The Income Tax Act brings to charge “gains or profits from any employment or office, including the value of any benefit provided by reason of any employment or office”.  The legislation does not define ‘employment’ or ‘office’ but with the introduction of the Fringe Benefits Rules in 2001 we now have a definition of ‘officer’ which means the holder of an office and includes an individual who is a director of a company, or holds directly or indirectly more than 5% of the ordinary share capital or of the voting rights in a company or is a partner in a partnership.  The said rules also define ‘employee’ and ‘employer’ and therefore one can easily deduce what constitutes employment – the provision of any service under a contract, whether written or not.

Income tax implications for individuals

Subject to treaty provisions, employment income arising in Malta is subject to income tax in Malta at the following progressive rates:

wdt_ID Tax Rate Single Rates Computation Married Rates (Joint) Parent Rates
1 0% first €9,100 first €12,700 first €10,500
2 15% €9,101 to €14,500 €12,701 to €21,200 €10,501 to €15,800
3 25% €14,501 to €60,000 €21,201 to €60,000 €15,801 to €60,000
4 35% over €60,000 over €60,000 over €60,000

Resident and domiciled individuals
The Income Tax Act defines a ‘resident in Malta’ as being any individual who resides in Malta.   Although not clearly defined, the Income Tax Act makes distinctions between ordinarily residence, residence and temporary residence.  The distinction is primarily based on the intention to stay in Malta as well as the duration of such stay.Chargeability to tax depends on the residence and domicile of the taxpayer.  Domicile is not defined in Maltese legislation. The concept of domicile is a legal concept and generally refers to the place where a person was born, lives and establishes his home and intends to live indefinitely.  Maltese law adopts the UK approach to domicile whereby a person previously not connected to Malta who establishes residence here will not be easily deemed to have attained a Maltese domicile. Such a Maltese domicile will only be attained if such an expatriate has, and circumstances show, that he has lost his foreign domicile and intends to indefinitely and permanently establish Malta as his home.Married persons may opt for a joint tax computation or a separate tax computation using either parent rates or single tax rates. No deductions are given against the gross employment income which is brought to charge to tax except for a deduction in respect of private school fees, alimony payments, childcare fees, homes for elderly fees and sports fees.