Taxes in Malta

Taxation of Individuals
A person who is a permanent resident of Malta is subjected to tax on every type of income, which means on income and capital gains from Malta as well as abroad. Individuals who are not residents of Malta or not domiciled in Malta should pay tax on income and capital gains arising in Malta and not abroad.
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Income of an individual that is subjected to tax comprises of income generated from all sources after eliminating exempt items and deductible expenses.

Earning from employment in a company or organization including pension is considered employment income and includes fringe benefits such as use of company property, car allowance, free or subsidized board and non-business travel. Deductions are not allowed for employment income. However, employment income is subjected to deduction at business or self-employment income level.

Business income is the gain or profit from a business, vocation, trade including profits from sale of real estate, undertaking or scheme. This income is associated with allowable business expenses that are deductible every year. Rental income is another area that is taxed at a rate set out by the government. The items that can be deducted from rental income include license fees, bank interest and rent payable.

Every property is a separate source of income, and losses from one property can be used to offset against another property’s income. In general, rates on income for a single or married person filing separately are 15% for income between euro 8500-14,500, 25% up to 19,500 and 35% exceeding 19,500 whereas that rate for someone filing jointly is 15% between 11,901-21,200, 25% up to 28,700 and 35% beyond 28,700.

Taxes in Malta 2015Non-residents regardless of their marital status are taxed at a different rate in Malta. They must pay 20% for any income between euro 700-3100, 30% for income between 3100-7800 and 35% for income beyond 7800. There is no wealth, gift or inheritance tax in Malta. However, stamp duty is imposed on heirs inheriting real estate properties and shares. The rate is 5% for immovable property and 2% for shares. Individuals living in Malta can also benefit from double tax relief.

Taxation of Companies
Companies that are incorporated under the laws of Malta are deemed to be resident and domiciled in the country for taxation purpose. Such companies are taxed on their income generated within Malta and outside as well. The income of a company including its taxable income and capital gains is taxed at 35%.

The taxable income is nothing but the profit that is reported by the company in its audited financial statements after making certain adjustments and arriving at a taxable profits. These adjustments include depreciation and deduction for capital allowances, amortization of property, donations, bad debts, unrealized differences on exchange and pre-trading expenses. The general rule for the expenses that can be deducted for tax purposes is that those expenses should have incurred exclusively in the production of the business income. However, companies can take advantage of flat rate foreign tax credits.