Help to complete your tax return - Basis year 2016 Year of Assessment 2017 - Commissioner for Revenue

 
 
Help
to complete your
tax return

Basis year 2016
Year of Assessment 2017

Inland Revenue Department - Malta
www.ird.gov.mt
Designed, Set and Printed at the Goverment Press

                       2
This information booklet has been                 Summer (16th June to 30th September):
produced by the Inland Revenue                    8.00am to 12.00pm (Monday to Friday)
Department to help you fill in your basis
2016 Income Tax Return in a complete              Gozo residents may contact the Inland
and correct way.                                  Revenue Branch at Enrico Mizzi Street,
                                                  Victoria.
Your return is to be completed
and forwarded so as to reach the                  Freephone 153
Department by not later than 30th                 Email: taxpayerservice.ird@gov.mt
June, 2017.
                                                  The Inland Revenue Department
You are to ensure also that all the tax due       uses the information provided, to
for 2016 will be paid by the 30th June,           process the Income Tax return and
2017. Your tax return will be carried free        Self-Assessment in accordance with
through the post in Malta by using the            the Income Tax Acts and subsidiary
light grey envelope enclosed.                     legislation. We may check information
Payments made by cheque are to be                 provided by you, or information about
posted by using the small light blue              you provided by a third party, with
envelope provided. If you have an                 other information held by us. We will
income tax query you can either visit             not disclose information about you to
the IRD Taxpayer Service in Floriana              anyone outside the Inland Revenue
or Victoria Gozo or phone the IRD Call            Department unless permitted by law.
Centre on Freephone 153.
                                                  The Inland Revenue Department
Note: This booklet is a guide only and            treats your personal information in
has no legal force whatsoever.                    accordance with the Data Protection
                                                  Act 2001 (Cap 440) to protect your
For further information                           privacy.
IRD Taxpayer Service, Inland Revenue
Department, Block 4 – Floriana                    Any queries may be addressed to
                                                  The Data Controller, Inland Revenue
Taxpayer Service is open to the public as         Department, Floriana, FRN 0170
follows:

Winter (1st October to 15th June):
8.00am to 3.30pm on Mondays,
Wednesdays and Fridays and 8.00am
to 12.30pm on Tuesdays and Thursdays.

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CONTENTS

General Information __________________________________________ 5
Personal Details______________________________________________ 7
Information on Deduction and Tax Credits_______________________ 10
Emoluments and Business Income_____________________________ 15
boxes 1-8
Investment, Capital Gains and Other Income_____________________ 19
boxes 9-15
Deductions _________________________________________________ 22
boxes 16-22
Tax Computation ____________________________________________ 25
boxes 24-27
Tax Credits _________________________________________________ 32
boxes 28-32
Relief from Double Taxation __________________________________ 32
boxes 33-34
Tax Payment _______________________________________________ 34
boxes 35-41
Underpaid or Overpaid Tax ____________________________________ 35
boxes 42
Entities Related to Tax Deductions _____________________________ 36
Filling of Income Tax Returns in Schools ________________________ 39

                                  4
GENERAL INFORMATION
THE SELF-ASSESSMENT SYSTEM                            by not later than 30th June, 2017.

Enquiries                                             Tax Refund

Although the Commissioner for Revenue will            If you have overpaid your tax for 2016 and
be accepting your tax return as declared by           you submitted the income tax return in
you, he may make those necessary checks               time the department will be refunding your
whenever he deems that circumstances                  overpayment by not later than the end of
so warrant. If it results that not all the tax        December, 2017. Interest at the rate of 0.54%
chargeable has been paid, penalties may have          per month will start to accrue in your favour
to be imposed. The additional tax and interest        from the following January. Please note that
will be charged as from the tax return date,          the said refund will not be issued unless you
which is 30th June, 2017.                             have submitted all your income tax and VAT
                                                      returns, where applicable.
Submission of tax return
                                                      Adjusting the Tax Statement
The income tax return is to reach the
Department by not later than 30th June, 2017.         If you think that the tax statement issued by
If, for some reason or another, you have not          the department contains a mistake you may fill
been served with a blank tax return form, you         in a Correction Form (Form AF). If you need to
are nonetheless obliged to submit your income         add to, or correct, your own self-assessment,
tax return and self-assessment by 30th June,          you may fill in an Adjustment Form (Form
2017. If you do not submit your tax return,           AF1). Both forms may be obtained from the
the Commissioner for Revenue will issue a tax         Department’s Taxpayer Service.
statement based on estimated amounts.
                                                      Following the submission of these forms, a
When personally submitting the income tax             new tax statement will be issued, superseding
return by hand you are to deposit this form at        all previous tax statements for the relative
the Correspondence Mailing Unit (CMU), Block          year.
no. 3.
Alternatively it may be left either at the            TAX RETURN OF MARRIED COUPLES
Customers’ Help Desk at Block 4 or the
Expatriates Section in Block 1 if you have been       Joint Return
assisted in filling this form by any of these
sections’ respective staff.                           The couple’s income is to be declared in a
                                                      joint return, which is to be signed by both
Payment of the tax due                                spouses. However a return signed only by the
                                                      responsible spouse is considered as having
30th June, 2017 is the TAX RETURN DATE, that          been duly signed.
is, the last day by which you may deliver your
tax return. It is also the TAX SETTLEMENT             It is important to note that for the purpose of
DATE. This means that you must pay any                this self-assessment the definition of Married
outstanding balance of tax for basis year 2016        Couple includes couples in a Civil Union.

