New Legal Notices relating to Payroll

Date: 02 March 2022

The Minister of Finance and Employment has recently issued Legal Notices relating to Payroll.

LN 66 of 2022- The Minister for Finance and Employment has notified of new amendments relating to the FS4 form. The change refers to Section B box B5 whereby the exempt income increased from €9,840 to €10,020 with effect from basis year 2022. Please click here to read the Legal notice issued LN 66 of 2022 – Final Settlement System (FSS) (Amendment) Rules, 2022

LN 67 of 2022 – The Part-time Work (Amendment) Rules, 2022 have been amended by LN 67 of 2022 to delete Schedule A and Schedule B. Schedule A was a form that used to be filled in by self-employed individuals to declare their profit and loss while schedule B was a form used to declare tax to be paid from part-time employment. These forms can now be downloaded from the Commissioner for Revenue website. Please click here to read the Legal notice issued LN 67 of 2022 – Part-time Work (Amendment) Rules, 2022

LN 68 of 2022 -Rule 3 of the Tax on Overtime Rules has been amended in such a manner that with effect from the year of assessment 2023, the maximum amount of qualifying overtime income derived by an individual in terms of Article 90B of the Income Tax Act cannot exceed (a) EUR 10,000 and (b) does not exceed the number of the actual overtime hours multiplied by the maxrate of 40 hours. Please click here to read the Legal notice issued LN 68 of 2022 – Tax on Overtime (Amendment) Rules, 2022

The Impact of the EU Non-Cooperative Tax Jurisdictions on Maltese Companies

Authors: William Cassar, Manager, Tax Compliance and Stephanie Aquilina Galea, Tax Supervisor

Several governments acknowledge that abusive tax practices can result in unfair tax competition. In an attempt to address tax avoidance and ensuring that profits are taxed in the country where the economic activities are generated and where value is created, the EU council has identified a list of jurisdictions which are regarded as non-cooperative. The motive is not to name and shame these jurisdictions, but to foster positive change and tax practices through cooperation.

Does your Company have a nexus with a country which is listed in the EU Non-Cooperative Tax Jurisdictions List?

In this Q&A edition we would like to bring to your attention the new reporting requirements and other tax implications involved related to the EU Non-Cooperative Tax Jurisdictions List.

Which countries are regarded as ‘Non-Cooperative Tax Jurisdictions’ by the EU?

The full list of jurisdictions can be found here. Such list is updated regularly, and a jurisdiction can be listed and de-listed in the same year.

What happens if a Maltese company has a nexus with a country which is listed in the EU Non-Cooperative Tax Jurisdictions List?

Essentially there are two key points that one should consider:

1. Additional reporting requirements in the corporate income tax return

2. Potential restrictions from the application of the outright participation exemption on income (dividends) derived by a Maltese Company from a qualifying participating holding.

What are the additional reporting requirements?

The Maltese corporate income tax return includes a particular Tax Return Attachment (TRA 110) which needs to be duly filled in if the company has any nexus with a jurisdiction listed in the EU Non-Cooperative Tax Jurisdictions List.

The questions raised in the income tax return are the following:

1. Did the Company have any nexus (including through incorporation, residence or fixed place of business, or through any transparent entity or arrangement) with any of the jurisdictions listed in the EU List of Non-Cooperative Tax Jurisdictions?

2. Did the Company carry out any transactions (including through any transparent entity or arrangement) with any arrangement or person incorporated, resident or carrying out any activity (including through a fixed place of business or transparent entity or arrangement) in any of the jurisdictions listed in the EU List of Non-Cooperative Tax Jurisdictions?

3. Did the Company have any links through ownership or governance (including through any transparent entity or arrangement) with any of the jurisdictions listed in the EU List of Non-Cooperative Tax Jurisdictions?

The answers to the above questions need to be filled in the income tax return on an annual basis.

What is the potential restriction on the application of the outright participation exemption?

A new proviso was recently introduced to the existing Maltese participating holding regime. Such regime provides for an outright exemption on income (dividends) or gains derived by a Maltese company from a qualifying participating holding.

