Personal Tax Rates
There are three tax rates in Malta; Single rates, married rates and parent rates of tax. Under the single rates of tax, the first Eur9,100 (as of 2020) of income is not taxed. The next Eur5,400 is taxed at 15%, then at 25% for the next Eur45,500, going up to a maximum tax rate of 35% for income over Eur60,000.
Social Security Contributions
Employees pay Social Security contributions under Class 1, generally at 10% of their earnings, capped to Eur48.57 (as of 2021) per week. Self Employed individuals pay a fixed amount of Eur31.03 (as of 2021) per week in their first year of registration under Class 2, then 15% of their profits capped to Eur72.86 (as of 2021) per week from their second year onwards. These are deducted directly from the salary for employees, whereas for self-employed persons, Social Security contributions are paid three times each year, in April, August and December.
Malta is a country full of opportunities, with an advantageous tax regime and a moderate cost of living, allowing people that come here to achieve a good quality of life. The primary language is English, with a large part of the Maltese people understanding and speaking also fluently Italian. Malta is a full EU member and a reputable jurisdiction for international business and investment.
Starting a business in Malta
With low start up costs and an environment promoting investment and job creation, starting a business in Malta can be attractive when looking to relocate to another country. Depending on the type of activity, and the legal form to be used, whether a limited liability company or trading as a sole trader, the first step to relocating to Malta is to find and rent a suitable residential property. The premises from which the trade is carried out, depending on the type of activity, will require suitable Planning permission and Trade license.
Residing in Malta
EU citizens can live, work and reside in Malta, as long as they have sufficient financial means to not become a burden on social security services in Malta, and as long as they have sufficient health cover, which can be through private health insurance, or by paying social security contributions (as an employee or as a self employed person).
Non EU citizens require an Employment license (work permit) before they can take up work in Malta, either as an Employee or through setting up their own business. There are different routes to follow, depending on whether the person is qualified and experienced and seeking employment in Malta, or whether they are investing adequately and setting up their own business, or also whether they are financially sufficiently able to reside in Malta without working here.
Tax Credits promoting capital investment and creation of new jobs
Companies and businesses through Microinvest can apply for tax credits (45% on eligible costs) to use directly against their tax balance each year. The scheme is open till 2020. These tax credits are available for both eligible (micro enterprises) companies and sole traders. The tax credits are capped to Eur50,000 over a period of three consecutive years. Businesses which are either operating from Gozo, registered as a Family Business or with a female majority of owners are given an extended capping of Eur70,000 over a period of 3 consecutive fiscal years.
The scheme aims to incentivise a growth in employment cost and also capital investment in the business, such as acquiring machinery, equipment, computer hardware, packaged and development of software solutions, furbishing and refurbishing of business premises.
Free Childcare in Malta
For working Parents and Parents attending a recognised course leading to a diploma or degree, the Government pays in full up to 40 hours of Private Childcare per child each month. Government child day cares are also available.
Opening a Bank Account in Malta
Purchasing Property in Malta
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Acquiring a property in Malta is relatively simply, and the costs involved are not high. The strong rental market can be a good opportunity for buy to let investors.
Taking a Bank loan or mortgage is also straight forward, with suitable proof of income, the Bank would generally lend up to 80% of the property value.
In Malta, a property transfer starts from a Promise of Sales agreement (konvenju), which is carried out at a Notary. A deposit of generally 10% is paid, and once the property searches are complete, the Contract can be signed.
The costs involved include the Notary fees and costs, which are around 2% of the property value, and Stamp duty at 5%, which can be discounted in some cases. There are no ongoing property taxes or council tax. The estate agency fee is usually included in the price of the property.
EU citizens can purchase property in Malta, however even if they do not reside in Malta, they can only purchase one property, which would be their primary residence or for any other purposes they require. To purchase a second property, one would need an Acquisition of Immovable Property (AIP) permit. Properties located in Special Designated areas (SDA) are exempted from requiring the purchaser to obtain such permit.
EU citizens that do reside in Malta for at least five years, can purchase additional properties without requiring an AIP permit.
Working In Malta
Bank Account opening in Malta is not confined to only Maltese residents, persons that are not resident in Malta and foreign companies can also apply to open a Bank Account in Malta. A suitable Bank Reference letter (in original) from your existing Bank would be required. The Maltese Bank would contact your Bank to verify your identity, banking history and good standing with the Bank. Other documentation include a certified true copy of your passport and an original recent utility bill showing your residential address.
Foreign companies opening a Bank account in Malta would require; for each of the beneficiaries, directors and each signatory of the bank account; a Bank reference letter, a passport certified true copy, the incorporation documents including registers of members and directors, certificate of good standing, a recent original Utility bill proving residential address, and a Bank reference letter for the company itself.
If you are residing in Malta, a copy of your lease agreement would be required, together with your Malta residence card if you have already obtained it.
Registering a new company in Malta
The time involved to register a new company in Malta can be as little as one week. With a separate legal entity, one can trade within this legal structure and this offers certain flexibility in terms of directorship and transfers of ownership (shares). Companies in Malta benefit from a number of advantages, such as moderate running costs, an English speaking skilled workforce, and a number of tax incentives. Maltese companies are regulated by the Companies Act 1995 (with the exception of companies formed to register a vessel under Maltese flag) and the company is formed at the Registrar of Companies.
The company formation documents include the Memorandum and Articles of Association, the Bank deposit slip showing the share capital deposit, and the full identity and verification (due diligence) documents for all persons involved with the company. The registry company formation and annual cost vary according to the authorised share capital of the company.The registry cost to form a company in Malta start from Eur245 (if formed using registry online services this is reduced to Eur100).
All companies registered in Malta require a Maltese registered office address. All changes to the company statute or with the persons involved with the company, need to be notified to the Registry using the prescribed forms.
Each year, all Malta Companies need to submit to the Registry of Companies an Annual return (within 42 days from anniversary date) together with the annual registry fee (starting from Eur85 when submitted online), and a set of Audited Financial Statements. The Company tax return is submitted to the Commissioner of Inland revenue after the financial statements have been audited and signed.
A Maltese Company is taxed at 35% on its chargeable profits. Dividends paid out from the Maltese Company are not taxed any further in the hands of the shareholder, even when the shareholder is not resident in Malta. The shareholders of the Company can apply for tax refunds under the Tax refund mechanism, when dividends are distributed.
VAT Registration in Malta
Whether registering for VAT for a company, or as a sole trader, the process generally takes two weeks. In some cases a meeting with the VAT Department may be requested to go over the application with the VAT Department officials.