                                                  5
Taxpayers who married during 2016                       Directors’ fees are always chargeable in the
                                                        hands of the responsible spouse – whether
The tax return of the responsible spouse is             these are earned by the responsible spouse or
to include (1) the income of the responsible            by the other spouse. The fact that a couple opts
spouse for the whole of 2016 and (2) the                for a separate computation does not mean that
income of the other spouse from the date of             two tax returns have to be submitted. Nor does
marriage to 31st December 2016. The ‘Married’           it mean that two tax statements will be issued.
rates or the separate tax computation are to            The tax statement will be issued in the name
be applied thereon. The tax return of the other         of the responsible spouse, but responsibility
spouse is to include the income of the other            regarding the payment of tax lies with both
spouse from 1st January 2016 to the date of             spouses jointly and severally.
marriage. The ‘Single’ rates are to be applied
on this income.                                         Single Parents

Responsible Spouse                                      Unmarried individuals, widows or separated/
                                                        divorced persons who maintained a child
The couple may choose who of the two                    during the year may compute their tax by
shall be the responsible spouse by filling the          applying the married tax rates instead of
appropriate form which is available from                the single rates. This means that they will
the department’s Taxpayer Service. In a joint           benefit not only from a higher tax threshold
return the word “Self” refers to the responsible        (€12,700) but also from the application of more
spouse. Therefore, steps 1 to 8 in the return           favourable tax bands. In order to qualify for
must show the emolument and business                    this benefit all the following conditions have to
income of the responsible spouse in the left            be satisfied:
hand columns (under “Self”). The emolument
and business income of the other spouse is              •     the parent must have maintained a
to be shown in the right hand column (under                   child who, during 2016, was not over
“Spouse”). The income and relative deductions                 16. However, where the child is over
of a dependent child (i.e. a child who is not                 16 the parent may still qualify for the
required to fill in an income tax return in his               benefit provided the child was a full-time
own right) are to be included with the income                 student or he was incapacitated from
of the responsible spouse.                                    maintaining himself;

Separate Computation                                    •     the child did not have an income
                                                              exceeding €2,400;
You may apply the single rates of tax if you            •     the parent was recognized by the
consider these to be more advantageous to                     Director of Social Security as the
you.                                                          beneficiary of the children’s allowance;
However the ‘separate tax computation’ may              •     the parent was not in receipt of financial
not be applied to all sources of income, but only             assistance from the other parent on
to income from employment, trade or pension                   behalf of the child/ren;
which is received in view of past employment.
All other income is chargeable in the hands of          •     the parents were not living together.
the spouse with the higher emolument and
business income.                                        If you are a single parent, tick the correct tax
                                                        status on page 1 of the tax return.

                                                    6
Separated/Divorced Couples                              Parent Tax Rates

Where a couple has separated, both spouses              These tax bands which came into effect
are required to register separately as a                on 1st January 2012, apply to parents who
taxpayer with the Department as from the year           maintained under their custody a child, or
of separation. This may be effected by a direct         paid maintenance in respect of their child as
notification to the IRD, specifying the date of         determined:
separation and referring to any arrangements
made between the spouses with regards to                a)   by the Courts of Malta or the Courts of
alimony paid to the other spouse and/or the                  another country;
children.
                                                        b)   by a public deed of personal separation
Each spouse will be responsible for filing his or            under the authority of the Courts of
her tax return covering income earned from                   Malta or the Courts of another country,
1st January to 31st December. Each individual                or
will be taxed as a single person and will be
responsible to pay the relative tax on the              c)   by the Courts of Malta in a divorce
income earned. Married rates will apply only if              judgment or a decree or by the Courts or
the individual qualifies as a single parent (see             other authorities of another country.
above).
                                                        The Parent Tax Rates apply only where such
Where income is derived from employment,                child was not over 18 years of age (or not over
separate FS3s of each individual covering the           23 years if receiving full-time instruction at
employment period for the year, are to be               a tertiary education establishment) and not
attached to the tax return.                             gainfully occupied, or if gainfully occupied did
                                                        not earn income in excess of €2,400.
In cases of separation or divorce it is important
that the department is notified with the                These rates may be viewed on the back of this
change in addresses of the respective spouses.          booklet.

PERSONAL DETAILS
Identity Details                                        status taking place during the year, should
                                                        be communicated to the Inland Revenue
Check the identity details printed on page 1            Department immediately.
of your tax return and make the appropriate
corrections in the space provided. Please write         Tax Status
your telephone number on page 1. In the case
of a married couple some of the details in this         Your tax status (“single” or “married and
section refer to the other spouse as currently          living together”) as known to the Department
recorded at the department.                             is printed on page 1. If the tax status, as
                                                        printed, is correct, you do not have to do
Changes in personal details                             anything. If your status has changed please
                                                        indicate this by ticking the appropriate box
It is important to note that changes of                 showing your new tax status and the date
address or changes affecting your marital               of the change. For example, if you are single

                                                    7
but you qualify as a single parent in 2016, tick        56(1)(c) of the Income Tax Act.
the box “single parent”. If you are a married
person but you became widowed, separated                However, when a non resident individual, who
or divorced during 2016, tick the box “widow”           although being a national of the E.U or the
or “separated/divorced”, as appropriate. Enter          E.E.A does not have 90% of his world wide
also the date of the change in status.                  income derived from Malta, he/she may opt
                                                        to be taxed by using the tax calculation as
Residency Status                                        explained in the following examples:

Different rates of tax apply to taxpayers who           EXAMPLE 1
are not residents of Malta. Therefore you are
to indicate your residency status for income            An E.U national being a non resident single
tax purposes in your tax return.                        taxpayer has an income chargeable to tax in
                                                        Malta of €8,000, whilst his world-wide income
Non resident taxpayers                                  is €10,000.

As a general guideline, a non-resident may              In this case although this individual does not
be defined as a foreign employee whose stay             have 90% of his world wide income derived
in Malta is less than 183 days. However, in             from Malta, he may use the following option:
cases where such employee can prove by a
contract of employment that the duration                Step 1. Calculate the tax on the Income
of the employment exceeds 6 months in any               chargeable to tax in Malta (€8,000) by using
12-month period, such employee is taxed                 the non-resident rates. In this case the amount
under the residents rates, even though the              of tax is €1,960;
period of employment in that particular year
of assessment is less than 183 days.                    Step 2. Calculate the tax that would result
                                                        by charging the world-wide income (€10,000)
If you answer ‘Yes’ to question 1 (i.e. you were        using the resident rates. In this example the
resident in Malta) you do not have to reply to          tax amounts to €135;
question 2 and 3 and you may go to the next
                                                        Step 3. Divide the income chargeable to
step straight away. If you answer ‘No’ (i.e.
                                                        tax in Malta by the World-wide income
you were not resident in Malta for income tax
                                                        €8,000/€10,000 = 0.8;
purposes) then you must answer question 2
and/or 3 and indicate the period during which           Step 4. Multiply the result from Step 3 (0.8) by
you were in Malta during 2016. If you had               the result in Step 2 (€135) = €108;
multiple stays in Malta during 2016 then attach
a list of the relevant dates.                           Step 5. Choose the lesser amount of Step 1
                                                        (€1,960 – using the Non resident tax rates) or
New Provisions regarding the taxability of non          Step 4 (€108);
residents (E.U and E.E.A Nationals) - Article
56(1)(c) I.T.A                                          Step 6. Transfer the amount chosen in Step 5
                                                        to section 26 on page 3 of the tax return.
Non resident Individuals from the European
Union (E.U) or the European Economic Area               EXAMPLE 2
(E.E.A), who earn more than 90% of their
worldwide income in Malta, shall qualify for            A non resident couple, whereby both spouses
the residents tax rates as per proviso in article       are nationals of a country within the E.E.A,

                                                    8
has an aggregate income chargeable to tax             Step 4. Multiply the result from Step 3 (0.04)
in Malta of €49,200. The spouses’ aggregated          by the result in Step 2 (€61,275) = €2,451;
total world-wide income amounts to €60,000.
                                                      Step 5. Choose the lesser amount of Step 1
Step 1. Calculate the tax on the Income               (€1,960 – using the Non resident tax rates) or
chargeable to tax in Malta (€49,200) by using         Step 4 (€2,451);
the non-resident rates. In this case the amount
of tax is €16,380;                                    Step 6. Transfer the amount chosen in Step 5
                                                      to section 26 on page 3 of the tax return.
Step 2. Calculate the tax that would result
by charging the world-wide income (€60,000)           If you are in doubt regarding your residency
using the resident rates. In this example the         status for income tax purposes you may phone
tax amounts to €11,095;                               our Call Centre on 153 or visit the Taxpayer
                                                      Service at Block 4, Floriana or our offices at
Step 3. Divide the income chargeable to               Victoria, Gozo to clarify your residency status
tax in Malta by the World-wide income                 before submitting your tax return.
€49,200/€60,000 = 0.82;
                                                      Expatriates
Step 4. Multiply the result from Step 3 (0.82)
by the result in Step 2 (€11,095) = €9,098;           This section is to be filled in by expatriates only.
Step 5. Choose the lesser amount of Step 1            Such individuals are to tick the appropriate box
(€16,380 – using the Non resident tax rates) or       or boxes.
Step 4 (€9,098);
                                                      Tax Return Language Choice
Step 6. Transfer the amount chosen in Step 5
to section 26 on page 3 of the tax return.            If you require this tax return in the Maltese
                                                      language you may contact the Department.
EXAMPLE 3
                                                      Declaration
An E.E.A national being a non resident single
taxpayer has an income chargeable to tax in           The declaration on page 1 is to be signed
Malta of €8,000, whilst his world-wide income         and dated. The return will not be considered
is €200,000.                                          complete unless properly signed. The return
                                                      of a married couple is to be signed by both
Step 1. Calculate the tax on the Income               spouses. If it is signed by the responsible
chargeable to tax in Malta (€8,000) by using          spouse only, it will be deemed to have been
the non-resident rates. In this case the amount       signed by both.
of tax is €1,960;
                                                      OTHER INFORMATION
Step 2. Calculate the tax that would result by
charging the world-wide income (€200,000)             Tax Advice
using the resident rates. In this example the
tax amounts to €61,275;                               If you are attaching with the tax return the
                                                      original written advice of a tax professional in
Step 3. Divide the income chargeable to               terms of the Income Tax Act, you are required
tax in Malta by the World-wide income                 to tick the box adjacent to the item and supply
€8,000/€200,000 = 0.04;

                                                  9
the name of the tax professional in the space          if this is 99 cents – in respect of any source of
provided.                                              income. For example, if you received a salary
                                                       of €11,155.65 you are to enter €11,155 in box
General Basis of Taxation                              1. If you received three interest amounts of
                                                       €210.84, €48.34 and €24.68, first you should
If you are domiciled and ordinarily resident           add them all up. This amounts to €283.86. At
in Malta you should declare all your 2016              this point you are to disregard the cents (86c)
income (including that of your spouse and              and enter €283 in box 9b.
dependent children) from whatever source. If
you are either not domiciled or not ordinarily         When you are determining any DEDUCTION
resident in Malta you should declare all income        AGAINST INCOME you are to round up to
accruing to you in Malta or derived from Malta         one euro. For example, if you need to effect a
(including that of your spouse and dependent           deduction of €60.45 from rental income, you
children), as well as any income which was             are to enter €61 in box 16b. Any fraction of a
remitted to Malta during 2016.                         euro even if it does not exceed 50c – is to be
                                                       rounded up to a euro.
Disregard or round up the cents
                                                       When you are computing the TAX DUE that
When you fill in your tax return enter the             is from section 26 onwards, the rules change
amounts in euro, leaving out the cents. This is        slightly. Here, you are to disregard any fraction
done as follows:                                       of a euro being equal to or less than fifty cents,
                                                       and round up to one euro any fraction of a euro
When determining the CHARGEABLE                        exceeding fifty cents.
INCOME disregard any fraction of a euro, even

INFORMATION ON DEDUCTIONS AND TAX
CREDITS
Tax credit for       women      returning   to         following tax credits:
employment
                                                       1.   Maximum of €2000 tax credit
Women who return to employment or self-                     If this amount of tax credit is not taken in
employment may benefit from a tax credit.                   a single year, the balance may be carried
Those who may benefit from this tax credit are:             forward to the following year. In this case
                                                            one may fill in an RA7 form, which may
a) Women who have children under 16 years                   be obtained from the Taxpayer Service at
   of age and who have returned to work after               Block No. 4
   the 1st of January 2016 after being absent
   from work for 5 years or more; or                   Or

b) Women who had children after 1st January            2. Tax credit up to a maximum of €5000
   2007 and continued or had returned back to               If the tax due on your employment or self-
   work in their employment on or after this                employment income is more than €2,000,
   date.                                                    you may avail yourself up to a maximum
                                                            of €5,000 tax credit. In order to opt for
If you qualify you may choose either one of the             this type of tax credit one needs to fill in

                                                  10
an RA9, also obtainable from Taxpayer              deduction against your income. The qualifying
     Service. If option 2 is taken, a married           expense may not exceed €20,000. If such
     couple must calculate their tax by using           deduction cannot be fully set off against your
     the separate or the Parent computation             income in the year of entitlement, it may be
     rates.                                             carried forward to subsequent years. Qualifying
                                                        expenditure includes expenditure of a capital
Moreover, women who returned to employment              nature (e.g. installation of a lift) and expenditure
during 2016 after an absence of at least 5 years        incurred in the training of employees having a
from any gainful occupation and had previously          disability. An approval has to be issued by the
been in employment for at least 24 consecutive          National Commission Persons with Disability
months may benefit from a tax credit of up to           following an application.
€2,000. This tax credit has to be claimed on
Form RA4, issued by the Department.                     To claim this deduction you are required to file
                                                        an RA12 form. The resultant expense computed
In case of difficulty please contact our Call           in this form should be included in the Profit and
Centre on 153.                                          Loss account accompanying your tax return.