Effectively the new proviso in question states that if the qualifying participating holding is resident in a jurisdiction which is included in the EU Non-Cooperative Tax Jurisdictions List (see link above) for a minimum period of three (3) months during a particular year, then subject to certain exceptions, the outright participation exemption on income (not gains) at the level of the Maltese company will not apply.

What do I need to do if a nexus is identified with a country which is listed in the EU Non-Cooperative Tax Jurisdictions List?

In the event that you identify such occurrence, we strongly suggest that you get in touch with us by sending us an email on

The New Separate Tax Computation for Married Individuals

Authors: Stephanie Aquilina Galea, Tax Supervisor and Sarah Schembri, Tax Accounts Assistant

Date: 26th April 2021


Married couples have for several years submitted one income tax return covering the declarations for both individuals.   Traditionally, married couples prepared an annual joint or separate income tax computation, and declared their income in one income tax return which is issued in the name of the responsible spouse.

However, the Income Tax Act was amended and introduced a new tax option to married couples with effect from 2020.

Situation before the 2020 changes

Prior to the 2020 changes, married couples, including civil partners, were able to opt for a separate computation.  This was usually preferable in instances whereby both individuals were earning employment, trading, or pension income.  Any income that was not employment income (excluding directors’ fees), trading income or pension income, in other words, ‘earned’ income, was automatically taxable under the higher income earning spouse.  This would in practice result in this other income being potentially taxed at higher tax rates.  Moreover, any tax credits were received under the responsible spouse’s name by default, even if they would have pertained to the other spouse.

What are the changes?

As from calendar year 2020, married couples, including civil partners, that live together have the option to receive a separate income tax return under their name, being referred to as ‘separate return election’, as long as the married couple are:

  • Employed (excluding directors’ fees), deriving trading income, or pension income; or
  • Have agreed to a separation of assets upon marriage

The separate return election means that the income of each spouse will be charged to tax under their own name separately from the income of the other spouse.  This includes any other income, whereby such other income may now be brought to charge in the name of the spouse actually receiving said income as opposed to it being brought to charge in the name of the spouse with the higher income.  Likewise, any tax credits or deductions shall be allocated to the spouse actually deriving or incurring such credit or deduction respectively.  With respect to deductions, the law makes reference to the name included on the receipt as an indication of the recipient.  If the receipt is issued in the name of both spouses, the deduction is to be split equally between the spouses. The same applies for any unabsorbed tax losses or capital allowances, and any unabsorbed tax credits.

Practical Implications

Married couples that satisfy the above-mentioned conditions may request a separate tax return from the Commissioner for Revenue.   The election will come into effect on 1 January of the year immediately following that in which the election is made and shall continue to have effect until such election is revoked. Spouses who do not opt for a separate return can still apply to receive a tax refund directly in their bank account rather than receiving a cheque under the name of the responsible spouse.

As stated in the paragraph above, the married couple may revoke the separate return election by signing a notice and sending it to the Commissioner for Revenue. The election will cease to have effect as from the year of assessment starting from 1 January of the year immediately following the notice of revocation and will be available for election again after 5 years.

Under any option, the tax return together with a self-assessment must be submitted by the end of June of the year following the calendar year.  Penalties will be incurred unless the tax return is submitted by the said deadline. It is up to the Commissioner for Revenue to decide whether the individuals are required to file a tax return or not. If the new election is selected, each spouse will be responsible to submit their own returns based on their Income in accordance with the Income Tax Act.

Concluding Remarks

Apart from allowing for a fairer calculation of the tax charge for married individuals, one may also conclude that this new law promotes equality between the spouses, an aspect which was the previous system did not take into consideration.  As the National Commission for the Promotion of Equality argued, in order for this reform to be as effective as possible, the separate tax return should be automatic rather than an option ‘since equal treatment should be the default and applicable to all’.


For further information and assistance, please contact us:

Sarah Schembri – Tax Accounts Assistant

+356 25 990 693



Directors’ Fees – Tax and VAT Implications

Authors: Stephanie Aquilina Galea – Tax supervisor, Jade Micallef – Senior Tax Accountant, Maria Spiteri Purkiss – Tax Accountant

Date: 12th April 2021

Director Fees – Tax and VAT Implications

Have you ever considered the income tax and VAT treatment of a director and more so, whether such treatment differs between Maltese tax residents or otherwise? The objective of this article is to highlight the salient features relative to the income tax and VAT considerations in respect of directors’ fees.

Income Tax Considerations relating to Directors’ fees

By virtue of Article 4(1)(b) of the Income Tax Act (ITA) tax is chargeable on income in respect of “gains or profits from any employment or office including the value of any benefit provided by reason of any employment or office”. Gains or profits which are taxed in terms of the said article include, inter alia, director’s fees.

For Maltese income tax purposes, director’s fees are arise in the country where the services rendered to the company in question is managed and controlled. This means that directors’ fees derived by a person for services provided to a company which is managed and controlled in Malta are said to be arising in Malta.   Therefore, such fees are taxable in Malta regardless of where such director is resident for tax purposes.

The approach of the Maltese Tax Authorities is the same  position adopted by the Organisation for Economic Cooperation and Development Model Tax Convention (‘OECD MTC’) whereby Article 16 thereof prescribes that “Directors’ fees and other similar payments derived by a resident of a Contracting State (say State A) in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State (say State B) may be taxed in that other State (State B).” However, one should note that Contracting States might decide to take a different position adopted by the OECD MTC. Therefore, the binding document between Contracting States is not the OECD MTC but the double taxation agreement in force between the two Contracting States. For example, the Malta-Poland DTA amended recently by virtue of L.N. 64 of 2021 denotes that where Polish tax resident directors sit on the board of a Maltese tax resident company, exclusive taxation is granted to Poland as the resident State of the directors and thus, Malta, does not have the right to tax the director’s fees.

Further, the Commentary to Article 16 of the OECD MTC also clarifies that directors’ fees refer to fees and similar payments received in the capacity of the person acting as a member of the board of directors and does not include emoluments relative to other services provided to the company such as advisory services, employment amongst others.

Director’s fees – practical implications

Director fees payable to an individual director, whether said director is tax resident in Malta or not, for directorship services rendered to a company which is managed and controlled in Malta, will be included as part of that individual’s total emoluments and taxed in accordance with the Final Settlement System (FSS) Rules at the applicable progressive rates of tax.

On the other hand, when a director is a corporate director rather than an individual, director fees will be part of the corporate director’s revenue and will be subject to tax at the Maltese corporate tax rate of 35%.

Nonetheless, a Maltese tax resident individual or corporate director rendering services to a company which is effectively managed and controlled outside Malta should consider their tax implications, if any, in the jurisdiction where the company in question is effectively managed and controlled. In such circumstances, Malta, as the resident state of the director, may still have the right to tax, however, this very much depends on the applicable tax treaty if any, between Malta and the country where the company is managed and controlled.

Non-Maltese tax residents on the other hand are subject to tax in Malta on Malta-sourced income, that is, income arising in Malta subject to the applicable double tax treaty in force.

VAT Considerations relating to Directors’ fees

In terms of article 5 of the VAT Act, the activities of an ’employee’ which, by definition includes the ‘holder of an office’, are not regarded as an economic activity for VAT purposes. In this respect, where an individual is appointed to the post of director of a company, the fees paid by the company to the director by way of remuneration for his/her activities or ‘services’ would typically fall outside the scope of Maltese VAT.

The main principle of VAT is to charge VAT on supplies of goods or services when the supply is made by a taxable person acting as such.  All activities carried out by a non-taxable person falls outside scope for VAT purposes.  The activities of a holder of an office are not considered as an economic activity for VAT purposes and therefore any remuneration received by the latter in consideration of his/her functions fall outside the scope of VAT.

The VAT treatment of supply Directors

There are scenarios whereby the individual holding an office (i.e. the director) is not remunerated directly, and in his/her own name, for the said activities.  These would include:

  • Where a corporate services provider or other service provider makes available, to its client company, an individual to sit on the board of directors of the client company; or
  • Where a director’s remuneration is paid to another company of which the director is a shareholder.

Up until very recently, it was generally considered that fees paid in both of the above mentioned circumstances fall outside scope of Malta VAT.  This, on the basis that the said fees constitute remuneration for an activity which is not to be considered as an economic activity for VAT purposes, that is, ‘holder of an office’.

