Brainston Advisory

Allowable Deductions in Malta

Tue, 09 Jun 2026 14:52:12 +0000

Optimising Your Tax Position: A Guide to Allowable Deductions in Malta

Navigating the complexities of Maltese tax legislation is key to maintaining strict compliance while maximising profitability for both individuals and businesses.

Under Article 2 of the Income Tax Act (Cap. 123) Tax is chargeable on a taxpayer’s total income. The Act explicitly defines total income as the aggregate amount of a person’s income from all sources, less any allowable exemptions and allowable deductions.

At the core of the Maltese tax framework lies a fundamental rule: to be considered a deductible expense for tax purposes, an expenditure must be incurred “wholly and exclusively in the production of the income.”

In practice, this means a cost is only tax-deductible if it is directly linked to the operations of the business or the active generation of its taxable income. Any expenditure falling outside this scope cannot be utilized to reduce taxable profits.

Corporate and Business Deductions

For companies and self-employed individuals, a wide range of operational costs can be utilized to reduce taxable profits, provided they pass the “wholly and exclusively” test.

Common Operational Deductions

Direct Costs: Employee wages and salaries, statutory bonuses, social security contributions (NI), sub-contracting fees, and direct transport expenses.

Rent and Premises Costs: Rent paid for land or buildings occupied for the purpose of acquiring the income is fully deductible. This also includes any ground rent (ċens) paid on the business property, provided it relates directly to the income-generating activity.

Administrative Expenditures: Day-to-day running costs including utilities, accounting fees, legal and consulting costs, marketing, and business insurance premiums.

Repairs and Maintenance: Costs incurred for the repair of premises, plant, or machinery employed in the business, as well as the renewal or alteration of business implements and utensils.

Borrowing Costs: Interest expenses on loans or capital employed directly for business purposes (subject to interest limitation rules under the Anti-Tax Avoidance Directive).

Treatment of Bad Debts

A strict distinction must be made between actual bad debts and general accounting provisions, in line with the official Bad Debts Guidelines issued by the Malta Tax and Customs Administration (MTCA)

Allowable Deductions: Under Article 14(1)(d) of the Income Tax Act and MTCA guidelines, debts are only deductible if they are proved to have become genuinely bad (irrecoverable) and are written off during the basis year. The claimant must show they have taken all reasonable, bona fide commercial steps to recover the money (e.g., formal demand notices, reminder letters, or legal tracking).

The 2% Turnover Threshold: For direct tax reporting, if the total value of bad debts being written off in a single year exceeds 2% of the taxpayer’s turnover, or if the aggregate amount exceeds €1,200, specific debtor details and explicit proof of recovery attempts must be disclosed or attached to the annual tax return.

Not Allowable: General accounting provisions or prudent estimates for doubtful debts (e.g., standard matrix or percentage-based provisions) do not satisfy the MTCA guidelines and are strictly disallowed for income tax purposes.

💡 Note on VAT Bad Debt Relief: Keep in mind that reclaiming the VAT portion on a bad debt falls under separate MTCA VAT guidelines.

Group Loss Relief Provisions

Under the Group Relief Provisions (Articles 16 to 22 of the Income Tax Act), companies forming part of the same tax group can opt to surrender current-year trading losses to a profitable company within the same group.

The 51% Relationship: For group relief to apply, both the surrendering company and the claimant company must be resident in Malta and must be members of the same group, meaning one must be a 51% subsidiary of the other, or both must be 51% subsidiaries of a third Malta-resident company.

The Co-Extensive Year Requirement: The group relationship must exist for the entire basis year preceding the year of assessment for which the relief is claimed. Furthermore, both companies must share concurrent (identical) accounting periods; you cannot surrender losses between companies with mismatched financial year-ends.

Trading Losses Only: Group relief applies strictly to trading losses incurred in the current year. It cannot be used to transfer unabsorbed capital allowances or trading losses brought forward from previous years.

Capital Allowances (Depreciation)

Capital investments, such as purchasing furniture, computer equipment, motor vehicles, or machinery, cannot be deducted fully in the year of purchase. Instead, their cost is spread over a statutory minimum number of years by way of Capital Allowances (Wear and Tear) as per Subsidiary Legislation 123.01 Deduction For Wear And Tear Of Plant And Machinery Rules.

Intellectual Property Option: Under Article 14(1)(m) of the Maltese Income Tax Act, capital expenditure incurred on intellectual property used in the production of income, including patents, copyrights, know-how, software, and other qualifying IP rights , is tax deductible. While such deductions were previously required to be spread over a minimum period of three years, as from financial year 2023 taxpayers may elect either to deduct the expenditure over the useful life of the IP or claim the full deduction immediately in the year the cost is incurred or the IP is first used to generate income.

Trading Losses

Businesses can carry forward unabsorbed trading losses and unabsorbed capital allowances from prior years indefinitely. Trading losses can be set off against any other profits and gains, whilst unabsorbed capital allowances can be offset in the subsequent years against sources of income in the production of which the asset was used.

Specific Deductions Allowable for Individuals

Beyond business operations, the Income Tax Act caters to resident individuals by offering specific personal tax deductions and reliefs. These are designed to ease the financial burden of education, childcare, sports, and healthcare.

Private School Fees: Parents with children attending private independent or church schools can claim a maximum annual deduction per child of:
- - Kindergarten: Up to €3,500
  - Primary Level: Up to €4,600
  - Secondary Level: Up to €6,500

Childcare and Summer Schools: Fees paid for registered childcare centers and summer schools can be deducted up to a maximum of €2,000 per year.

Sports, Cultural, and Artistic Activities: A deduction of up to €300 per child under the age of 16 is available for fees paid to recognized entities for extracurricular athletic or creative development.

Facilitator Services: Fees paid for the services of a facilitator for children with special needs during school hours are fully deductible.

Alimony Payments: Legally binding maintenance/alimony payments made to an estranged spouse as ordered by the court or established via a public deed are deductible.

Private Elderly and Respite Care: Fees paid for a private home for the elderly or registered respite care facilities are eligible for tax deductions.

Tertiary Education Studies: Individuals who successfully complete a recognized course of study at tertiary level (MQF levels 5 to 8) can deduct tuition fees up to a maximum of €10,000. Any unabsorbed portion can be carried forward indefinitely, provided no other tax credit (such as the Get Qualified scheme) has been claimed for the same qualification.

Disclaimer: The information and amounts referred to above are based on the legislation and rates applicable as at the date of publication of this article. The availability and application of any deductions may be subject to the satisfaction of specific criteria, conditions, and regulatory requirements under Maltese tax law.

Maximise Your Tax Efficiency

Claiming these deductions requires precise record-keeping, statutory documentation, and correct reporting on your annual tax returns.

Want to ensure your business or family is capturing all available tax reliefs?

Contact our tax team at Brainston Advisory for tailored assistance with your corporate or personal tax compliance.

Contact Us

📞 +356 2152 1025/6

✉️ info@brainston.mt

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The Taxation of Pension Income in Malta

Wed, 03 Jun 2026 14:12:25 +0000

The Taxation of Pension Income in Malta: A Professional Guide

The taxation of pension income in Malta is structured to reduce the fiscal burden on retirees through a system of specific exemptions and targeted relief. Following the completion of a multi-year government strategy to phase out income tax on pensions, Malta now operates under a stable, fully integrated exemption framework. This guide outlines the core legal mechanisms that govern how retirement income is treated for Maltese tax purposes.

The Pension Income Tax Exemption

The cornerstone of Malta’s fiscal policy for retirees is the statutory tax exemption on pension income.

Eligibility: To qualify, individuals must be 61 years of age or older during the applicable basis year.
Scope of Income: The exemption applies comprehensively to all recognized forms of retirement income. This includes:
- State Social Security pensions
- Service pensions
- Treasury/National pensions
- Foreign pensions received by Maltese residents
- Occupational pensions and qualifying Private Retirement Schemes (PRS / VOPS)

Under the established framework, pension income is 100% exempt from income tax up to a capped statutory threshold (regularly adjusted by the authorities to mirror the maximum pension benchmarks). Any pension income falling below this cap is entirely excluded from the individual’s chargeable income calculation.

The Impact on Active Income

A major advantage of this framework is its structural design regarding “other income” (such as employment, self-employment, or investment returns). Because the pension income is treated as exempt rather than standard taxable income, it no longer pushes a pensioner’s secondary earnings into higher progressive tax brackets. Working pensioners can utilize the standard 0% tax-free brackets for their active earnings in full.

Tax Rebates and Supplementary Relief

For individuals who have additional chargeable income over and above their exempt pension, Malta provides a targeted tax rebate system.

If a pensioner’s non-pension income creates a tax liability under Malta’s progressive tax rates (Single, Parent, or Married computations), a specific Tax Rebate may be applied directly against the final tax due. This mechanism ensures that retirees who choose to remain active in the workforce or maintain investments are not fiscally disadvantaged.

Important Note: These rebates serve strictly to reduce or eliminate a calculated tax liability; they cannot be used to trigger a tax refund or be carried forward to subsequent years.

Income Tax Return Filing Requirements

Receiving a pension does not automatically mandate or excuse a taxpayer from filing obligations.

Non-Filers: Pensioners whose total income consists solely of a pension that is fully exempt, or whose secondary income is entirely taxed at source, generally fall under the “non-filer” category and are not required to submit an annual return.
Standard Filers: Pensioners who exceed the statutory exemption caps, or who have untaxed secondary income streams, must file a comprehensive self-assessment return within the standard Inland Revenue deadlines to prevent late-submission penalties and interest.

Special Tax Rates for Part-Time and Rental Income

Retirees frequently supplement their pensions with passive income or part-time work. Malta encourages active retirement by offering distinct, favorable flat-tax options for these income streams, which can be declared using dedicated schedules rather than standard progressive rates:

Form TA23: Utilised to declare and pay flat-rate tax on part-time employment income.
Form TA22: Utilised for declaring part-time self-employment income under favorable flat rates.
Form TA24: Utilised to declare rental income derived from residential or commercial properties, subjecting the gross rental revenue to a final, low-rate flat tax.

Alternatively, taxpayers retain the right to opt out of these flat-tax mechanisms and include these streams in their global income computation if the progressive rates prove more financially advantageous.

Here is a highly professional final section tailored specifically for your firm, focusing on your core corporate services, compliance, and wealth/pension advisory capabilities.

