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For employers and job seekers alike, comprehending the nuances of Malta's tax system and the spectrum of employee benefits is crucial. This knowledge not only ensures compliance but also enhances the attractiveness of compensation packages, aids in financial planning, and contributes to a fair and motivating work environment.
Understanding the Maltese Tax System
Income Tax in Malta
Overview of the Maltese Income Tax System for Individuals:
Malta's income tax system for individuals is progressive, meaning the rate increases as personal income rises. Residents are taxed on their worldwide income, while non-residents are only taxed on income arising in Malta. The tax year in Malta aligns with the calendar year, with taxes assessed in the year following the year in which income is earned.
Progressive Income Tax Rates and Corresponding Income Brackets:
For the tax year 2024, the income brackets and rates for single filers range from 0% for incomes up to €9,100 to 35% for incomes over €60,000. Married couples and single parents benefit from slightly more favourable tax brackets. For instance, married couples are not taxed on the first €12,700 of their combined income and face the same 35% rate for incomes exceeding €60,000. It's important to note that different rates apply for non-resident individuals.
Tax Rates For Individuals in 2024:
Specific Considerations for Expatriates and Foreign Workers in Malta:
Individuals who are both domiciled and ordinarily resident in Malta are taxed on their worldwide income. However, those who are resident but not domiciled in Malta are taxed only on Maltese-source income and foreign income remitted to Malta, not on foreign-sourced capital gains, even if remitted to Malta. This distinction is crucial for expatriates and foreign workers who might be considering relocating to Malta for work.
Social Security Contributions:
Explanation of the Social Security System in Malta:
In Malta, both employers and employees contribute to the social security system, which funds various social benefits, ensuring a safety net for individuals in different circumstances.
Detailed Breakdown of Contributions by Employers and Employees
In Malta, social security contributions, also known as Class 1 contributions, are a mandatory component of the employment landscape, with both employers and employees contributing towards the system. These contributions finance various social benefits, from pensions and healthcare to unemployment, sickness, and maternity benefits. Here's a detailed breakdown of the social security rates for the year 2023:
For Employees Born Before 1st January 1962:
Basic Weekly Wage Range (€192.73 - €392.76): Both the employer and employee contribute 10% of the basic weekly wage.
Basic Weekly Wage Exceeding €392.76: A fixed rate of €39.28 is contributed by both the employer and employee each.
For Employees Born on or After 1st January 1962:
Basic Weekly Wage Range (€192.73 - €515.98): Both the employer and employee contribute 10% of the basic weekly wage.
Basic Weekly Wage Exceeding €515.98: A fixed rate of €51.60 is contributed by both the employer and employee each.
For Students (Under 18 and 18 and over) Following Certain Study Schemes:
A maximum contribution of 10% of the basic weekly wage is paid by both the employer and employee, capped at €3.66 for students under 18 and at €7.94 for students 18 years old and over.
It's important to note that the rates are generally revised upwards at the start of every calendar year. In addition to the social security contributions, employers also contribute towards the Maternity Leave Fund (MLF), which is not reflected in the employee's contribution but is a sole responsibility of the employer.
For Self-Employed / Self-Occupied Individuals:
These individuals contribute 15% of their annual net income from the previous year. The maximum contribution for persons born on or after 1st January 1962 amounts to €77.40 per week.
Benefits Covered Under the Social Security System:
Pensions: Contributions go towards retirement pensions, ensuring financial support for individuals upon reaching retirement age.
Healthcare: Contributions ensure access to public healthcare services, including hospital care and medical treatments.
Unemployment Benefits: These offer temporary financial support to individuals actively seeking work.
Sickness and Maternity Benefits: These provide short-term financial support during illness or maternity leave.
Disability and Injury Benefits: These offer financial assistance to individuals who are temporarily or permanently disabled or have suffered an injury.
Family Benefits: Contributions also support various family-related benefits
Other Deductions and Tax Credits in Malta
Malta's tax system offers a range of deductions and tax credits, ensuring that individuals can benefit from various reliefs, enhancing their take-home pay and fostering a favourable economic environment.
Common Deductions:
Employment Expenses: Deductions for employment expenses are permitted if they are incurred wholly and exclusively in the production of income. This includes expenses reimbursed by the employer, provided there's no additional gain or profit to the employee from these reimbursements.
Personal Deductions: These encompass various expenses, notably:
Alimony payments to an estranged spouse (taxable for the recipient).
Fees for childcare services for children under 12, to a bona fide childcare centre.
Fees for private school education for children (kindergarten to secondary education).
Fees for sports, cultural, or artistic events for children under 16 (capped at €300 per annum per child).
Fees paid for school transport and residence in private homes for the elderly, capped at specific amounts.
Available Tax Credits and Incentives:
Tax Credits for Pensioners: The tax rebate on pension income has been enhanced. Pension income up to €14,968 is not taxed, with married couples enjoying additional rebates for supplementary income. Moreover, active pensioners can enjoy exemptions on a portion of their pension income.
Tax Refunds Scheme: Individuals earning up to €60,000 annually are eligible for tax refunds ranging between €60 and €140, encouraging personal savings and investment.
Reduced Tax Rate for Authors: Royalty income derived from qualifying literary works by authors now attracts a reduced tax rate of 7.5%, fostering the creative arts sector in Malta.
Tax Credits for Therapies for Children with Disabilities: Parents of children with disabilities receive an annual tax credit of €200, assisting with private therapy costs.
Incentives for Educational Advancement: Tax credits are available for obtaining higher educational qualifications, with specific provisions for Masters and PhD students, thereby encouraging higher education and professional development.
Voluntary Occupational Pension Scheme (VOPS) and Personal Retirement Scheme (PRS) Rules: These schemes offer tax credits to both employers and employees contributing to occupational pension schemes, promoting retirement planning and financial security.
First-Time Buyers Scheme: To support homeownership, the scheme offers exemptions on duty for the first €200,000 transfer value upon the acquisition of the first immovable property for residential purposes. This initiative includes a grant of €10,000 for qualifying first-time buyers.
These deductions and tax credits are part of Malta's commitment to fostering a favourable economic environment, supporting families, encouraging education, and facilitating homeownership, all of which contribute significantly to the nation's socio-economic fabric.
Overview of Malta's Economic Landscape:
Malta, a small yet robust economy within the European Union, has consistently demonstrated resilience and growth. In recent years, particularly post-pandemic, the nation has seen significant economic rebound. The Central Bank of Malta projected a growth of 4.9% in 2021, 5.4% in 2022, and a slight moderation to 4.7% in 2023. This growth, driven by strong domestic demand and a vigorous pace of vaccinations, positions Malta as a dynamic player in the Mediterranean region. Despite global economic uncertainties, Malta's economy is forecasted to continue expanding with a GDP growth rate of 4.0% in 2023, moderating from 6.9% in 2022, with robust contributions from private consumption and net exports.
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VC (VacancyCentre)is a leading recruitment agency in Malta, facilitating the resourcing of talent needed by organisations of all sizes with particular specialisation within certain industry disciplines, namely Finance, Compliance, Technology& Operations. To find out more about how partnering with us can help you in your search for your dream job, do not hesitate to contact us at [email protected].