15% Tax Rate on Rental Income

Article 31D of the Income Tax Act provides for a 15% flat withholding tax rate on rental income. The 15% tax rate is valid both for commercial and residential properties. This is a significant reduction from the usual 35% tax rate in Maltese tax laws.

However, this rate is not applied automatically. One must fill in the applicable form (TA24) and pay the 15% tax on the gross rental income by 30 June of the subsequent year. If this is not done, one will have to include such rental income in his tax return and pay the normal, higher rates

Who is eligible for the 15% rate?

Both companies and individuals are eligible to use the 15% income tax rate and it applies to income obtained from rental of immovable properties; commercial and residential properties.

Which rentals cannot make use of the 15% tax rate?

The only category of rentals that are not able to take advantage of such reduced tax rate are rentals made to related parties.

Who is a related party?

For the purposes of such tax, A body of persons is related to an individual if it is owned or controlled, directly or indirectly, as to more than twenty-five percent by that individual; and two bodies of persons are related if they are owned or controlled, directly or indirectly, as to more than twenty-five percent by the same persons

Other factors to keep in mind

All property rented out by an individual/company/entity must either make use of the 15% rate or not. Therefore, one cannot choose to use such rate for a portion of his properties and the normal rates for the remaining portion.

The choice to use such rate is made annually. Therefore, a person who chooses to use such rate in one year may choose not to use it the following year and vice versa.

The applicable form must submitted yearly by 30 June.

The 15% tax is applied on the gross rental income. Therefore, no expenses are allowed for such tax calculation.

Is the rate applicable for undeclared income?

No. Any undeclared income is subject to the normal tax rates. Furthermore, late payment interest will be applied.

How to apply?

To apply for the 15% rate on rental income, one must fill in Form TA24. This must be submitted and the related tax must be paid by 30 June of the subsequent year.
If you require any help with such process, our team will be happy to help you. For contact information, kindly go to the contact us page on our website.

Invest through Micro Invest

Micro Invest is a scheme launched by the Malta Enterprise, made effective from 1st January 2014 to 31st December 2020. The scheme unanimously encourages small to medium-sized enterprises to invest in their business, in order to grow, develop, and innovate their operations.

All eligible entities benefiting from this scheme will be comprehensively supported through a tax credit calculated as a percentage of eligible expenditure and wage costs. The maximum eligible credit stands at €50,000, which is to be used over a period of three years (€70,000 for start-ups established in Gozo and female-owned undertakings).

Under this scheme, Malta Enterprise will approve a tax credit equalling to 45% of eligible expenditure. There will be an added bonus of 20% for female-owned undertakings and start-ups operating from Gozo.

With effect from 1st January 2018, family businesses are also eligible to benefit from the increased capping. However, there are pre-requisite eligibility criteria which must be satisfied by the parties seeking this benefit:

• Company turnover must not exceed €10 million
• At the date of application, the entity must employ at least one person either on a full or part-time basis
• The entity does not employ more than 50 people either on a full or part-time basis
• All applicants must be registered with the VAT department

Interested applicants can apply for a tax credit on the following costs:

• Investment Costs that includes machinery, technology, and infrastructure
• Motor Vehicle Costs
• PV System Costs
• Furnishing and Refurbishing
• Wage Costs – applicants may apply for a tax credit on an increase in wage costs over 3%

To apply for Micro Invest, the following documents are required:

• Detailed Invoices of Capital Investment: A proper invoice should include the date of issue; invoice number; name, address and VAT number of the customer and the supplier; quantity of goods supplied.
• Proof of Payment: It must include – a tax invoice and receipts, a fiscal invoice, and a hire purchase agreement.
• FS7 form – if you’re claiming a tax credit on the increase in wage costs
• Copy of the Vehicle Log Book – if the costs of a motor vehicle are being claimed
• Partnership Agreement – only for non-registered partnerships
• A copy of MFSA registration certificate and ETC employment history – for start-ups
• A copy of ETC registration certificate and employment history – for self-employed applicants
As Certified Public Accountants, we can help you with such applications. Contact us if you need help applying for such credit!

Step by step guide to start a business in Malta

Malta is a small country located in the Mediterranean Sea, positioned between Africa and Europe. It is home to both budding entrepreneurs and established business owners. It is the ideal country to operate a business, offering great weather, short transportation times, and a skilled workforce.

With its easy accessibility to Europe and Africa and membership of the European Union, business owners are constantly showing their keen interest in starting a company in Malta. If you are one of them and are looking forward to start your very own business in Malta, here is a step by step guide that can help you.