Pharmacy Of Your Choice Scheme (L.N                     Childcare facilities at the workplace
171/2010)
                                                        If, as an employer, you have incurred
If you carry a business through a pharmacy              expenditure to provide childcare services for
outlet and you have incurred an expense                 the children of your employees you are entitled
in purchasing or installing any equipment               to a deduction equivalent to the expense up to
or software for the implementation of the               a maximum of €20,000. Where the deduction
Pharmacy Of Your Choice scheme you may                  cannot be fully set off against your income
qualify for an additional deduction. This is            in the year of entitlement, it may be carried
equivalent to 300% of the expense. The total            forward to subsequent years. The expenditure
deduction claimed may not exceed €12,000 for            must be of a capital nature and consist of (a) the
each pharmacy.                                          construction or conversion of a childcare facility
                                                        (b) the acquisition of childcare equipment for
To qualify for this deduction you are to file           use in a childcare facility at the workplace. The
an application with the Standing Advisory               claim is to be made on the RA 13 form which you
Committee. Upon approval you are required to            may download from our website. The resultant
fill in the RA11 form (obtainable from the IRD).        expense computed in this form should then be
The resultant expense computed in this form             included in the Profit and Loss account.
should then be included in the Profit and Loss
account accompanying the tax return under               Deduction of donations to the University
LN171/2010 POYC Rules. Please see page 15               Research, Innovation & Development Trust
regarding a further tax credit related to this
Scheme.                                                 See Section 20 for more details about this
                                                        deduction.
Workplace accessibility deduction
                                                        MicroInvest tax credits for micro enterprises
If, as an employer, you have incurred an                and the Self-employed
expense to increase the accessibility to the
workplace to any of your employees suffering            This incentive is open to all micro enterprises
from a disability, you may be allowed a special         including self-employed individuals that at

                                                   11
point of application satisfy all criteria set up            employment activity which constitutes an
by the Malta Enterprise. Malta Enterprise may               ‘eligible office’. An ‘eligible office’ consists of
approve a tax credit of €30,000 and €50,000 for             a specified senior employment position with
a Gozo based micro enterprise for the duration              companies licensed and/or recognised by the
of this incentive. All the relevant information             Malta Financial Services Authority (MFSA),
regarding this scheme may be found on the                   the Lotteries and Gaming Authority and the
Malta Enterprise website at maltaenterprise.                Authority for Transport.
com.mt. Any tax credit claim with respect to
this incentive is to be made on the appropriate             The eligible offices may be found in L/N 106 of
RA 15 form. As from 1st January 2016 this                   2011, L/N 428 of 2011 and 306 of 2012.
scheme has been extended so as to entitle
self-employed women or businesses which are                 An application must be made to the MFSA on
majority controlled by women to a tax credit of             form RA17 which is downloadable from the IRD
up to €50,000.                                              and MFSA website. The completed form is to be
                                                            attached to the income tax return and filed by
Tax Credits for creative enterprises                        the 30th June 2017.

The scope of this incentive is to support creative          Qualifying Employment in Innovation and
business whose economic performance                         Creativity L.N 106/2013
is directly linked to the creative talent of
the individual or individuals involved in the               This Scheme apply to income from emoluments
company. Self-employed individuals involved in              which must be payable under a qualifying
the creative industry may benefit through this              contract of employment, and received in
incentive which will be in the form of a tax credit.        respect of work or duties carried out in Malta by
The aid will be calculated as a percentage of the           a person who is not domiciled in Malta.
eligible costs incurred by these undertakings in
the development of their creative endeavours.               Qualifying contract of employment consists in
For a more detailed explanation about this                  income subject to tax under article 4 (1) (b) of
scheme you may visit the Malta Enterprise                   the ITA subject to a minimum of €45,000 and the
website maltaenterprise.com.mt – (Incentive                 employment is in a role directly engaged in the
Guidelines). The tax credit claimed is to be                development of innovative and creative digital
computed on the RA 16.                                      products as approved by Malta Enterprise (ME).
                                                            Anti-abuse provisions are also provided for.
Highly Qualified Persons Incentive
                                                            The beneficiary must be in possession of
Expatriates in receipt of income payable in                 professional qualifications recognised by the
terms of a “qualifying contract of employment”              Malta Qualification Recognition Information
in respect of activities carried out in Malta,              Centre or has relevant experience to the eligible
may opt to be subject to tax on such income                 office as approved by Malta Enterprise.
at a flat rate of 15%, provided that the income
amounts to at least €82,353, adjusted annually              An eligible person qualifies to be taxed under
in line with the Retail Price Index. The 15% flat           article 56(21) of the ITA at the rate of 15%.
rate is imposed up to a maximum income of                   Where the option is exercised, the income
€5,000,000 and the excess is exempt from tax.               that is charged to tax at the said rate shall be
                                                            deemed to constitute the first part of that
In order for a beneficiary to qualify for the               individual’s total income.
reduced rate of tax he must be engaged in an

                                                       12
The option applies for a consecutive period of 3            from the scheme must submit with his income
years commencing from the year preceding the                tax return a declaration signed by him and
first year of assessment in which that person is            endorsed by Malta Enterprise. The income
first liable to tax under the provisions of the Act.        tax return must be filed by not later than the
This condition applies for both EEA/Swiss and               relative tax return date.
third country nationals.
                                                            Deduction    (Apprentices    and         Work
The Rules (L.N 106/2013) provide a schedule                 Placements) L.N. 179 of 2014
with a list of designations which qualify under
these rules subject to the approval of the                  Where an employer provides a work placement,
competent authority (ME).                                   a deduction equivalent to €600 is available
For the scope of this scheme the RA18 form,                 against the employer’s chargeable income
which may be obtained from the department, is               for each work placement. In the case of
to be filled in and submitted with the tax return.          apprenticeship, the deduction is of €1,200.
                                                            The deduction is allowable in case where
Repatriation of Persons established in a Field              the work placement or apprenticeship is for
of Excellence                                               a continuous duration of at least 6 months.
                                                            Where the deduction available cannot be
An individual would be deemed to be eligible                wholly set-off against the chargeable income
for the scheme if he is established in a field of           for a particular year, the deduction can be
excellence and returns to Malta as ordinarily               carried forward and set-off against the income
resident. Such individual must have been                    for subsequent years.
ordinarily resident in Malta for at least twenty
years after which he spent ten consecutive                  The employer cannot benefit from the said
years in which he was not resident in Malta                 deduction, if assistance has already been
prior to his return to Malta. The term “field of            provided by the government or a government
excellence” refers to an area of professional               entity on the same expenditure.
competence in the manufacturing and research
and development sectors.                                    Deduction (Mature Workers) L.N. 180 of 2014