How Brainston Advisory Can Assist

Navigating the intersection of pension exemptions, active employment, and global income streams requires careful fiscal planning. At Brainston Advisory, our multi-disciplinary team of tax consultants, accountants, and corporate service specialists provides tailored solutions to ensure your retirement transition is both financially optimal and fully compliant.

We assist local and expatriate clients with a comprehensive suite of services, including:

Personal Tax Optimization: Analysing your total income profile, including pensions, investments, and active earnings, to implement the most tax-efficient structure under Maltese law.
Compliance & Tax Filing: Determining your filing status, preparing annual self-assessments, and ensuring correct submission of forms (including TA22, TA23, and TA24) within strict statutory deadlines.
Cross-Border Pension Advisory: Guiding expatriates on the tax implications of transferring or receiving foreign national, occupational, or private pensions in Malta.
Corporate & Payroll Solutions: Assisting working pensioners and employers with specialized payroll adjustments to properly reflect tax-exempt pension thresholds against active employment income.

Optimise Your Fiscal Position

Whether you are approaching retirement or managing complex income streams as an active pensioner, our team is here to protect your wealth. Contact Brainston Advisory today to schedule a consultation with one of our tax professionals.

Contact Us

📞 +356 2152 1025/6

✉️ info@brainston.mt

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Companies Act (Youth Enterprise) Regulations

Tue, 19 May 2026 08:28:43 +0000

Companies Act (Youth Enterprise) Regulations, 2026

On March 12, 2026, the Maltese government officially published the Companies Act (Youth Enterprise) Regulations, 2026 through Legal Notice 56 of 2026 . This landmark legislation is designed to bridge the “entrepreneurial gap” for individuals aged 16 and 17 who have completed their compulsory education but were previously restricted from incorporating businesses.

This represents a significant shift in the Maltese corporate landscape, offering a structured environment for the next generation of leaders to learn corporate responsibility and financial accountability.

Core Legal Structure

A Youth Enterprise (YE) is established as a private limited liability company with a legal personality distinct from its members. To ensure these entities remain focused on their educational and entrepreneurial purpose, several specific requirements apply:

Age & Residency: Incorporation is restricted to natural persons who are 16 or 17 years old and are residents of Malta.
Company Name: The name must explicitly include the expression “Youth Enterprise” or the suffix “YE”.
Share Capital: The authorized share capital is capped between €100 and €20,000, with a minimum paid-up capital of €100 per member.
Equality of Rights: All members must hold equal voting rights, regardless of their individual capital contributions.
Consent: Formal consent from parents or guardians is also a prerequisite for incorporation.

The Mandatory Mentorship System

To maintain rigorous oversight, every YE must have an appointed mentor at all times. The mentor acts in an advisory capacity, exercising reasonable care and diligence to support the youth’s skills and monitor financial transparency.

Monitoring: The mentor must review financial records and provide guidance on strategy, compliance, and financial management. The mentor must monitor progress at least every three months.
Liability: Mentors are not personally liable for the enterprise’s debts if they act in good faith.
Restrictions: Mentors are prohibited from holding executive positions or participating in daily management or voting, except to break a deadlock if specifically allowed by the company’s memorandum.

Operational and Tax Considerations

From a tax and compliance perspective, several unique restrictions define the Youth Enterprise:

VAT Status: The enterprise must qualify as a small enterprise and be registered (or entitled to be registered) under the Value Added Tax Act.
No Employees: A Youth Enterprise is strictly prohibited from hiring employees. Members themselves are not considered employees, ensuring they remain eligible for student maintenance grants.
Licensing: The entity generally cannot be granted licenses or permits unless they are legally available to minors under Maltese law.
Dividends: Dividends may be declared during general meetings, but they must not exceed the amount recommended by the mentor.

Ongoing Compliance and Training

Compliance is not a one-time event for a YE. Each member is required to complete at least 20 hours of annual training in business, compliance, or financial literacy. This training must be verified by the mentor or the Malta Business Registry (MBR), with logs submitted every six months. Additionally, the enterprise must file basic annual accounts with the Registrar.

Transition to Adulthood

The Youth Enterprise regime is designed as a “stepping stone.” Once all members turn 18, the entity must:

Convert into a standard commercial partnership (such as a standard Ltd company) under the Companies Act.
Dissolve or strike off if the founders choose not to continue.

This ensures a seamless transition into the adult business world without losing the brand or operational history built during the “Youth” phase.

The Registrar also holds the power to strike the company off the register if it becomes inactive or if members reach adulthood without converting the enterprise.

This new regulation provides a controlled legal structure for young entrepreneurs while maintaining the high standards of the Malta Business Registry. For young visionaries, it offers a unique “learning ground” for real-world business management within the framework of Maltese law.

Brainston Advisory Note: While the process is simplified, compliance remains key. From filing basic annual accounts with the Malta Business Registry (MBR) to maintaining accounting records, the YE framework is a “real-world” classroom for future CEOs.

How Brainston Advisory Can Help

Navigating the legalities of the Companies Act can be daunting at any age. Our team provides specialized support for Youth Enterprises, including:

Assistance with the incorporation process and MBR filings.
VAT and Tax compliance advice tailored for small-scale startups.
Strategic planning for the conversion at age 18.

Is your young innovator ready to start?

Contact Brainston Advisory today to explore how we can support the next generation of Maltese business leaders.

📞 +356 2152 1025/6

✉️ info@brainston.mt

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Senior Family Office and Treasury Professionals

Sun, 12 Apr 2026 08:00:37 +0000

Navigating Malta’s 2025 Tax Rules for Senior Family Office and Treasury Professionals

As Malta continues to position itself as a premier hub for private wealth management, the government has introduced a targeted fiscal incentive to attract top-tier talent. Effective January 1, 2025, the Senior Employees of Family Offices, Back Offices and Treasury Management Operations Tax Rules offer a specific tax treatment for specialized professionals.

The 15% Flat Tax Rate: An Overview

Under these new rules, qualifying senior employees can elect to have their employment income taxed at a flat rate of 15%. This is a major shift from the standard progressive tax rates (which can reach 35%) and applies to gross emoluments of up to €7,000,000 per year. Any income exceeding this cap is taxed at the standard rate of 35%.

Who is Eligible?

The regime is specifically designed for individuals in senior management and highly specialized roles within three types of entities:

Single and Multi-Family Offices: Duly licensed or recognized entities managing private wealth.
Back-Office Operations: Companies providing essential administrative, IT, and support services to family offices.
Treasury Management Operations: Entities handling liquidity, capital, and risk management for family office structures.

Eligible Roles Include:

Chief Executive Officer (CEO) / Managing Director / General Manager
Head of Back Office
Chief Risk Officer / Head of Compliance (including AML Officers)
Portfolio Manager / Chief Investment Officer
Senior Trader / Senior Structuring Professional

Key Requirements for 2025

To benefit from this preferential rate, applicants must satisfy several criteria:

Minimum Salary Threshold: The gross basic salary must meet the prescribed minimum threshold (excluding fringe benefits). This threshold is subject to periodic increases in line with the legislation.
“First Employment” Rule: The individual must be taking up their first employment in an eligible office in Malta and must not have earned Maltese employment or business income before January 1, 2025.
Qualifications & Experience: Applicants must possess a recognized professional qualification or at least five years of relevant professional experience.
Non-Domiciled Status: The individual must not be domiciled in Malta.
Substance & Residency: The employee must perform genuine and effective work in Malta, reside in “normal” accommodation for their family, and hold private health insurance.

Duration and Renewals

The tax benefit is initially granted for a period of five consecutive years, starting from the year a formal determination is issued by the competent authority.

Extensions: Beneficiaries may apply for up to two extensions of five years each.
Maximum Benefit: A total of 15 years of tax benefits.
Sunset Clause: The rules are currently scheduled to cease on December 31, 2040.

Application Process

Applications are now open and must be submitted to the competent authority (typically involving the Malta Financial Services Authority – MFSA).

Deadlines: The application window for new beneficiaries remains open until December 31, 2034.
Formal Determination: Once the authority verifies that all conditions—including salary, qualifications, and the “eligible office” status—are met, they will issue a formal determination.

Why This Matters

This framework reflects Malta’s continued development as a regulated hub for family office, treasury, and back-office operations. It provides international structures with a clear and compliant basis for establishing senior operational functions in Malta, while supporting long-term workforce planning and regulatory certainty.

How Brainston Advisory Can Assist

Brainston Advisory provides corporate and tax advisory support to family offices and treasury structures operating in or relocating to Malta. We assist with assessing the tax impact of this framework and with the practical implementation of compliant structures.

For further information and for a tailored discussion of your requirements, please contact Brainston Advisory.

Contact us

📞 +356 2152 1025/6

✉️ info@brainston.mt

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Highly Skilled Individuals

Tue, 07 Apr 2026 09:30:18 +0000

Malta’s 2026 Highly Skilled Individuals Framework:

A Regulatory Talent Strategy for the Next Decade

Malta has introduced a new, consolidated framework for attracting senior international talent. Enacted through the Tax Treatment of Highly Skilled Individuals Rules, 2026 (L.N. 20 of 2026), this new framework consolidates several former incentive schemes, including the Highly Qualified Persons (HQP) Rules and the Qualifying Employment in Innovation and Creativity Rules, into a single, streamlined tax regime.

This is not simply a tax incentive. It is a regulatory-led talent strategy, designed to channel expertise into industries that are critical to Malta’s long-term economic positioning.

A unified and future-proof regime

Effective from 1 January 2026, the new framework establishes one set of eligibility standards and one tax treatment model for highly skilled professionals working in Malta.

The regime applies until 31 December 2040, offering long-term certainty for both employers and internationally mobile executives. It introduces defined qualification, role-based, and compliance requirements, to ensure that only genuine, high-value employment roles benefits from the incentive.

The fiscal incentive

Eligible beneficiaries may elect to be taxed at a flat rate of 15% on qualifying employment income, subject to:

Any income exceeding the €7 million cap is taxed under the standard rates that would otherwise apply.

Eligibility is role-driven, not salary-driven

A central feature of the 2026 framework is that the role itself must qualify.

An individual may only benefit if they hold an “eligible office” with an undertaking that is licensed or recognised by a statutory competent authority named in the rules.

These competent authorities are:

Malta Financial Services Authority

for eligible offices within licensed or recognised financial services undertakings;

Malta Gaming Authority

for eligible offices within licensed gaming operators;

Transport Malta, in relation to:

aviation undertakings holding Air Operator Certificates or aerodrome licences
maritime undertakings holding ISM or MLC certification
shore-based ship management and offshore oil & gas servicing companies

The Office of the Chief Medical Officer to Government

in respect of highly skilled medical and healthcare roles;

Malta Enterprise

covering recognised strategic, innovation-driven and STEM-based industries.

This structure makes the regime a sector-specific tool, not a general expatriate tax programme.

Who qualifies?

To benefit, an individual must:

Be non-domiciled in Malta
Derive qualifying employment income in Malta
Hold an eligible office within a licensed or recognised undertaking
Earn at least €65,000 per year (excluding fringe benefits)
Possess recognised qualifications or professional experience
Be protected as an employee under Maltese law
Hold private medical insurance and maintain normal accommodation in Malta

Substance is essential. Artificial job titles, restructured remuneration, or collusive arrangements are expressly targeted by anti-abuse provisions.

Duration and certainty

Initial term -> 5 years

First renewal -> +5 years

Second renewal -> +5 years

Maximum benefit -> 15 years

Up to -> 31 December 2040

Even with renewals, no benefits apply to income earned after the 2040 cut-off.

Strategic significance

The 2026 framework supports Malta’s wider economic strategy by directing highly skilled talent into regulated and growth-focused industries that are critical to the country’s long-term development. It gives employers a compliant, long-term tool to attract international expertise, while offering senior professionals a stable and competitive base within the European Union.

How Brainston can help

Brainston guides employers and professionals through every stage of the Highly Skilled Individuals framework, from eligibility assessment to application and compliance.

If you are considering this regime, contact Brainston for tailored advice and support.

Contact us

📞 +356 2152 1025/6

✉️ info@brainston.mt

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Taxation on Rental Income

Tue, 24 Mar 2026 08:30:15 +0000

Taxation on Rental Income in Malta: A Practical Guide for Property Owners

Rental property remains one of the most popular investment vehicles in Malta. However, the taxation of rental income is not always straightforward. The applicable tax treatment depends not only on the rate selected, but also on whether the activity is classified as passive investment income or trading income.

Taxation Options for Individuals

Rental income derived from immovable property may be taxed under one of the following methods

Option 1 – Progressive Income Tax Rates (0%–35%)

Under this method:

Rental income is added to your personal income (e.g. salary, business income, pensions).
Tax is calculated at the applicable progressive personal income tax rates.
Tax is charged on the net profit (after allowable deductions).

However, allowable deductions depend on the nature of the rental activity (see section below).

This option may be beneficial where:

The taxpayer falls within a lower tax bracket.
Significant deductible expenses are incurred

Passive vs Trading Rental Activity: Why It Matters

A key consideration in determining the appropriate tax treatment of rental income is the classification of such income as:

Passive income, or
Trading income arising from a business activity

This classification directly affects deductibility and loss treatment.

Passive Rental Income

Where a property is held as a long-term investment and rented without substantial additional services, the income is generally treated as passive rental income.

In this case, tax is charged on the net rental profit, after deducting the following allowable expenses as per S.L. 123.26 Deduction of Expenses in respect of Immovable Property:

Interest on loan used in relation to the immoveable property in question
Rent, ground rent payable
Licence payable
20% further deduction after deducting rent, ground rent and licence payable

Losses arising from passive activities may only be set off against passive profits and cannot be offset against active trading profits. Any unutilised passive losses may be carried forward to subsequent tax years for set-off against future passive profits.

Trading Rental Activity

Rental income may be treated as trading income where the activity goes beyond passive investment.

Indicators may include:

Letting multiple properties in an organised, commercial manner
Short-term or holiday rentals involving services
Frequent acquisition of property for rental purposes

In such cases:

Expense incurred in the production of the income are deductable
Capital allowances are allowable
Trading losses may be carried forward and allowed against any source of income
VAT and licensing obligations may arise

Short-let and tourism-related rentals may also require registration with the Malta Tourism Authority.

The classification is highly fact-dependent and must be assessed carefully.

Option 2 – Final Withholding Tax (15% Flat Rate)

As per Article 31D of the Income Tax Act Malta offers an attractive alternative: a 15% final withholding tax on gross rental income.

Key Features:

15% tax on gross rental income
No deductions allowed
Tax is final (not added to your other income)
Must be declared in the specific rental income form

When is this beneficial?

If you are in a higher income tax bracket (25%–35%)
If your rental property has minimal expenses
If you prefer administrative simplicity

⚠️ Important: Once selected for a particular property in a year of assessment, this method must be applied for any other rented property during that year. However, you can switch methods from one year to the next.

Rental Income Derived by Companies

Where a company holds rental property, it may either be taxed under the standard corporate tax system (35%) or opt for the 15% final tax regime on gross rental income.

Option 1 – Standard Corporate Tax System (35%)

Under this method:

Rental profits are taxed at 35% at company level.
Deductions allowed depending whether the trading is of a passive or trading nature, as explained above.
Upon distribution, shareholders may claim a tax refund under Refundable Tax Credit System

This option may be beneficial where:

The company incurs substantial deductible expenses.
Losses are to be carried forward.
The activity amounts to trading.

Option 2 – 15% Final Tax on Gross Rental Income

Companies may also opt for the 15% final withholding tax on gross rental income.

Where this option is exercised:

Tax is charged at 15% on gross rental income.
No deductions are allowed.
The tax is final.
The income does not form part of the company’s chargeable income for corporate tax purposes.
No tax refunds apply because the tax is final.

This can be attractive where:

If the company has high rental margins and very few deductible expenses.
The company does not require loss utilisation.
Simplicity is preferred.

Summary

Special Rental Tax Regimes

Malta provides additional reduced-rate regimes in specific circumstances.

10% Final Tax – Housing Authority Schemes

Where property is leased to the Housing Authority under approved schemes:

10% tax on gross rental income
No deductions allowed
Tax is final

This regime is separate from the 15% option and is designed to support social housing initiatives.

5% Final Tax – Restored and Qualifying Properties

Rental income derived from qualifying restored properties (including certain properties in Urban Conservation Areas or scheduled properties) may qualify for:

5% tax on gross rental income
No deductions allowed
Tax is final

The restoration must meet statutory conditions and planning requirements, and the regime must be properly elected.

VAT Considerations for 2026

While residential letting remains generally exempt from VAT, landlords should be aware of specific exceptions:

Short-term/Tourist Lets: Subject to 7% VAT (and the increased €1.50 per night Eco-Contribution as of 2026).
Commercial Lets: Often subject to 18% VAT if the tenant is a taxable person using the premises for economic activity.

How Brainston Advisory Can Help

At Brainston Advisory, we assist landlords with:

Evaluating the correct tax classification
Comparing taxation options
Ensuring full compliance with Maltese tax legislation

If you would like a personalised rental income tax review, our team would be pleased to assist.

Contact us

📞 +356 2152 1025/6

✉️ info@brainston.mt

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7.5% Reduced Tax Rate for Creative Practitioners in Malta

Tue, 24 Mar 2026 07:49:12 +0000

A Guide to the 7.5% Reduced Tax Rate for Creative Practitioners in Malta

Malta has long been a hub for cultural expression. However, many artists face economic challenges due to unpredictable income and non-traditional working arrangements.

To support the sustainability of the creative sector, the Maltese Government, in collaboration with Arts Council Malta (ACM) and the Malta Tax and Customs Administration (MTCA), offers a specialized fiscal incentive: a reduced income tax rate of 7.5% for creative practitioners. This incentive is primarily governed by Article 56(26A) of the Income Tax Act (Cap. 123) and is specifically regulated under Subsidiary Legislation 123.211 (Income from Artistic Activities Rules). Most notably, the scheme was recently enhanced by Legal Notice 137 of 2025, which transitioned the tax base from a gross to a net basis for the 2025 basis year (Year of Assessment 2026).

This guide explains who qualifies, how the tax is calculated, and the key updates applicable from the 2025 basis year (Year of Assessment 2026).

1.Who Qualifies as a “Creative Practitioner”?

The scheme applies to self-employed individuals (full-time or part-time) earning income from qualifying artistic activities.

From 2025 onwards, eligibility has been expanded to include a broader range of economic activities under specific NACE Rev. 2.1 codes.

Eligible activities include:

Performing Arts: Actors, dancers, musicians
Artistic Creation: Painters, sculptors, writers
Support & Production: Artistic directors, choreographers, curators, and those involved in motion picture or TV production.
Intellectual Property: Royalties or licensing income from artistic works

2.Key Benefit: The 7.5% Tax Rate

Eligible income is taxed at a flat rate of 7.5%, subject to the following:

Threshold: Applies to the first €50,000 of net profits from qualifying activities
Excess Profit: Any profits earned above the €50,000 threshold is added to your other income (if any) and taxed at the standard progressive rates of 0% to 35%
Final Tax: The 7.5% is a final tax, meaning it cannot be offset against other income or used to claim refunds

3.Important Update (Basis Year 2025): Net vs. Gross Income

A key change applies from the 2025 basis year:

Previous Years (2022–2024):
The 7.5% rate applied to gross income (total revenue before expenses)

New Rules (Effective 2025):
Following updates in Legal Notice 137 of 2025, the 7.5% rate is now explicitly applicable to a maximum net income of €50,000. This means the tax is calculated on your profit after deducting allowable business expenses as defined in Article 14 of the Income Tax Act.

4.Application Process

The reduced rate is not automatic and requires a two-step process:

Step 1: Certification by Arts Council Malta (ACM)

You must first obtain certification confirming that your activity qualifies.

Required documentation:

VAT certificate
Proof of NACE classification
Signed accountant’s declaration

Step 2: Submission of Form TA26

Once the notification letter from ACM is received:

Complete Form TA26
Submit the form and payment by 30 April (Year of Assessment)

Important: Late submission may result in 0.6% interest charges or loss of eligibility for the reduced rate.

5. Is This Option Right for You?

The 7.5% flat rate can significantly reduce your tax burden, particularly if you also earn employment income taxed at higher progressive rates.

However, since it is a final tax with a capped threshold, it is essential to compare this option with the standard tax system based on your specific financial situation.

How Brainston Advisory Can Help

Understanding eligibility, navigating NACE classifications, and assessing whether the reduced rate is beneficial can be complex, especially with the new net income rules.

At Brainston Advisory, we assist creative professionals with obtaining the required certification, ensuring full tax compliance, and providing tailored advisory to optimise their tax position.

Get in touch with our team today:

📞 +356 2152 1025
📧 info@brainston.mt

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Micro Invest

Wed, 25 Feb 2026 18:58:25 +0000

Micro Invest: Supporting Business Growth Through Tax Credits

In the ever-evolving Maltese economic landscape, the Micro Invest scheme remains one of the most effective tools for small businesses and self-employed individuals to fuel their expansion. Managed by Malta Enterprise, this incentive provides tax credits on qualifying business expenditure, including wages, assets, and business upgrades.

Recent national Budget announcements have outlined a number of enhancements to the Micro Invest scheme. These measures will apply once they are formally implemented through updated Malta Enterprise Incentive Guidelines. Until such guidelines are issued, the scheme continues to operate in accordance with the currently published rules, which remain legally binding

What is the Micro Invest Scheme in Malta?

The Micro Invest Scheme is a Malta Enterprise incentive that grants tax credits of up to 45% (65% for Gozo-based businesses) on qualifying business expenditure, including wages, digital investments, vehicles, and premises upgrades.

Current Support Levels

Under the existing Micro Invest Guidelines, the tax credit is calculated as follows:

- 45% of qualifying expenditure for Maltese applicants
- 65% for Gozitan applicants

Maximum Tax Credit (over any rolling 3-year period)

Important Deadlines for 2026

To avail of the tax credit against your basis year 2025 tax return, applications must be submitted within the following windows:

- Self-Employed Individuals: 25th March 2026
- Companies: 27th May 2026
- Late Applications: Can be submitted until 25th November 2026.

Please note: Late submissions will result in the tax credit only becoming available as from basis year 2026.

Qualifying Expenditure

The scheme covers a variety of costs aimed at modernizing and growing your operations. However, specific conditions apply to ensure the quality of the investment:

- - - Wage Costs: Eligibility is triggered where the applicant demonstrates at least a 3% increase in wage costs compared to the higher of the previous two years.
    - Investments & Vehicles: Any machinery or commercial vehicles must be new or at least first-time registered in Malta. For motor vehicles, eligibility is typically restricted to commercial vehicles with a European Emission Standard of at least Euro 5.
    - Refurbishment: Costs for furbishing or upgrading business premises are only eligible if the premises are covered by the appropriate Planning Authority (PA) licenses or permits for the intended business activity.
  - - Digitalisation & Tech: The scheme covers digital solutions including computer hardware, packaged software, and development costs for bespoke software and websites.

Eligibility Criteria

The scheme is strictly targeted at micro-enterprises. At the point of application, the undertaking must satisfy the following:

- - 1. Employ no more than 50 full-time employees.
    2. Have an annual turnover or balance sheet total not exceeding €10 Million.
    3. Employ at least one person (full-time or part-time) at the date of application.

Proposed Budget Measures (Subject to Official Guidelines)

Malta Budget 2026 announced a number of proposed enhancements to the Micro Invest scheme, aimed at strengthening support for investment, digitalisation, and workforce development.

These measures are not yet in force.

At the time of writing, Malta Enterprise has not issued updated Incentive Guidelines or legal notices to formally implement them. Until that happens, all applications must follow the currently published Micro Invest rules.

1.Higher Tax Credit Rates & Increased Caps (Proposed)

The Budget proposed increasing the level of support available to micro enterprises, including:

In addition, the standard tax credit rate for Maltese applicants was proposed to increase from 45% to 65%, aligning with the current Gozitan rate.

2.Digital & Innovation Investment Focus (Proposed)

The Budget highlighted the Government’s intention to widen the scope of eligible digital expenditure. Proposed qualifying areas include:

- - - Automation and smart production tools
    - Cybersecurity systems
    - Advanced business software
    - Cloud-based systems
    - Digital workflow platforms

These digital investments were proposed to qualify for enhanced tax credit rates, subject to final guidelines.

3.Workforce Incentives (Proposed)

Additional support was proposed for businesses investing in staff retention and development, including:

- - - Enhanced wage support for long-serving employees
    - Targeted incentives for skills development in digital and technical roles

Final conditions, rates, and limits remain subject to official publication.

4.AI, Automation & Cybersecurity Credit (Proposed)

The Budget also referred to a specialised Investment Tax Credit aimed specifically at:

- - - Artificial Intelligence (AI)
    - Automation systems
    - Cybersecurity infrastructure

This incentive was proposed at a rate of 60%, spread over a four-year period for qualifying investments.

All of the above measures remain Budget proposals only. They will only become effective once formally issued by Malta Enterprise through updated Incentive Guidelines or legal notices.

Brainston Advisory will publish an update as soon as the official documentation is released.

How Brainston Advisory Can Assist

At Brainston Advisory Limited, we specialise in guiding businesses through the entire application lifecycle, from initial eligibility assessment to the final submission of the claim.

Not sure if you qualify?

Contact Brainston Advisory today for a free initial eligibility review and ensure you don’t miss the deadlines.

Contact us

📞 +356 2152 1025/6

✉️ info@brainston.mt

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Final Settlement System (FSS)

Wed, 25 Feb 2026 18:35:09 +0000

Final Settlement System (FSS) & Payroll Compliance in Malta

The Final Settlement System (FSS) is Malta’s mandatory tax and social security withholding system for employment income.

FSS compliance carries real risk if not handled correctly. Late or incorrect submissions are subject to penalties and interest, and even small errors can trigger statutory fines unless properly managed.

What is the Final Settlement System (FSS)?

Introduced in 1998, FSS is regulated by Articles 4(1)(b) and 4(1)(d) of the Malta Income Tax Act.

It applies to:

Employment income
Pensions
Annuities
Other annual payments

Under FSS, employers must deduct tax and Social Security Contributions (SSC) from employees and remit them to the Commissioner for Revenue through a monthly and annual reporting system.

Before Hiring: Permission to Employ (PE)

Any person or company employing staff in Malta must first obtain a Permission to Employ (PE) number.

Once registered, employers must:

Apply the correct FSS tax treatment for each employee
Calculate payroll tax and Social Security Contributions (SSC)
Deduct and pay the relevant tax and SSC amounts
Submit the required statutory forms within the prescribed timeframes
Complete annual reconciliations to confirm all figures are aligned

If obligations are not met on time, this may result in penalties and interest.

Key FSS Forms and Their Purpose

Social Security Contributions (SSC)

Under the Social Security Act, taxpayers must pay regular social security contributions. These are categorized as:

- Class 1: For employees, contributions are deducted monthly from their gross emoluments by their employers. Employers are required to remit these contributions to the Malta Tax and Customs Administration (MTCA) each month.
- Class 2: For self-occupied individuals (earns income from a trade, business, profession, vocation or other economic activity), contributions are paid quarterly directly to the Commissioner for Revenue (April, August and December) on the net annual income from the prior year.

Contribution rates and categories are updated annually and vary based on age, wage level, and student status.

https://mtca.gov.mt/personal-tax/fss/social-security-contribution-rates/social-security-contribution-rates

Submission Deadlines and Penalties

FS5: By the end of the following month
FS3: By 15 February
FS7: By 15 February

Penalties for non-compliance with FSS obligations are outlined in S.L 372.14 – Final Settlement System Rules.

PE Deactivation & Reactivation

A PE number can only be deactivated once all FS3 and FS7 forms are filed. It must be reactivated before hiring new staff.

How can Brainston Advisory assist you

Payroll and FSS compliance require accuracy, consistency, and up-to-date technical knowledge. Our team specialises in Maltese payroll, FSS, and Social Security compliance, supporting businesses across every stage of employment, including work permits for Third Country Nationals (TCNs).

We can assist you by:

Payroll setup and onboarding
Employee registration and compliance support
Preparation of payslips
Monthly FSS and SSC calculations and submissions
Ongoing compliance and payroll consultation
Updates on legislative and rate changes
Direct liaison with the MTCA on your behalf
Payroll reviews and annual reconciliations
Work permit applications for Third Country Nationals

Book a Free Initial Consultation

Let’s discuss your payroll needs and show you how we can support your business.

Contact us

📞 +356 2152 1025/6

✉️ info@brainston.mt

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Simplified Liquidation Procedure

Tue, 24 Feb 2026 22:39:44 +0000

New Simplified Liquidation Procedure for Maltese Companies

On July 11, 2025, the Companies (Amendment) Act, 2025 (Act XVII / Act XVIII of 2025) was enacted, introducing key amendments to Maltese company law. One of the most important changes is the addition of Article 214A, which establishes a simplified dissolution procedure for private limited liability companies. This new process allows companies that have never traded or have ceased business operations to be struck off the register more quickly and efficiently, without the need to appoint a liquidator.

Eligibility Criteria

To apply, the company must submit a specific application form to the Registrar, which must be signed by its directors. The application must include:

1) Form B1 and a declaration by the directors confirming that the company:

Is not a regulated entity.
Has settled all creditor claims or had them written off.
Has no pending legal proceedings.
Has assets valued at €5,000 or less.
Has not entered into any contracts in the last six months, excluding those with service providers if applicable.
Has no outstanding dues to government authorities or bodies.

2) Further confirmations by the directors stating that:

A shareholders’ resolution has been passed to approve the use of this procedure, in accordance with the company’s memorandum and articles of association.
All company bank accounts have been closed.
VAT de-registration (if applicable) has been filed.
Only company officers remain employed.
A personal commitment from the directors to retain the company’s beneficial ownership details and financial records as required by law, or to assign this responsibility to another person.

Registrar’s Actions and Striking-Off

If the application is complete and accurate, the Registrar will publish a notice of the proposed striking-off in the Government Gazette and on the Registry’s website. After a three-month waiting period, the company’s name will be struck off the register. During this three-month period, the directors and company secretary remain in their roles and retain their duties, as no liquidator is appointed under this procedure.

Safeguards and Penalties

The law includes provisions for safeguards and penalties:

Restoration Remedy: An interested party can apply for the restoration of the company to the register after it has been struck off.
False Declarations: Any director who makes a false declaration may be subject to fines (multa), imprisonment, or both.

Conclusion

The introduction of the simplified liquidation procedure under Article 214A is a positive development for inactive Maltese companies. By making the dissolution process more streamlined, this reform reduces the administrative and financial burdens on companies that meet the eligibility criteria, providing a faster and more cost-effective way to exit the register.

If you are considering making use of the new simplified liquidation process, our team would be pleased to guide you through each step. Please feel free to contact us should you require advice or assistance on the matter, we are here to help ensure the process is handled smoothly and efficiently.

📞 +356 2152 1025/6

✉️ info@brainston.mt

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