Malta: Tax Alert - The Budget Measures Implementation Act, 2018

Last Updated: 17 May 2018
Article by André Zarb
Most Read Contributor in Malta, September 2019

The Budget Measures Implementation Act, 2018 ('the Act'), contains a number of amendments of a fiscal nature; we herein highlight the salient features of the income tax and duty measures contained in the Act.

Reduction in the 10% participating holding threshold to 5%

Malta's 100% participation exemption relieves income tax both on income derived from a participating holding and on gains derived from the transfer thereof. The Act reduces the minimum participating holding requirement of 10% of the equity shares of a company to 5%. In addition, the Act extends the scope of entities in which a participating holding can be held to include, in addition to companies and collective investment schemes, European Economic Interest Groupings (EEIG), partnerships en nom collectif and partnerships en commandite, irrespective of whether such entities elect to be treated as companies for tax purposes in Malta.

Group Loss Relief by Insurance Companies

Effective from financial year ending in 2018, companies carrying on the business of general and/or long term insurance can claim group loss relief or surrender losses to the group.

Rental Income subject to 15% final withholding tax

Taxpayers in receipt of ground rents from urban and rural tenements can now opt to be taxed in terms of the 15% final withholding tax system.

The deadline for the payment of the 15% tax on rental income, if opted for by any person (including corporate entities), will be moved forward by two months, from 30th June to 30th April following the end of a calendar year. The first payment deadline under this new rule will be 30th April 2019 for rents earned in 2018.

Deductions related to Intellectual Property

A new tax deduction was introduced to those exploiting intellectual property. The deduction is capped at a percentage amount of qualifying income derived from qualifying intellectual property by any person as the Minister may prescribe. Further details are expected on the application of this deduction.

In addition, the Act has aligned the wording of Article 14(m) of the Income Tax Act with the Guidance Note that had been published by the Inland Revenue on its website in connection with deductions on capital expenditure related to intellectual property. It has been clarified that such property must be 'used and employed' in the production of the relevant income and the expenditure must be spread equally over a number of consecutive years, not being less than three.

Computation of the Notional Interest Deduction

The Act provides a clarification on the computation of the notional interest deduction that was introduced in 2017. The Notional Interest Deduction Rules allow a tax deduction for the notional cost of risk capital, capped at 90% of the chargeable income that is allocable to the Maltese Taxed Account and Foreign Income Account. The Act clarifies that such 90% cap should be computed on the chargeable income ignoring any flat rate foreign tax credit.

Tax credits available in terms of the Business Promotion Act

With retrospective effect from year of assessment 2015 (i.e. basis year 2014), tax credits available to taxpayers in terms of the Business Promotion Act may be utilised without regard to any order of priority.

Additional reporting requirements for Payors of Investment Income

Upon the deduction of 15% final withholding tax on payments of interest and other investment income, banks and other payors of such income are now required to disclose the identity and other details of the recipients of such income to the Commissioner for Revenue. Such information must be submitted by payors by 31st January following the year in which the tax was withheld, with the first reporting date being 31st January 2019 in respect of payments effected during 2018. This reporting requirement ceases after the lapse of 9 years from the year that the said income becomes payable. The Commissioner for Revenue may impose a penalty capped at €23,000 if the information is not submitted on time, or not as required. The professional secrecy provisions of the Income Tax Management Act do not apply to such information.

Tax on part-time work

The payment deadline for individuals who opt for the 15% tax rate on income from part-time self-employment has been moved forward by two months, from 30th June to 30th April following the end of a calendar year. The first  payment deadline under this new rule will be 30th April 2019 for income earned in 2018.

In addition, unless the 15% tax is paid by the due date, the income from part-time work will be subject to tax at the standard progressive rates of tax when a notice is issued by the Commissioner for Revenue to the effect that an enquiry will be conducted on that person's tax declarations and liabilities.

Remittance basis of taxation - Minimum Tax Charge introduced for ordinarily resident persons

The Act introduces a minimum tax of €5,000 (before taking into account any foreign tax relief) per annum chargeable to individuals who are 'ordinarily resident' but non-domiciled, as from basis year 2018. This tax charge will apply to individuals and married couples who:         

  • Derive income arising outside of Malta of at least €35,000 which is not remitted to Malta; and
  • They are not taxable in terms of a special tax status such as Global Residence Programme, The Residence Programme, Malta Retirement Programme and the Residents Scheme Regulations.

