Malta: Taxes and Costs

Malta: Taxes and Costs

EFFECTIVE TAX RATE ON RENTAL INCOME MONTHLY INCOME €1,500 17.8% €6,000 25.5% €12,000 26.7% Click HERE for worked sample. SOURCE:  Income Tax: High Permit to rent is only granted to owners with properties having a communal or private swimming pool and worth more than MTL100,000 (€232,915). Income tax is payable on your rental earnings. Married couples may choose to be assessed jointly or separately. Deductions Taxable income is gross rent less the following: any rent or ground rent payable by the owners relevant to the property, license fees related to the Malta Travel and Tourism Act, interest expense on housing loans, and an allowance of 20% on the gross income remaining after deducting the rent and the license fees. The standard 20% allowance covers maintenance costs, repairs, and other related expenses.Nonresident individuals are subject to a withholding tax of 25% on their rental income. This tax is then credited to the nonresident’s final tax liability when they file their income tax returns. Income is then taxed at the following progressive rates: INCOME TAX TAXABLE INCOME, MTL (€) TAX RATE Up to 300 (€699) 0% 300 – 1,300 (€3,028) 20% on band over €699 1,300 – 3,300 (€7,686) 30% on band over €3,028 Over 3,300 (€7,686) 35% on all income over €7,686 Property Tax: None There are no property taxes levied in the Islands of Malta. Capital Gains: 12% of the sale price A non-resident may only sell their property in Malta to a Maltese citizen. However, if you are not able to find a buyer who is either a Maltese or EU citizen, only then can you make the transfer to another foreign national. Capital Gains Tax is calculated in an unusual way in Malta, more like a sales tax. The tax is levied at a flat rate of 12% of the transfer value, or selling price. Only brokerage fees can be deducted from the selling price. During the sale, a provisional tax equal to 12% of the selling price must be paid to the notary public, who will then pass it on to the Inland Revenue as payment of the tax liability. Capital gains earned when the property was held for less than five years can be taxed in two ways. It can be taxed at a flat rate of 12% or at progressive rates under the old system. However, a non-resident seller may be subject to tax on the gain in his country of residence. Normally he would have the right to claim double taxation relief in his country of residence. However, it is possible that the relief would only be granted if the tax paid in Malta were a tax on the gain. A non-resident may therefore choose to have the transfer taxed under the old system rather than at 12%. Under the old system, the gains can be considered as ordinary income and taxed at progressive rates. During the sale, you will be required to pay a provisional tax equal to 7% of the selling price through the notary public, who will then pass this on to the Inland Revenue as initial payment. This amount is credited to the total tax payable. To avail this, he needs to produce a notarized statement from the tax authorities in his country of residence confirming his residency and certifying that he is subject to tax in that country. Consequently, residents of tax-haven countries and countries whose basis of taxation is the source of income and not the residency status of the taxpayer cannot avail of this option.