Further to the CJEU judgement C-94/19 (San Domenico Vetraria SpA vs Agenzia delle Entrate), the above mentioned interpretation has been challenged since the judgement has reaffirmed that the lending or secondment of staff by one company to another (including the services of a director) with fall within the scope of VAT and would thus be taxable.

As a result of the judgement, in practice, when a company charges another company for the provision of an individual to sit on the board of the latter company, the transaction should be treated as an economic activity and therefore falling within scope of VAT and subject to the normal VAT rules.

Corporate Directors

In instances whereby a director of a company is a corporate director (and thus not an individual), one may conclude that the activities carried out by the said corporate director are activities falling within the scope of VAT.  The exclusion relating to the activities of the holder of an office in terms of Article 5 of the VAT Act specifically refers to an ‘individual’, and therefore a corporate director cannot be regarded as an ‘employee’ for the purposes of the said Article 5.


Pursuant to the above insight, we hope that the main aim of this article is now more fulfilled and therefore, all readers particularly directors, have now a better understanding on the income tax and VAT considerations relative to directors’ fees.

For further information and assistance, please contact us:

Maria Spiteri Purkiss – Tax Accountant +356 25 990 647

Covid-19: Postponement of Certain Tax Payments – Update

Author: Jade Micallef, Senior Tax Accountant

Date: 8th April 2021

The Maltese Tax Authorities notified the extension of the tax deferral scheme, the objective of which is to improve the business liquidity emanating from the economic impact of the Covid-19 pandemic.

The updated notification provides that settlement of eligible taxes (provisional tax, social security contributions of self-employed persons and VAT) will start to apply from May 2022.

The Tax Deferral Scheme applies to companies and self-employed businesses which suffered a significant downturn in turnover as defined in the Revenue notification.

The deadline for the submission of the application is 15th May 2021. Companies and self- employed persons that had already applied for deferment of eligible taxes for March 2020 to August 2020 do not need to re-apply as they will automatically be considered for the extended period till December 2021.

Should you have any questions or require our assistance with the application, do not hesitate to get in touch with us on

The 2021 Investment Aid

Authors: Stephanie Aquilina Galea, Tax Supervisor and Letizia Grech Seychell, Senior Tax Accountant

Date: 16th March 2021

The Malta Enterprise Corporation has published a new set of Guidelines in relation to the Investment Aid Scheme, which guidelines are applicable as from 1st January 2021 and shall remain in force until 31st December 2021 (unless reviewed or updated in line with any revisions made to the relevant State Aid regulations or with any changes to the national policy requirements).


The Investment Aid Scheme aims to sustain the regional, industrial and economic development of Malta.  The aim is to facilitate initial investments by encouraging the setting up of new establishments as well as the expansion and development of existing businesses.

The applicable aid will be a percentage of qualifying expenditure incurred and may take the form of tax credit and / or cash grant.

Eligible undertakings and projects

The Investment Aid Scheme is available for both small and medium-sized enterprises (SMEs)[1] and large enterprises.

Undertakings shall be eligible if they operate from Malta and are incorporated in the European Union as a partnership or a limited liability company, cooperative or similar set-up.

The Aid will be awarded to eligible investment projects commencing after 31 December 2021, but no later than 31 December 2023, with some specific exceptions.

The conditions for the eligibility of Initial Investment Projects are:

  • Must result in the development, expansion, diversification, or a fundamental change in the carrying out of a Qualifying Economic Activity.
  • The beneficiary shall provide a financial contribution of at least 25% of the eligible costs.
  • Both the investment and the Qualifying Economic Activity shall be retained in Malta for the minimum period of at least five (5) years or three (3) years in the case where the beneficiary is an SME, after completion of the investment project.
  • Confirmation by the applicant that it has not carried out a relocation in the two years preceding the application for aid and commits that not such relocation will occur up to two years after completion of initial investment.

The Guidelines include specific rules for eligibility for both SMEs and large enterprises.