Self-employed or limited liability company

Operating as a self-employed person in Malta is very easy. However, liability for business debts will extend to the owner’s assets, and therefore personal risks are higher.

On the other hand, a limited liability company gives your business a separate legal personality, limiting the owner’s liability to any part of the share capital which is unpaid.Registering a company in Malta is easy, and running it is also cost-effective. A company must have an annual audit and can be registered even with only one shareholder.

Documents for registration

If you are planning to open a limited liability company, then you will have to prepare a set of documents, the most important of which is the Memorandum and Articles of Association.While you can prepare this on your own, most prefer to seek advice from a professional corporate service provider to help them set-up their business in Malta. The proper documentation is important for the registration of the company. We can help you with such incorporation.

Share capital

Companies can be set-up with as little as €1,200 in share capital, which must be at least 20% paid-up. You can liaise with your accountant to decide the best amount to include in your memorandum and articles.

Until the Company is operating and a functioning bank account opened, these funds can be deposited in a company-in-formation bank account which will hold these funds until they are transferred to an operating bank account.

Setting up a Company in Malta

To set-up a Company in Malta, you will have to submit the Memorandum and Articles of Association, confirmation that the Company-in-Formation funds have been deposited, and copy of the identification documents of the shareholders, directors and company secretary. These documents are to be submitted to the Malta Financial Services Authority, which is the regulator of all registered companies in Malta. A registration fee, which depends on the share capital of the company, is to be paid to such authority together with the submission of the documents and registration is generally completed within 2-3 working days.For details on registration fees and the entire process of registration, kindly contact us.

VAT registration for a Maltese Company

If you want to start a trading company in Malta, it is also very important to register your company with the VAT department. You will have to provide details about your trading activity, forecast of EU revenue and purchases, and contact details of your Company. Being VAT registered in Malta allows you to make use of the reverse charge VAT mechanism for intra-EU sales and purchases. We can help you make the VAT registration process easy and efficient.

Obtain a tax identification number

Once the Company is registered with the MFSA, the Commissioner for Revenue registers the company for tax purposes. For self-employed individuals, the tax identification number is their ID card if they were born in Malta. If not, an application must be filed with the Commissioner for Revenue and a tax number will be given by such department. After such registration, you have to file a tax return once a year, whether you are self-employed or a limited liability company. It is always preferable to seek professional advice and assistance from an accountant or tax advisor for such procedures.

Get a PE number

If your intention is to have employees, whether you are self-employed or a company direct, you need to apply for a PE number. We can assist you with such application to ensure that it is done efficiently.

Register with Jobsplus

If you are beginning your business venture as self-employed, you must register with Jobsplus as a self-employed individual.

If your company is going to employ an individual, then registration of such employment must also be done with Jobsplus. Termination of employment should also be registered with the same agency.

Things you must look for while hiring a professional Tax Advisor for your company

Are you planning to start a self-employed business or a company in Malta? Have you thought of hiring a good tax advisor for your company yet? If not then you must. A tax advisor can help you with the taxes involved and also give you professional advice on the formation and running of the business. However, it is very important to hire the right tax advisor so that you can obtain the biggest benefit for your business.

As a business owner, you are already occupied with running the business, and therefore it is advisable to hire a someone who has the right experience and skills to handle your accounting and taxation system properly.

Some of the most important things that you should consider while hiring a tax advisor for your company/business include:

Know your company’s requirements

Evaluate the areas of work for the tax advisor

Every business has different requirements. While some might need a business advisor to take care of their taxes, others might need an advisor to manage the payroll, keep book-keeping records, set up their business entity, and also help with income tax returns, tax refund applications and more.

As your tax advisors, we can definitely help you with all of the above and any other related services you may require. Businesses need to have a proper tax plan and a tax advisor can definitely help you with the entire taxation process.

Evaluate the amount of work required for the tax advisor

While deciding who you are going to hire it is also crucial to evaluate the amount of work you have for the advisor. For businesses, it is important to hire a reliable professional who can give them the right advice and handle any complexities present in their business and their taxation plan.

Understand your business’ needs

One of the most important parts of hiring a professional tax advisor is to know exactly what your business’ needs are. However, as a business owner, you might not know exactly what your business needs. We can help you with identifying and getting the right services, whether they consist of back office, payroll, accounting, income tax, VAT, or other services.

Steps to considering when hiring a tax advisor

Here are a few steps that you can follow while hiring a tax advisor for your business.

#1 Choose right

Choose the right professional for your business. For a Malta-based accountant to obtain the warrant of a Certified Public Accountant, he must have high-level qualification, appropriate experience and also take yearly continued professional development sessions. This ensures that the CPA is up-to-date with the latest development and can help clients keep abreast recent developments. A CPA can help you in various requirements, including direct and indirect taxes, accounting, auditing, tax planning, internal controls, payroll and other corporate services. A CPA can offer you a wide range of services when it comes to planning and preparation of tax-related documents.

#2 Internal vs. external tax and business advisor

Business owners need to know when best to have an internal or external professional to help with tax advisory and liabilities.

Internal tax advisor

Large businesses generally have a structure big enough to warrant the hiring of an internal tax advisor. This can ensure that all business entities are kept in compliance with all tax laws and all accounting and other related corporate services are kept up to date. An internal financial controller can help you with the management of payroll, daily transactions, cash flow, and other financial aspects of the business.

External tax advisor

An external tax advisor can also offer the services that an internal advisor can. However, for small and medium-sized enterprises, it is generally more cost-effective to hire an external advisor than an internal one to help with accounting, tax, VAT and other corporate services. An external advisor is also generally preferred for foreign entities who wish to open a local branch. Hiring an external tax advisor can save your company a lot of money.

#3 Factors you should consider when chossing a tax advisor

It is very important to ensure that the professional you are going to hire as your advisor is the right one for your business. The following factors can help determine whether a certain advisor is suitable or not for your business.

Education and qualifications

Whether you are hiring an accountant or a tax advisor it is very important to look into their educational background. A well-qualified professional should generally have obtained at least an undergraduate degree qualification. Education is key for an advisor to become familiar with the various tax laws and accounting standards in place. Look for a well-qualified professional who can benefit your business.

Experience

While education is fundamental to have a proper background, experience enables the advisor to give an effective and efficient service to his clients. Make sure to hire a professional who has proven experience. An experienced professional can help you navigate through the various legislation and standards in place.

Expertise and warrants

While hiring a tax advisor you should also check if they have dealt with related businesses in the past, as this would generally prove beneficial to the service he can provide you with. Additionally, always try and get your services from appropriately warranted individuals. If you’re choosing a Maltese advisor, try and use a Certified Public Accountant as this warrant is only given if the said person has the appropriate qualifications and experience.

How hiring a professional tax advisor can benefit your business

As a business owner, it is very important to understand the importance of taxation for your business. Taxation can present a significant burden on a business, and therefore it should be managed carefully and by appropriately qualified persons. A tax advisor can help you with the entire process of income tax and VAT return preparation, submission and tax liability calculation and payment. A professional CPA can help you with the right strategies and planning that is required to ensure that your tax liability is minimised. If you are looking for a tax advisor in Malta, we can help you to create an optimal tax strategy to maximise your business’ potential.

A tax professional can help you with planning, compliance, preparation, filing and payment of both income tax and value added tax. Assistance can also be provided to optimise the corporate structure.

In this blog, we are going to discuss some of the major reasons why you should be hiring a professional accountant for your business.

Saves you time

There is no doubt that filling taxes is a complex process that needs to be done very carefully. If a single detail is missed or filled in incorrectly, it can present significant problems for the business. That is why hiring a professional who has experience in the field is always the best option. Through his help, you will save time which you can use more productively in the running of the business.

Saves you money

One of the major benefits of hiring a tax advisor is that they can benefit your business by lowering the tax liabilities of the business. Tax advisors have appropriate knowledge of the various tax laws and can help you structure your business in a way that optimises the tax liability position.

A professional certified public accountant as your tax advisory will also ensure that you keep in line with all deadlines and compliance requirements, thus ensuring that you do not incur unnecessary fines and penalties.

A tax advisor can help estimate tax liabilities, thus giving you advanced notice of cash outflows so that when the time comes for tax to be paid, you will have the necessary cash in hand and thus avoid interest on late payments

Saves you from unnecessary hassle

Non-compliance with tax regulations can lead to companies and self-employed individuals to incur fines and penalties and also to face lawsuits. Employing a professional advisor ensures tht all obligations are taken care of appropriately and on time and that therefore you can concentrate on your business without any worries about non-compliance.

Using a CPA for your tax and other business needs also ensures that any complex situation can be handled effectively and efficiently, thus saving you from unnecessary hassle.

The right advice at the right time

As your adviser becomes familiar with your business, he can keep you up-to-date with any new legislation that affects your business. Through his experience and knowledge, he can also give you advice on how to improve your business’ operations and profitability. Through constant two-way communication, you as the business owner can bring up any issues you are facing to your advisor who can then offer you professional advise in a timely manner to overcome such issues, thus enabling your business to overcome issues as efficiently and effectively as possible.