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Social Security and Taxation in Malta

Working in Malta definitely has its advantages: an English-speaking labor force, a flourishing tourism sector, a breathtaking environment. Our expat guide offers you a comprehensive overview of Malta’s business world, from an economic dossier to taxation, from working conditions to expat pensions.
Due to its tax benefits and its excellent healthcare, Malta is a popular retirement destination.

Malta’s National Pension System

If you don’t intend to move to Malta to actually spend your sunset years there, you should consider making provisions for your retirement during your time as an expat. Malta’s national insurance scheme includes an old-age pension plan for its citizens. This social security arrangement covers all residents who are over 18 years old, as well as citizens employed by a Maltese company overseas.

Both employer and employee each have to pay 10% of the salary, and the government adds another 50% of this sum to the pension fund. Self-employed people need to cover most of their contributions on their own, thus paying somewhat more than an employee.

Once a Maltese resident reaches the official retirement age of 65 (applicable to everyone born after 31 December 1961), he or she ceases to be gainfully employed. If they have collected at least 156 weeks of paid insurance contributions, with an annual average of at least 50 weeks for 35 years, they are entitled to receive a state pension.

The amount depends on their previous earnings, as well as their marital status (retirees with dependent spouses get more money), and it adds up to a maximum of circa 220 EUR per week.

Expat Pensions

Expats only benefit from the Maltese pension plan if their country of origin has a social security agreement with Malta. Social security agreements coordinate the pension programs of two countries for everyone who has lived or worked in both of these nations. Malta has entered into such a social security agreement with all other EU member states, as well as Australia and Canada.

If your country is not among these states or if you want to provide for a higher pension than the modest sum that Malta’s insurance scheme allows for, you have to make your own arrangements. For example, talk to the social security administration back home and to your bank about possible alternatives.

Taking Care of the Kids

EU nationals will receive maternity benefits from the Maltese government if they give birth to a child in Malta. Alternatively, the benefits must be covered by a woman’s employer if there is a stipulation for her occupation or company in the Employment and Industrial Relations Act. In the latter case, third-country nationals profit financially as well.

Regardless of whether or not she is entitled to monetary support, a working mother always has a legal right to 14 weeks of maternity leave. She must take at least four of them before the child is due, and a minimum of six weeks after the delivery. For some expat mothers, though, the maternity leave remains unpaid. Fathers may be granted up to three months of parental leave, but they don’t receive any financial compensation at all.

Tax Benefits for Affluent Expats in Malta

For so-called “high net-worth individuals” who settle in Malta under the Permanent Resident Scheme, the country has plenty of fiscal advantages. Capital gains made overseas and overseas income not derived in Malta do not have to be taxed there. There is no property or estate tax, either, and Malta’s fiscal legislation does not include taxation on individual wealth or inheritance. People with an annual tax liability of 20,000 EUR or more automatically fall into the flat tax rate bracket of 15%.

Income Taxes in Malta

The average taxpayer only has to report all income arising in or remitted to Malta. So, if you still have a savings account or an investment portfolio at home, you don’t have to pay any tax on the capital interest in Malta. Moreover, all residents of Malta are exempt from local as well as municipal taxes. The taxes you do have to pay depend on the amount of income that you earn in Malta. There are four tax brackets, ranging from 0% for low-income earners to 35% in 2015.

Sadly, paying income tax in Malta does not necessarily save you from filing a tax return in your country of origin. However, Malta has a number of bi-lateral tax agreements with other nations (e.g. all EU states) to prevent that the same income is taxed twice. Please get in-depth advice on international taxation from a tax accountant. He or she will help you with minimizing the taxes you must pay in two countries.

 

We do our best to keep this article up to date. However, we cannot guarantee that the information provided is always current or complete.

If there’s something you’re still not sure about, check out the InterNations Forum.

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