Doing Business in Malta

Malta is an island nation in the Mediterranean Sea around 80 km off the southern coast of Italy, and 284 km north of Tunisia. One of the smallest countries in the world by both size and population, Malta has nevertheless been historically important on the world stage, thanks to its strategic location in the middle of the ocean, between Europe, North Africa, and the Middle East. The main industries in Malta include tourism, manufacturing and financial services - although reliant on international shipping and transport, current high performance sectors include technology, IT and communications, maritime, pharmaceuticals and engineering. Malta’s GDP has been rising steadily since the 1980s, and reached $10.95 billion in 2016 - with an average growth rate of 0.81% since 2000. A parliamentary republic and EU member-state, Malta bases much of its legislative and administrative procedures on the United Kingdom - from which it gained independence in 1964. In 2017, Malta was ranked 84 on the World Bank’s Ease of Doing Business Survey.

Why Invest in Malta?

Entrepreneurs and business owners seeking information about the Maltese economy, or looking for opportunities, may find a number of reasons to invest, including:

  • Tax rate: Malta offers one of the most favourable tax systems in Europe - especially at the corporate level. While the corporate rate in Malta stands at 35%, a system of dividends results in significant refunds - which effectively lower corporate taxes to around 5%.
  • Government incentives: Malta has a stable, democratic political system, with both main parties engaged in an effort to attract investment to the country. The Business Promotion Act, for example, in force since 2001, offers a range of financial incentives for businesses in high-growth industries.
  • Financial centre: Malta is an international financial services hub. Having emerged from the 2008 financial crisis with surprising resilience, Maltese financial service businesses have developed a reputation for professionalism and excellence - and contribute around 15% of GDP.
  • International gateway: Malta is an international trade gateway to Europe, North Africa and the Middle East. A member of the EU, and hosting a variety of knowledge, manufacturing and tech-based sectors, Malta offers valuable commercial connections to markets of tens of millions of consumers.
  • Workforce: Malta’s workforce is highly-educated, dedicated and skilled. A high percentage of Malta’s employees are university-educated and experienced in STEM disciplines.

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.

Registering a Company and Establishing an Entity in Malta

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

  • Create a Maltese company: Once the company is registered as a Private Employer, you can set up the Payroll for the employees.                 
  • Register as a Private Employer: 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 between 8.30 a.m. and 12.30 p.m. Mondays to Fridays and banks are open until 12.00 p.m. on Saturdays.

Payments can be made to employees via cheques, direct deposit and cash. The authorities can be paid in cheques and direct deposits.

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

The Republic of Malta is an archipelago in the Mediterranean Sea, and represents a continental gateway to Europe, North Africa, and the Middle East. Malta has been controlled by a variety of historic powers, including Greek, Roman, Arab, Italian and Spanish colonial forces, but was most recently under British control until it was granted independence in 1964. Today, Malta is a liberal democracy, a member of the European Union, and a member-state of the United Nations. The natural beauty of the island, and its year-round Mediterranean climate, have made it a popular destination for tourists from across the world: Malta is home to three UNESCO world heritage sites, and comprises miles of dry but verdant landscapes which host a variety of flora and fauna. Malta’s capital city, Valletta, is one of two larger urbanised zones in the country - which are inhabited by around 95% of its population.

Full Name: Republic of Malta

Population: 436,947 (World Bank, 2016)

Capital: Valletta

Primary Language: Maltese, English

Main Religion: Christianity

Monetary unit: Euro

Main exports: Machinery and transport equipment

GNI per capita: US $18,620 (World Bank, 2010)

Internet domain: .mt

International Dialing Code: +356

Hello Merħba
Good morning Bonġu
Good evening Lejl it-tajjeb
Do you speak English? Titkellem bl-Ingliż?
Good bye Saħħa
Thank you Grazzi

Tax & Social Security in Malta

The Tax Year runs from 1st January to 31st 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 and Income in Malta

Income tax in Malta is charged at a progressive rate which ranges from 0-35%, but this rate may be affected by marital status, or by family dependents. Employers in Malta are required to withhold income tax from their employees’ salaries, and report it to the Maltese tax authorities. Tax must be reported on a monthly basis in Malta, and the tax year follows the calendar year. Details of relevant monthly and yearly tax duties are as follows:

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 in Malta must be registered with Inland Revenue Department and JOBSPLUS, the Employment and Training Corporation. Employees must be registered within 14 days of the engagement date.

Please see below for an example of the information needed for any new employees. This list is not exhaustive;

  • Full name
  • Date of Birth
  • Nationality
  • Date of arrival in Malta
  • Copy of Maltese ID card or tax number
  • Copy of Maltese Social Security Card/Certificate
  • Residential Address
  • Annual Gross Salary

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

Employee Contract Terminations in Malta

JOBSPLUS, Malta’s centralised government labour system, must be informed of all employee terminations. In the case of expatriates, the Inland Revenue Department must be informed that the employee is leaving. Employees have certain rights regarding the termination process, which may differ in the context of the number of employees being terminated, compensation in lieu of notice, fixed term contracts, and other factors.  

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

Payroll in Malta

Payroll in Malta involves employers withholding income tax and social security contributions from employee salaries on a monthly basis, before reporting these amounts to the inland revenue. Income tax is withheld at a progressive rate, as follows:

          Income (€)                  Rate

  • Up to 8,500                 0%
  • 8,500 to 14,500           15%
  • 14,501 to 60,00           25%
  • 16,001 and over          35%

Along with VAT and Withholding taxes, employees and employers must also make a social security contribution of 10%. Malta payroll regulations allow employers to provide their employees with online payslips, while payroll reports must be kept for a minimum of 10 years.

The complexity of Malta’s tax system often presents an administrative burden for expatriate businesses - but it is possible to engage a third-party organisation to handle the process. Implementing a global payroll solution is a way to maintain both procedural efficiency across international territories, and remain compliant with the relevant Maltese legislation.

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