Work carried out in Malta by an eligible                    Where an employer provides employment to an
individual under a contract of employment shall             individual aged between 45 and 65 years old and
be taxed at the reduced rate contemplated in                whose name appears on the unemployment
Art 56 (25) that is at 15 %.The Rules provide               register for at least the preceeding 6 months:
that the remuneration must be at an annual
minimum of €75,000 and the eligible person                  •   The employer may benefit from a deduction
must prove his professional competence to                       equivalent to €5,800 per annum which shall
Malta Enterprise Corporation.                                   be allowed against the chargeable income
                                                                of the said employer;
                                                            •   Provided that, where the employee is not
The option available under article 56 (25) of the               employed for a full year during the year of
Act may not be exercised in respect of any year                 assessment, the deduction is allowable pro
of assessment preceding year of assessment                      rata. The two years deduction commence
2013 and the option shall apply for a consecutive               on the first day of employment, and,
period of 5 years.                                              provided the employee remains in the
                                                                relative employment, the qualifying person
A qualifying individual who wants to benefit                    will benefit from a deduction equivalent to

                                                       13
€11,600 at the elapse of the said two years          15% of the aggregate of any contributions
•   A deduction equivalent to 50% of the                 made or premiums paid by a person during the
    expense incurred in providing training to a          year in respect of membership in any personal
    qualifying employee of up to a maximum               retirement schemes as defined in the Special
    of €400 shall be allowed against the                 Funds (Regulation) Act or any Act substituting
    chargeable income of the employer;                   the said Act, or a policy of insurance held with
                                                         a company authorised to carry on long term
Provided that all the deductions available               business under the Insurance Business Act; and
cannot be wholly set-off against the chargeable
income, the deduction can be carried forward             €150.
and can be set-off against the income for
subsequent years.                                        In the case of a married couple resident in
                                                         Malta, each of the spouses may claim the
Married women returning to work –                        credit (irrespective of whether they have used
Exemption of tax                                         the parent, single or married computation).
                                                         The credit will only be available in respect of
A married couple may opt to be taxed under               income tax chargeable for the year in which the
the married tax rates without taxing the wife’s          contribution was made or the premium paid and
employment income (other than income                     cannot be carried forward if not utilized. The
derived from the holding of an office of                 income against which the tax credit is granted
director), provided that:                                is considered to be the first part of the income.
                                                         This tax credit may be claimed in box 30 of the
•   the wife has been absent from any gainful            tax return.
    occupation for at least 5 years;
•   the wife is over 40 years of age, and                New tax credits applicable from 1st January
•   the wife’s income does not exceed €9,450             2016

This incentive applies for a period of five              Seed Investment Scheme
consecutive years of assessment commencing
from the basis year in which the woman started           The purpose of this Scheme is to grant tax relief
work. One has to fill in the RA 19 form in order         to natural persons resident in or operating in
to apply for this incentive.                             Malta investing in start-up businesses.

Personal Retirement Scheme tax credit                    Any qualifying investor may benefit from a tax
                                                         credit equivalent to a sum amounting to thirty-
This tax incentive is aimed at encouraging               five per cent (35%) of the aggregate value of
Maltese residents to start saving for their              the investments made by such investor in one
pension by investing in private products offered         or more qualifying companies, so however
by local banks, life insurance companies and             that the total tax credit applicable to any such
other financial institutions. It provides for a          investor shall not exceed two hundred and fifty
tax credit with respect to contributions paid            thousand euro (€250,000) per annum. Such tax
to personal retirement schemes or premium                credit shall be set off against the tax due by the
payments in relation to a policy of insurance.           qualifying investor in respect of any income or
                                                         gains brought to charge to tax in the year of
The amount of the tax credit is equivalent to the        assessment immediately following the basis
lower of:                                                year during which the investment is made.

                                                    14
Any part of the tax credit that is not absorbed           fill in the RA22 form.The relevant tax credit may
in the year of assessment referred to may be              be deducted in Box 30 of the tax return.
carried forward by the qualifying investor and
set off against tax due for any subsequent year           Employment in Aviation – L.N 177/2016
of assessment until it is fully absorbed.
                                                          This initiative provides for a beneficial tax rate
In order to qualify for this tax credit one has to        of 15% for non-domiciled individuals employed
fill in the RA20 form                                     in the aviation sector.
                                                          The minimum amount of income which shall
The relevant tax credit may be deducted in Box            be chargeable to tax at this beneficial rate is
30 of the tax return.                                     €45,000 (exclusive of the annual value of any
                                                          fringe benefits) and shall consist of emoluments
For further information regarding this Scheme             from an eligible office. The 15% shall apply
one may contact Mimcol or visit their website -           without the possibility to claim any relief,
mimcol.com.mt.                                            deduction, reduction, credit or set off of any
                                                          kind.
POYC tax credit on service of home delivery
of medicine                                               For EEA and Swiss nationals, this option, shall
                                                          apply for a consecutive period of five years
As from 1st January 2016 pharmacies that                  commencing from the first year of assessment
provide the service of home deliveries of                 in which that person is first liable to tax under
medicine as part of the extension of the POYC             the provisions of The Income Tax Act, whilst for
scheme may qualify for a tax credit equivalent            third-country nationals, this option shall apply
to 100% of the cost incurred by each pharmacy             for a consecutive period of four years.
outlet participating in this POYC extension. This         An application for a formal determination
tax credit is capped at €14,000.                          relating to eligibility under these rules shall
The tax credit available is in respect of                 be made on such form as the Authority for
expenditure on motor vehicles and labour                  Transport in Malta may require.
additionally required for home delivery of
the medicines. The tax credit also covers                 The Schedule to the Legal Notice 177/2016
expenditure on equipment, as was the case in              provides a list of eligible employments and
the previous deduction.                                   offices.

