Income tax in Malta is covered by the Income Tax Acts, which comprises the Income Tax Act and the Income Tax Management Act.
The Income Tax Act covers the obligations of income tax, the calculation of chargeable income and the tax thereon; It contains provisions on allowable deductions and available exemptions.
The Income Tax Management Act regulates the administration of Income Tax. It provides the administrative framework for the filing of tax returns, issue of assessments and procedure of appeal.
Under Malta's tax system, the total income from all sources (including capital gains) is aggregated, exemptions and allowances deducted and the final income taxed according to the rates applicable. Companies are taxed at a flat rate of 35%, certain types of investment income is taxed at source at 15% and transfers of immovable property in Malta at 12% of the transfer value.
A company's reserves are allocated to 5 tax accounts, namely:
- the Final Tax Account (FTA);
- the Immovable Property Account (IPA);
- the Maltese Taxed Account (MTA);
- the Foreign Income Account (FIA);
- the Untaxed Account (UTA).
Imputation, the arrangement by which investors who receive a dividend also receive a tax credit for corporate taxes that the firm has paid, applies to dividends issued from the IPA, MTA and FIA, but not from the FTA. Distribution of dividends from the UTA to non-resident shareholders is tax-free. Besides the imputation system, other refunds are available from the MTA and FIA under certain conditions.
Value Added Tax is levied under a self-assessment system - those registered establishing their own VAT liability, transferring the net amount due or claiming a net tax refund. VAT is charged by the person providing the goods or service at the time the transaction is taking place. The rate of tax is regulated by Art 19 and the Eighth Schedule of the VAT Act at either 18%, 7%, 5% or 0%.
Excise duties are established and administered under the Excise Duty Act. The current goods and services subject to excise duties include alcohol and alcoholic beverages, manufactured tobacco, energy products, portland cement, (excluding white cement) and mobile telephony services. The rates of excise duties applicable to these goods and services can be found in the schedules attached to the Excise Duty Act.
Any company which is resident in Malta, or which is not resident in Malta but carries on any activity in Malta, is required to register for a tax registration number with the Inland Revenue Department (IRD). Some small businesses can be registered as VAT exempt. These still need to register, but neither charge nor claim back VAT. The myGov.mt website provides many services including an E-Vat online service, for which you must first register.
Submitting your tax declaration
Tax returns are filed annually either within 9 months of the company's year end or by the 31 March - whichever is earlier. They can be filed electronically, for which you will receive a 'real time' receipt. Along with these obligations, VAT-registered companies must account for and settle their liabilities with the department, such as submitting returns and paying VAT due.
Companies are required to pay provisional tax during the year in which income is earned. Such tax is held on account until a self-assessment is determined by the company. The final balance of tax must be paid by the same deadline applicable to the submission of the tax return. Payments can be made online through the Inland Revenue Malta website or through internet banking. Companies also have to deduct tax and national insurance contributions from their employees' salaries.
All operators trading in excise goods and services, either as excise tax warehouse keepers or as registered excise consignees, require prior authorisation by the Customs Department.
The Accountancy Board of the Ministry of Finance, the Economy and Investment offers online consultation, tax compliancy kits, exchange data and other information on its website:
The Inland Revenue offers information on the legislation that supports the country's tax laws and sets out the hierarchy of the department. Services include a tax return calculator, information on social security contributions and tax rates.
Inland Revenue services online offers a host of internet applications to help taxpayers and their accountants file returns, pay their tax and social security contributions and submit other revenue forms over the internet. There are sections for corporate taxpayers and for those who employ over 30 employees and who are therefore required to submit FSS (Final Settlement System) records.