Navigating through tax laws and regulations can be stressful, especially when it comes to understanding tax credits and incentives. Here, we simplify the complex terminology and break down the various tax benefits available to individuals in Malta, empowering you to make informed decisions about your finances.
Tax Exemptions for Investment and Insurance Expatriates
Certain tax exemptions are available for expats working in investment services and insurance under the Maltese Income Tax Act, provided they meet specific statutory requirements (note that these exemptions cannot be combined with the Highly Qualified Persons Rules). These exemptions cover various expenses incurred for the benefit of the expatriate or their immediate family, including:
- Costs associated with moving to or from Malta.
- Housing expenses in Malta.
- Transportation expenses to or from Malta.
- Provision of a car for expatriate use in Malta.
- A living allowance of up to EUR 600 per month.
- Healthcare costs and medical insurance.
- Tuition fees for children.
These expatriates may not have to pay Maltese tax on certain income, typically taxable, related to expenses incurred for themselves or their immediate family by the investment service or insurance company for the first ten years after becoming liable to Maltese tax.
These expenses include costs such as relocation expenses to or from Malta, accommodation expenses in Malta, travel costs to or from Malta, provision of a car for use in Malta, a cost of living allowance up to EUR 600 per month, medical expenses, medical insurance, and school fees for children.
Interest, royalties, and capital gains from the disposal of certain investment funds and company shares or securities (under specific conditions) received by these expatriates are also exempt from Maltese tax.
In addition, interest, royalties, and capital gains on the disposal of units in collective investment schemes and company shares are exempt from Maltese tax for such expatriates.
An investment services expatriate may also be exempt from payment of Maltese social security contributions, subject to certain conditions.
Voluntary Occupational Pension Scheme (VOPS) Rules
The VOPS Rules offer fiscal incentives to encourage participation in occupational pension schemes. Here’s what you should know:
- Employers may benefit from an annual tax credit of up to 25% of contributions paid per employee, with a maximum of EUR 750 per employee.
- Employees making voluntary contributions to the scheme may also receive a tax credit of 25% of qualifying contributions, up to EUR 750 annually.
- Contributions made by employers for employees’ benefits are non-taxable under the Fringe Benefits Rules.
Learn what a Fringe Benefit is to have a better insight into VOPS rules.
Personal Retirement Scheme (PRS) Rules
The PRS Rules incentivise contributions to personal retirement schemes through tax credits. Individuals contributing to a PRS may receive an annual tax credit of 25% of qualifying contributions, up to a maximum of EUR 750. These schemes enable individuals to build retirement savings while enjoying tax advantages. To qualify under the PRS Rules, schemes must allow beneficiaries to start withdrawing benefits between the ages of 61 and 70, promoting sustainable income post-retirement.
Tax Credits for Specific Circumstances
- Malta provides targeted tax credits to support families with children with disabilities, offering an annual tax credit of EUR 500 per child to assist with therapy costs.
- Individuals achieving higher educational qualifications, such as PhDs or Master’s degrees, may be eligible for tax credits equivalent to the tax chargeable on income from whole-time employment.
- Tax credits are also available for certifications, degrees, or post-graduate degrees approved by the Ministry of Education, encouraging lifelong learning and skills development.
Conclusion
Whether you’re an expatriate, an employer, or an individual pursuing higher education, exploring available incentives can lead to substantial savings and benefits. By staying informed about tax regulations and consulting with financial advisors, taxpayers can optimise their tax strategies and achieve their financial goals effectively in Malta’s dynamic tax landscape.
For more detailed assistance, kindly refer to the Expatax Malta website.
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