No tax credit can be claimed for any expenditure          For the scope of this scheme the RA21 form,
incurred after the 31st December 2019.                    which may be obtained from the department, is
                                                          to be filled in and submitted with the tax return.
In order to qualify for this tax credit one has to

EMOLUMENT AND BUSINESS INCOME
On page 2 of your tax return you are required             responsible spouse under the “Self” column
to include all your emolument and business                and the income of the other spouse under the
income. If your tax status is single you                  “Spouse” column. If your tax status is single
must declare your income under the “Self”                 parent you must declare your income under
column. If your tax status is married and living          the “Self” column.
together, you must declare the income of the

                                                     15
The box numbers, found from this page                     Special tax rate of 7.5% on income derived
onwards, correspond to the numbers of the                 from sport
sections in the tax return.
                                                          A professional football or waterpolo player,
1. Employment or Office                                   registered with the Malta Football Association
                                                          or the Aquatic Sports Association respectively,
In this section you are to include the gross              who earned income taxed at the special rate
income received during the year from                      of 7.5% should not include this income in the
employment or office. This includes: salary               tax return unless the individual needs to claim
or wages; bonuses; overtime; directors’ fees;             back the tax so paid. In this case, one should
fringe benefits; and other payments and                   include the football/waterpolo income in box 1
allowances, including commissions.                        and claim the tax already deducted in box 35.

For each separate source of income from                   As from 1st January 2016 this special tax
employment or office enter the PE number of               rate has been extended to coaches and
the payer. FS3s are to be attached to page 3 of           professional sportsmen.
your return.
                                                          Other information
If you or your spouse received director’s fees,
these are to be included in box 1 under the               Arrears of salary received in 2016 are taxable
column SELF. You may not opt for a separate               in 2016, and are to be included in box 1. If you
computation in respect of such fees.                      are a lotto receiver, do not declare your income
                                                          in section 1 but in section 2. Although you may
Part-time employment                                      have been given an FS3, this income is not
                                                          derived from an emolument but from a trade
Part-time employment income up to a                       or business.
maximum of €10,000 which qualifies under
the part-time rules and on which tax at 15%               It is important to note that if you are an
has already been paid are not to be included              individual whose tax is calculated by using
in your return – unless you need to claim back            the “single” tax rates and who during 2016
some of the tax so paid. In this case, include the        received only employment income or income
part time gross income in box 1 and claim the             from pension not exceeding €9,450, you will
tax already deducted in box 35. If tax on part-           not be taxed.
time income is going to be claimed back, FS3s             Therefore if for example your employment
in respect of each source are to be attached to           income or pension income during 2016
page 3. Any part-time income over €10,000 is              amounted to €9,400, you are to enter this
to be included in box 1.                                  amount in box 1a and deduct €300 (€9,400 -
                                                          €9,100) in box 6.
Reduced income tax rates for police officers
                                                          Exemption from tax of Students’ Stipends
With effect from 1st January 2016, income
received for extra duties carried out by police           Please note that as in the previous year
officers will be taxed separately at the rate of          students’ stipends are exempt from income
15% and should not therefore be included in               tax and therefore are not to be included in the
the income tax return unless the individual               tax return.
needs to claim back the tax so paid.

                                                     16
2. Trade, Business, Profession or Vocation                  If you are registered with the Malta Tourism
                                                            Authority as a host family and you received
For each source of trade, business, profession              payments from a registered language school
or vocation you must provide the VAT number                 you should fill in the RA6 form (copies available
and the net profit earned during 2016. In the               from the Department’s Taxpayer Service).
case that such business does not need VAT                   The RA6 form together with the statement/s
registration, mark the box N/A (not applicable).            provided by the language school/s showing
If this income was derived from a trade or                  the total payments made for the year are to
business carried out in partnership, tick the               be attached to page 3 of the income tax return.
appropriate box.
                                                            3. Pensions and Social Security Benefits
In the case of a loss indicate the loss in brackets.        (Applicable to local and foreign pensions)

A signed Profit and Loss Account is to be                   Include the PE number (or other reference
attached to page 3 of the tax return. You may               number) of the pension provider and the
use the enclosed specimen Profit and Loss                   gross income received from each local and
statement for this purpose.                                 overseas pension. You should have an FS3 or
                                                            similar statement for every amount of pension
If the trade or business is carried out in                  income included in this step. Attach these
partnership, include the following details                  statements to page 3 but pensioners in receipt
in your Profit and Loss account: (1) the                    of a Social Security pension should not attach
partnership number (2) the name of each                     a Social Security pension statement with their
partner (3) the ID card number of each partner.             income tax return.

Please note that special legislation is in place,           Certain Social Security benefits, e.g.
providing for cross-checking between the                    Unemployment Benefit or Sickness Benefit are
VAT and the Inland Revenue Departments as                   taxable and are also to be declared in box 3.
regards sales and purchases. Trading losses
brought forward from previous years should                  War pensions and certain allowances/ benefits
not be declared in this section but in box 21 on            payable under the Social Security Act which are
page 3 of the return.                                       exempt from income tax need not be declared.

Part-time self-employed 15% threshold                       FSS tax deductions made from local pension
                                                            payments are to be claimed in box 35.
It is important to note that as from 1st January
2014 the 15% threshold for part-time self-                  4. Overseas Employment
employment, has been increased to €12,000.
                                                            In this step you must declare the gross amount
Sale of Agricultural Produce                                of emoluments received under a contract of
                                                            employment requiring the performance of
If during the year you had income from the                  work or of duties mainly outside Malta. Insert
sale of agricultural produce please refer to the            the PE number of your employer in the box
leaflet issued with the RA1 form to help you fill           provided. The following information in respect
in this part correctly.                                     of each source of overseas employment must
                                                            be provided on a separate statement and
Income from Student Hosting                                 attached to page 3:

                                                       17
•   Country where the duties were performed;            €300 (€9,400 - €9,100) in box 6.

•   Employer’s name and PE number;                      7. Exemptions

•   Duration of contract; and                           In this section you may deduct any income
                                                        declared in steps 1 to 3 which is exempt for tax
•   the amount of gross income (in euro).               purposes.

If you satisfy the conditions for overseas              Exemption on Royalties derived from
employment and you (or your spouse, if                  Patents
married) wish to have this income taxed at
15%, you are required to tick the box adjacent          Royalties and similar income derived from
to this item.                                           patents in respect of inventions are exempt
                                                        from tax.
It is important to note that income from
overseas employment is taxed as the first part          This incentive does not restrict the exemption
of the income. For further information please           to patents registered in Malta and neither
see page 31 of this booklet.                            does it restrict the exemption to research and
                                                        development activity carried out in Malta.
5. Sub Total                                            For the exemption to apply in the case of an
                                                        individual, however, such individual must
Add steps 1 to 4 and enter the totals in boxes          have carried out, either solely or together with
5a and 5b.                                              other persons, research, planning, processing,
                                                        experimenting, testing, devising, developing
6. Deductions from Employment or Office                 or other similar activity leading to the invention
                                                        which is the subject of the qualifying patent.
In this section you may deduct expenses which
are directly related to the income you have             The exemption is obtained through an
declared in steps 1 and 4. Under this step a            approval issued by Malta Enterprise following
deduction cannot be higher than the relevant            an application by the claimant.
income it relates to, i.e. you may not declare
a loss on your employment income. Also note             Malta Enterprise may ask for any
that you may not claim as a deduction the               documentation and information it deems
Social Security Contributions made during the           necessary in order to arrive at a decision.
year. FSS tax withheld from your salary is not a
deduction and is to be entered in box 35.               8. Total Emolument and Business Income

Please be reminded that if you are an individual        Deduct 6a and 7a from box 5a. Enter the result
whose tax is calculated by using the single             in box 8a. If this return is in respect of a married
tax rates and during 2016 you received only             couple then you should also deduct box 6b and
employment income or Pension income which               7b from 5b and enter the result in box 8b. Box
did not exceed €9,450, you are to deduct the            8a (and 8b, in the case of married couples) is
difference between your income amount                   not to be left blank. Where there is no income
and €9,100 by using this box. Therefore if for          to report, insert “0”. If boxes 8a or 8b are
example your employment income or pension               negative amounts (as a result of a loss from a
income during 2016 amounted to €9,400, you              trade or business) then indicate the amount in
are to enter this amount in box 1a and deduct           brackets.

                                                   18
INVESTMENT, CAPITAL GAINS AND
OTHER INCOME
9. Local Investment Income                          dividend declared in the tax return, the amount
                                                    or portion of such dividend, up to the amount
Local Dividends                                     of the said deduction, may be declared. In
                                                    such cases one may add the relative deduction
Persons using the single rates of tax who           amount to the respective threshold.
earned an income of:
• less than €19,500 excluding any dividends,        The following examples will help you arrive
   may only declare that amount of dividend         at the correct amount of dividends which
   which when added up with their other             should be included in your self-assessment.
   chargeable income, shall not exceed the
   total of €19,500;                                Example 1
• more than €19,500 excluding dividends,            A single person receiving employment income
   shall not declare any dividends.                 of €18,000 and local gross aggregated dividend
                                                    of €3,000. The gross dividend amount is made
Persons using the married rates of tax who          up of €2,000 from company A, and €1,000 from
   earned an income of:                             company C. The tax at source (TAS) on these
• less than €28,700 excluding any dividends,        dividends amount to €1,050.
   may only declare that amount of dividend
   which when added up with their other             Chargeable income excluding aggregate gross
   chargeable income, shall not exceed the          dividends €18,000
   total of €28,700;                                Less relevant threshold (single rates) €19,500
• more than €28,700 excluding dividends,
   shall not declare any dividends.                 Since the individual’s chargeable income,
                                                    excluding the aggregate amount of dividends,
Persons using the parent rates of tax who           does not exceed €19,500, this person can
   earned an income of:                             declare €1,500 dividends in box 9a and claim
• less than €21,200 excluding any dividends,        the proportionate tax at source in box 38.
   may only declare that amount of dividend         In this example the tax at source that can
   which when added up with their other             be claimed is determined by dividing the
   chargeable income, shall not exceed the          dividends to be declared in box 9a (1,500) by
   total of €21,200;                                the total dividends (3,000) and multiplying the
• more than €21,200 excluding dividends,            result by the total tax a source (1,050) i.e 1500
   shall not declare any dividends.                 / 3000 x 1050. Therefore in this case €525 tax at
                                                    source may be claimed in box 38.
It is important to note that for the scope
of any of the above calculations where an           Example 2
individual receives more than one dividend,         A person using the parent rates of tax receiving
the aggregate amount of such dividends shall        employment income of €32,000 and local
be treated as one dividend.                         gross aggregated dividend of €5,000. The
                                                    gross dividend amount is made up of €3,000
Moreover in the case where the individual           from company A, €1,000 from company B and
is entitled to claim a deduction against a          €1,000 from company C.

                                               19
Chargeable income excluding aggregate gross            computation option.
dividends €32,000
Less relevant threshold (parent rates) €21,200         Option 2: Joint Computation

Since the individual’s chargeable income,              Chargeable income excluding aggregate gross
excluding the aggregate amount of dividends,           dividends €28,500
exceeds the relevant threshold, the dividend           Less relevant threshold (married rates) €28,700
income (€4,000) cannot be declared in the tax
return.                                                Since the couple’s chargeable income,
                                                       excluding the aggregate amount of dividends
Example 3                                              is less than the relevant threshold the amount
A married couple who do not qualify for                of €200 gross dividend is that part of gross
the parent rates where spouse A has an                 dividend which may be declared in the tax
employment income of €19,000 and Spouse                return. Since €200 are being declared in box
B earns an employment income of €9,500.                9a, the relative tax at source amounting to €70
This couple also receives a gross dividend of          ((200 / 4200) x 1,470) can be claimed in box 38.
€4,200. Tax at source on this dividend amounts
to €1,470.                                             Local Interest

The tax treatment of the dividend in this              All local interest income (including foreign
example is as follows:                                 currency accounts held at local banks) that did
                                                       not suffer tax deductions at source must be
Option 1: Separate Computation                         included in box 9b. Interest income from local
                                                       banks, which has already suffered 15% tax
Spouse A                                               should not be declared in your tax return. The
Chargeable income excluding aggregate gross            15% withholding tax on local interest income
dividends €19,000                                      is final and cannot be claimed back. Non-
Less relevant threshold (single rates) €19,500         residents should note that their local interest
                                                       income is exempt from income tax in Malta.
Since the individual’s chargeable income,
excluding the aggregate amount of dividends            10. Foreign Investment Income
is less than the relevant threshold the amount
of €500 gross dividend is that part of gross           In this step you must include the gross amount
dividend which may be declared in the self-            of foreign dividends and foreign interest. If you
assessment. Since €500 are being declared in           are domiciled and ordinarily resident in Malta
box 9a, the relative tax at source amounting to        you must declare all foreign dividends and
€175 ((500 / 4200) x 1,470) may be claimed in          foreign interest income. All other taxpayers
box 38.                                                (i.e. not domiciled or not ordinarily resident
                                                       in Malta) are required to declare only those
It is important to note that the dividend is           foreign dividends and foreign interests which
being taxed with the higher income earner, in          were received in Malta.
this case spouse A.
                                                       Foreign Dividends
Spouse B
Total chargeable income of spouse B amounts            Include in box 10a the total amount of gross
to €9,500 and is taxed in the usual way                foreign dividends (in euro).
under the single tax rates being a separate

                                                  20
Foreign Interest                                          income received. For this purpose one has to
                                                          fill in the TA24 prescribed form which may be
In box 10b include the total amount of gross              downloaded from our website. The duly filled
foreign interest (in euro) except:                        and signed form together with the relative
                                                          payment covering the amount of tax due is to
•   foreign interest from which 15% tax has               reach the Inland Revenue Department by not
    been withheld;                                        later than 30th June 2017.
•   foreign interest on which an arrangement
    will be made with an authorised financial             The TA24 form can now be submitted online
    intermediary by 30th June 2017 for the                from our Website together with the 15%
    payment of tax at 15%.                                payment. In order to access said form one
                                                          has to click on the ‘Learn more’ beneath the
The 15% tax is final and cannot be claimed back           Reduced Tax on Rent banner.
in your tax return. Foreign currency accounts
held locally are not to be included here but              12. Capital Gains Income
under local interest (box 9b).
                                                          Enter the net amount of capital gains derived
Write down the amount of credit for overseas              during 2016. Taxable capital gains arise from
tax paid on foreign investment income in box              the transfer of the ownership or usufruct of, or
33. See step 33 below on how to calculate the             from the assignment or cession of any rights
amount of the credit for double taxation.                 over, any immovable property, securities,
                                                          business goodwill, copyright, patents,
11. Rental Income                                         trademarks and trade names.

In box 11a you should enter the total income              With effect from 1st January 2016 the capital
from gross rents, premiums, key money,                    gains tax system has, with minor exceptions,
laudemia and any other receipts arising from              been replaced by the tax on property transfer
property. In box 11b enter the total income               system, in respect of immovable property
from ground rents received. Deductions                    situated in Malta. Capital gains continued to
against rental income are to be made in                   apply in respect of the transfer of shares and
section 16.                                               other prescribed items as well as immovable
                                                          property situated abroad.
Note that if income from property renting is
carried on as a business activity (e.g. short             The new Final Withholding Tax is 8% on the
letting of holiday accommodation) this is to be           value of the property transferred. There will
included in section 2 above, and not here.                however be two exceptions to this as follows:

Rental Income received from the Housing                   a. In the case of individuals who do not
Authority that was subject to a final tax of 5%              carry on the business of property trading,
should not be declared in your tax return.                   the applicable final withholding tax rate
                                                             shall be 5% if the property is transferred
15% Final Withholding Tax on Rental income                   less than five years after the date of its
                                                             acquisition.
This optional 15% tax rate is applicable to rented        b. In the case of properties acquired by any
properties for residential and commercial                    person (individuals & companies) before
purposes, (excluding rents between related                   the 1st January 2004 the applicable final
parties) and will apply on the total gross rental

                                                     21
withholding tax rate shall be 10% the value        15. Total
   of the property transferred.
                                                      Enter the total of boxes 9a to 14 in box 15.
Transfers of inherited immovable property
will remain subject to a 12% final tax on the         DEDUCTIONS
difference between the transfer value and
the cost of acquisition (denunzja); and to a          16. Rental Deductions
7% final tax on the consideration if inherited
before 25/11/1992. Nothing has changed in             Deduct the following expenses in connection
this regard.                                          with rental income:

The current exemptions are not affected by            •    ground rents payable; and
the new system and will therefore continue            •    a further deduction of 20% (on rental
to apply. For example: transfers of one’s                  income less ground rents).
own residence, donations as prescribed,
assignments during separation and divorce,            Ground rent payable is to be deducted in
intra-group transfers, etc, will remain exempt        box 16a. Deduct 20% as a further deduction
from tax.                                             in box 16b. This 20% deduction is allowable
                                                      irrespective of whether actual expenditure has
There are transitory provisions with respect          been incurred. It amounts to one-fifth of the
to properties in respect of which a notice of         rents received i.e. one-fifth of (gross rents less
a promise of sale or transfer relating to that        ground rents).
property has been given to the Commissioner
before the 17th November, 2014.                       Example:
                                                      Gross rents.............................................. €400
FAQ’s have been uploaded on the IRD website           Less ground rent
for further information and guidance.                 payable (€40) .......................................... €360
                                                      20% of €360 = €360 divided by 5 = €72
13. Income from Alimony
                                                      Enter €72 in box 16b. The 20% further
If you received any income from your spouse as        deduction is not allowable on emphytheutical
maintenance payment, such income is taxable           grants, i.e. against the ground rents declared
and should be included in box 13. However,            in box 11b only the ground rents paid may be
any income received during the year from your         deducted.
estranged spouse as maintenance payment in
respect of your child/ren is exempt from tax          The total amount of deductions in respect of
and is not to be declared.                            each separate rental property in boxes 16a
                                                      and 16b must not exceed the amount of rental
14. Other Income                                      income declared for that property in section
                                                      11.
In this step you must include any other income
to be declared which has not been included            17. Interest Payable on Capital
elsewhere in your tax return. The appropriate
documentation in respect of each amount of            This is interest payable on capital used in
other income declared must be attached to             acquiring income. No deduction is allowed in
page 3 of your tax return.                            respect of interest which is of a personal or
                                                      private nature. Indicate in the space provided

                                                 22
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