Payroll in Malta
What tax considerations are there?
Personal Income Tax
Everyone living in Malta is taxed on their worldwide income, as long as this income is received in Malta. Any non-residents in Malta are taxed only on income deriving from Malta. The rate of tax depends on income, marital status and parenthood. Single residents earning less than €9,100 annually, married residents earning less than €12,700, and parents earning less than €10,500 are all exempt. After this, the starting tax rate is 15%, the next bracket is 25%, and the maximum tax is 35%. In all cases, salaries over €60,000 are taxed at 35%.
Individuals must submit tax returns annually, by the end of June in the following calendar year. In the case of married couples, one spouse must take responsibility of the joint tax return, by registering as the taxpayer. This registration lasts for five years. Tax and social security payments for individuals should be withheld by employers from staff salaries.
Corporate Income Tax
A company that has been incorporated in Malta is taxable on a worldwide basis however a foreign company in Malta is only taxable on income from within Malta. There is a flat rate of 35% tax.
Although the official financial year in Malta runs from January 1st to December 31st, companies can make a request with Maltese Inland Revenue to use an alternative Year End if preferred. Tax returns for companies must be filed by March 31st following the assessment year, or nine months after the end of the financial year – whichever is later.
HR in Malta
What are the regular working hours in Malta?
The average working week in Malta is 40 hours, and the legal limit is 48 hours – however the extra eight are considered overtime and must be paid as such. Office hours are usually 8am to 5pm or 8.30am to 5.30pm.
Vacation, maternity and sickness
There are 14 public holiday days in Malta during which employees are entitled to full pay, and are not expected to work. As well as this, the lawful holiday allowance is 26 working days for anyone working a 40 hour week.
Pregnant employees are entitled to 18 weeks (126 days) of maternity leave, 6 weeks (42days) of which are compulsory. Employers must pay the employee’s full salary for the first 14 weeks of maternity leave, and then the remaining four weeks are paid for by the government at a rate of €175.84 per week.
Full time employees in Malta are allowed up to 20 days of sick leave on full pay. The first three days are paid in full by the employer, and the remaining days are paid by the employer at a rate of their full salary minus their sickness benefit entitlement under the Social Security Act.
Should either party wish to terminate the employment contract, due notice must be given. This differs depending on the employee’s length of service;
< 6 month: 1 week
6 months – 2 years: 2 weeks
2-4 years: 4 weeks
4-7 years: 8 weeks
> 7 years: 8 weeks + 1 week for every additional year, up to 12 weeks.
Longer notice periods may be agreed upon in the case of certain roles. According to law, severance pay does not need to be paid.