 The list of qualifying economic activities is:

  • Manufacturing
  • Maintenance Repair and Overhaul of watercraft, aircraft or industrial engines, or electromechanical equipment.
  • Industrial Services
  • Computer Programming
  • Data processing and hosting facilities
  • Call Centre
  • Research, development, and design
  • Treatment of waste
  • The operation of environment solutions
  • The carrying out of activities related to Life Sciences
  • Pharmaceutical activities
  • Audio-visual productions
  • Audio recording productions
  • Design and development of digital video games
  • Education and tuition
  • The operation an immovable structure providing human inpatient and/or day care services
  • Freeport operations
  • Operation of a logistics facility
  • Industrial packaging
  • The operation of hotels and guest houses
  • The provision of knowledge-intensive services
  • The restoration of works of art and antiques
  • The operation of temporary or permanent facilities used for cultural events, trade shows, concerts, festivals, exhibitions or sporting activities and film projection.

Eligible project expenditure

This shall be:

  • the acquisition of Qualifying Tangible and Intangible Assets required for the implementation of an eligible Initial Investment Project; or
  • the estimated wage costs arising from job creation as a result of an initial investment.

The Guidelines include details of how each item indicated above is to be calculated. Any taxes or Government induced charges are excluded.

Aid awarded: Form and Intensity

The aid shall amount to a percentage of qualifying expenditure incurred and may take the form of tax credits (which may be claimed against future tax bills) and/or cash grants.

The aid itself is then awarded as a percentage of the qualifying expenditure as follows:

Size of Undertaking Aid Intensity
Small 30%
Medium 20%
Hotels, guest houses and their amenities as licensed by the MTA – SMEs 15%
Large 10%

Benefitting from Investment Aid

An application must be submitted to the Malta Enterprise Corporation for each initial investment project in order to benefit from this aid. This application will serve as a determination of the project’s eligibility within the parameters established in the Guidelines.  The application must be submitted on the appropriate application form and will be reviewed by the Corporation, whereby specific procedures may be followed.  Once reviewed, the applicable feedback will be communicated to the beneficiary.

For further information and assistance, please contact us:

Letizia Grech Seychell – Senior Tax Accountant

+356 25 990 430

[1] In terms of the Annex I of the Commission Regulation (EU) No 651/2014)

The 2021 VAT changes for cross border e-commerce

Authors: Kristina Hili, Tax Supervisor, Amanda Abela, Senior Tax Accountant and Maria Spiteri Purkiss, Tax Accountant

Date: 5th March 2021

The main aim for the 2021 VAT changes, which come into force as of 1 July 2021, is to simplify the VAT compliance obligations for taxable persons operating cross-border transactions of either goods or services to final customers and to ensure that the VAT due on such supplies is duly paid to the Member State (MS) of where the customer is established. The changes were originally set to be applicable with effect from 1 January 2021, however the European Commission proposed to postpone the introduction of the new e-commerce VAT rules by six months, which in fact such proposal was adopted by the European Council.

Transactions covered by the 2021 changes

The following transactions are covered by the new provisions of the law:

  • Distance sales of goods imported from third territories or third countries carried out by suppliers, except for goods subject to excise duties;
  • Intra-community distance sales of goods carried out by suppliers or deemed suppliers[1];
  • Domestic sales of goods by deemed suppliers; and
  • Suppliers of services by taxable persons not established within the EU or by taxable persons established within the EU but not in the Member State of consumption to non-taxable persons.

Extension of the current MOSS to OSS

The Mini-One-Stop-Shop (MOSS) scheme, currently applicable to business-to-consumer (B2C) supplies of telecommunications, broadcasting and electronic (TBE) services, will be extended with effect from 1 July 2021 to the One-Stop-Shop (OSS) scheme, covering all types of B2C services as well as intra-community distance sales of goods.

Under the current VAT rules, supplies of goods to end consumers by Maltese businesses (‘MS 1’) to another MS (‘MS 2’), whereby the customer is not registered for VAT in that other state (‘MS 2’), is treated as supplied in the country of dispatch (‘MS 1’), unless the distance sales threshold is breached. Once the distance sales threshold is exceeded, the supply is subject to VAT in line with the VAT rules where the end consumer is established (‘MS 2’). Thresholds vary from one country to another; currently in Malta the distance sales threshold is EUR 35,000.