This minimum tax will be net of withholding tax and any other tax already paid in Malta, with the exception of tax paid on capital gains from a transfer of immovable property. Moreover, if the non-domiciled person proves to the Commissioner for Revenue that the tax payable on foreign income and capital gains would have been less than the minimum tax above had he/she been taxed on a worldwide basis, that person's tax liability will be capped at such lower amount.

In addition, the Act provides clarification for what was previously a grey area, that individuals who acquire either of the following statuses in Malta, will not be eligible to claim the remittance basis of taxation:

  • Permanent residents of Malta in terms of the Free Movement of European Nationals and their Family Members Order; and
  • Long Term residents of Malta in terms of the Status of Long-Term Residents (Third Country Nationals) Regulations.

Eligibility for the 'Married Tax Bands'

Certain conditions for the application of the married tax bands by Maltese residents who are unmarried, widows/widowers, separated or divorced have been changed. Such individuals must, amongst others, have whole maintenance of a child under his/her sole custody and must be designated as the sole beneficiaries of children's allowance where applicable. The age bracket of the child has increased from 16 to 18 years, and to 23 years if still receiving full-time education or serving an apprenticeship. The child must not receive more than €3,400 (previously €3,200) income during the year. The latter increase of €200 to the income cap of a child is similarly reflected in the provisions governing the use of the parent tax bands.  

Income Tax on Property Transfers and Donations

Several changes were made to Article 5A of the Income Tax Act, the article which regulates the final withholding tax system on the transfer of immovable property situated in Malta.

  • The definition of a 'project' for the purposes of applying the final tax on the transfer of immovable property has been amended to exclude land acquired by the owner and divided for transfer into more than one transferable portion, where the land is transferred in the same state as when acquired and without planning permits for the development of more than one transferable unit. This may, among other things, affect the tax rate applicable on a property transfer.
  • Certain anti-avoidance provisions were introduced in relation to the transfer of immovable property which was acquired by donation or acquired in the course of winding-up in order to deem the date of acquisition as being the date when the said property was acquired by the donor who made the original donation or by the company that had been wound up. As a result, such changes could also potentially affect the tax rate applicable upon a property transfer.
  • The exemption available in respect of the transfer of own residence has been limited to exclude immovable property forming part of a project.
  • A company transferring immovable property that is of a trading nature (i.e. not a capital asset) will now qualify for the intra-group exemption as long as the transfer is part of a restructuring which involves the transfer of the whole or part of a company's business. As such, the application of the intra-group exemption on transfers of such immovable property is no longer dependent on a 12-year holding period.
  • Upon a partition of immovable property which was acquired exempt of tax in terms of the own residence exemption, the Act imposes taxation at the point of partition. Each partitioner is taxed in relation to a deemed transfer of a portion of that property, equivalent to his undivided share in that property, at its market value.
  • Article 5A now also clarifies that a balancing statement should in general be prepared by the transferor of the immovable property if such taxpayer had at any time claimed capital allowances in respect of the said immovable property.

Duty on transfer of own residence between spouses

The imposition of duty on documents and transfers is being waived on the transfer inter vivos between persons who are married to each other, of the ordinary residence or part thereof, of any or both of the spouses.

Other selected fiscal changes

Other fiscal measures enacted by the Act include:

  • An extension of the tax exemption on receipts for child maintenance to that provided by a parent to another in terms of a public deed, irrespective of whether the assistance is authorised or ordered by a Court.
  • Clarifications to the conditions applicable for sports players, athletes and licensed coaches to avail themselves of the 7.5% reduced income tax rate.

Changes related to the administration of income tax and its collection

Changes related to the administration of income tax and its collection include the following:

  • The service of notices to taxpayers may now be carried out by electronic means to a taxpayer's verified email address. Previously, notices could only be served in person or by post.
  • When tax is required to be withheld at source is not duly withheld, or if withheld is not paid, the Commissioner may charge interest in addition to additional tax. In the event that the Commissioner issues a demand notice for such tax at source, such demand notice will also constitute a privileged claim over the assets of a principal officer in the case of a body of persons.
  • Enforcement of demand notes issued by the Commissioner for Revenue is strengthened with the introduction of a right to register in the public or land registry a note of privilege for the amount demanded in the judicial act made as intimation for payment of any tax due.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Chetcuti Cauchi Advocates
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Chetcuti Cauchi Advocates
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions