate for 2016 is 35%.
A company is resident if either:
• incorporated in Malta; or,
• not incorporated in Malta but has its business management in Malta
There is no obligation to deduct tax at source from a dividend paid to foreign residents. There is zero withholding tax on interest and royalties paid to foreign residents.
Passive or capital income from a ‘participation holding’ have participation exemption.
Participation Holding is defined in general as holding of 10% or more in a non-resident entity, subject to some alternative tests.
Malta Deduction of Tax at Source (non-residents)
Malta tax rates for deduction at source:
• Dividends - 0%
• Interest - 0%
• Royalties - 0%
Expat Taxation
To attract highly qualified personnel from abroad, Malta has introduced an incentive scheme targeting foreign executives. Professionals in the financial services, gaming and aviation sectors can benefit from a flat personal income-tax rate of 15 per cent on income up to €5 million. Any income over that figure is tax-free. To qualify for this tax incentive, the employee must earn a minimum of €80,100 per year (basis year 2013), among other criteria. EU nationals can benefit from the reduced tax rate for an unlimited period, EEA and Swiss nationals for a period of five consecutive years and third-country nationals for four consecutive years. Malta is also an attractive place for retires as well as high-net-worth individuals and their families, with separate programmes allowing to benefit from a reduced tax rate if they relocate to the island.