The new rules require EU based suppliers to report these transactions, which will now be referred to as ‘intra-community distance sales of goods’ under the OSS.  B2C operators established in the EU providing intra-community distance sales of goods, will be subject to the VAT rules of the MS where the transport ends. However, if the EUR 10,000 threshold is not exceeded, the intra-community distance sales will be deemed to be taking place in the country of dispatch. The application of the OSS will eliminate the need for multiple VAT registrations in different EU jurisdictions and will ease the compliance burden as EU businesses may opt for the OSS system and will be able to remit the VAT due in other Member States through one return, known as the OSS return.

The following businesses would be eligible to apply for an OSS regime in Malta:

  1. Taxable persons established in Malta engaged in intra-community distance sales; or
  2. Taxable persons established outside the EU having a fixed establishment in Malta, engaged in intra-community distance sales; or
  3. Taxable persons established outside the EU and have no fixed establishment in Malta but is dispatching intra-community distance sales from Malta.

The OSS will also be applicable, with effect from 1 July 2021, to B2C services taking place in a MS other than the MS where the supplier is established. This mainly applies to businesses providing hiring of means of transport (such as the pleasure yacht chartering industry), supply of transport services, and supply of services connected with immovable property. Under the current VAT rules, such suppliers must register in the different Member States where the services are taking place. Through the application of the OSS system, such businesses will no longer be required to retain multiple VAT registration but may opt to declare such services through the OSS regime.

The practicalities of the OSS scheme

A taxable person should notify the Commissioner for Revenue when intra-community distance sales and/or supplies of services falling within the scope of the OSS regime commence or cease through an application filed electronically. The OSS registration would subsequently be cancelled if the taxable person no longer performs such supplies.  The OSS return is a calendar quarter return (i.e. January to March, April to June, July to September, October to December) and would be due within 30 days of the end of the calendar quarter.

The Import One Stop Shop (I-OSS)

To complement the OSS system, with effect from 1 July 2021 the Import-One-Stop-Shop (I-OSS) scheme will be introduced. The I-OSS regime applies to distance sales of goods imported from countries outside the EU with value not exceeding EUR 150.  Operators have the option to register under the I-OSS scheme and VAT will be charged by the supplier at the point of sale to the EU customer. Therefore, if I-OSS is applied, no VAT would be charged by Customs on importation as is currently being done. This will likely speed up the process as the goods will not be delayed at Customs due to processing and collection of VAT payment. Operators have the option to appoint an intermediary to register under the I-OSS on their behalf. The operator or intermediary will submit a monthly I-OSS return reporting the VAT collected and remit the VAT due to each MS of importation.

The low value consignment relief which exempts from VAT on importation of low-value goods not exceeding EUR 22 will be abolished as of 1 July 2021. To support this measure, suppliers may opt for the I-OSS regime.

The practicalities of the I-OSS scheme

Similar to the OSS, a taxable person or its appointed intermediary should notify the Commission for Revenue when activities falling under this scheme commence or cease through an application filed electronically. The I-OSS return is a monthly declaration and would be due by the end of the following month.


The reason behind these changes is to overcome the barriers to cross-border online sales, in particular challenges arising from the VAT regimes for distance sales of goods and from the importation of low value consignments. The new rules will place EU businesses on equal footing with non-EU businesses, wherein according to the current rules non-EU businesses are not required to charge VAT.

For any queries or assistance on any of the above, please feel free to contact


[1] Deemed supplier is defined as a taxable person who is deemed to receive the goods from the underlying supplier and to supply the goods to the final customer. The deemed supplier is the taxable person facilitating supplies through an electronic interface.

Tax Treaties and COVID-19

Author: Letizia Grech Seychell, Senior Tax Accountant

Date: 1st March 2021

Head of Tax Compliance Department William Cassar and Senior Tax Accountant Letizia Grech Seychell write in yesterday’s edition of the Times of Malta:

“COVID-19-related measures such as travel restrictions and curtailment of business operations are still very much in place and they seem to be here to stay for at least the medium- term. To this end, the OECD felt that it should provide additional insight on three main concerns…”

“What clearly stems from the OECD guidance is that, in the OECD’s opinion, temporary changes in circumstances during these extraordinary times should not give rise to tax treaty implications. However, this guidance only represents the views of the OECD secretariat and therefore taxpayers should closely monitor any guidance issued from relevant tax authorities to be able to correctly assess their particular situations.”

Read the full article here: