Malta Payroll and Tax Overview

Foreign Direct Investment in Malta

The government in Malta is eager to encourage and attract foreign investment. Special preference is given to manufacturing. In particular, the government is eager to attract high value-added, capital intensive and high technology industries. The Malta Enterprise Corporation (MEC) plans and promotes industrial development in Malta. It deals with inquiries and evaluates applications for tax and other incentives.

Registrations and Establishing an Entity

It is not necessary to have a Legal Entity established in order to process a payroll, there are various alternatives.

• You can create a Maltese company; once the company is registered as a Private Employer, you can set up the payroll for the employees.
• If you have a well-established business outside Malta, but you do not plan to have a physical office in Malta, then you should consider registering your foreign business as a Private Employer.

First, it is necessary to ask for a nonresident dormant tax number and a PE number. This is a Tax ID for a non-resident company without a permanent establishment.

Business Banking in Malta

Banking hours are usually Monday to Friday between 8.30 a.m. and 12.30 p.m. Most banks are open until 12.00 p.m. on Saturdays.

Payments can be made to employees via cheque, direct deposit and cash. The authorities can be paid by cheque and direct deposit.

Working Week in Malta

The working week in Malta is Monday to Friday. As a rule, the maximum working hours are 40 per week. Overtime is permitted but only up to 8 hours per week; overtime hours over and beyond the 8 hours per week are permitted only if agreed by the employee in writing.

Basic Facts About Malta

Full Name: Republic of Malta

Population: 533,286 (World Bank, 2023)

Capital: Valletta

Primary Language: Maltese, English

Main Religion: Christianity

Monetary unit: Euro

Main exports: Machinery and transport equipment

GNI per capita: 23.53 billion PPP dollars (2021)

Internet domain: .mt

International Dialing Code: +356

The Tax Year in Malta runs from 1 January to 31 December.

Income Tax in Malta

An individual who is ordinarily resident and domiciled in Malta is subject to income tax on their worldwide income and taxable gains.

Taxable income is the aggregate amount of income of a person after allowing for exemptions and allowable deductions. Some of the major items included in an individual’s taxable income include:

• Salaries, wages, and other benefits from employment
• Profits or gains from a business
• Dividends, interest, royalties, rents, and other investment income
• Pensions and annuities

In Malta, income tax is withheld from salaries under the final settlement system, employers are required to deduct income tax from salaries/wages that are paid to their employees whether they are a resident or a non-resident. Contributions are due by the end of the month and must be made using the appropriate form, which will include both tax and social security contributions.

Contributions are usually paid using a cheque to the Inland Revenue Department.

Social Security in Malta

Social security is compulsory for everyone who is employed in Malta between the ages of 16 and 65, including non-resident persons working in Malta.

The Social Security Contribution rate due is based on earnings derived from the basic weekly wage. The basic weekly wage does not include allowances, bonuses, and/or overtime earned in a particular week. There are different classes of contribution rates. Social Security Contributions by Employed persons are Class 1 Contributions and are paid by direct deductions from the same employees’ wages/salary. In a normal case scenario, an equivalent rate paid or deducted from the employee’s wage/salary, is also paid by the employer.

Part-time employees who work less than 40 hours per week and who earn less than the National Minimum (weekly) Wage can opt to have their share on social security contributions, paid at the rate of 10% of their basic weekly wage.

Reporting Tax in Malta

Monthly Income

Tax and Social Security on the appropriate form (FS5) must be submitted to the Inland Revenue Department by the end of the subsequent month.

Yearly

FS7 is an annual report submitted by the employer by the 15th February of the following year to the Inland Revenue Department. This form states all taxes and social security contributions made that year.

FS3 is an individual annual report provided by the employer to each employee with a summary of all taxes and social security contributions paid throughout the year. This form is submitted to the Inland Revenue Department along with the FS7. It is also due on 15th February each year.

New Employees in Malta

All new employees must be registered with Inland Revenue Department and JOBSPLUS, the Employment and Training Department. Employees must be registered within 14 days of the engagement date.

All third country nationals must obtain a work permit before starting work in Malta.

Leavers in Malta

JOBSPLUS must be informed of all terminations. In the case of expatriates, the Inland Revenue Department must be informed that the employee is leaving.

All termination documents and final salary payments must be made to the employee on the last day of employment.