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Tax on Rental Income in Malta
April 13, 2022
When it comes to property renting, don’t be an April fool. The decisions you make in April are decisive in determining how much money you will save on taxes. You must choose whether it is beneficial for you to declare your rental income and pay tax at the final withholding rate of 15% or else whether you will include your rental income and charge tax with your other income.
Let’s get the facts straight with the related laws. The provisions of article 31D of the Income Tax Act, Chapter 123 of the Laws of Malta (“ITA”), provide a person in receipt of rental income from non-related parties, including ground rents derived from the granting of an emphyteutic concession in respect of a residential tenement and a commercial tenement, with an option to tax such rental income at 15%.
You must choose whether it is beneficial for you to declare your rental income and pay tax at the final withholding rate of 15% or else whether you will include your rental income and charge tax with your other income.
The final tax of 15% can be applied on receipts of rental income that otherwise would be chargeable to tax either as part of the trading income under Art 4(1)(a) ITA or as passive income under Art 4(1)(e) ITA. As indicated above, the 15% is a final tax on the gross rental income and therefore the company may not claim any expenses as a deduction against the said income to the effect that in certain circumstances, the application of the provisions of Art 31D ITA (i.e. 15%) may be less favourable than the provisions of Art 4(1)(a) ITA and/or Art 4(1)(e) ITA.
In view of the above, the best course of action would be to determine whether the Company has earned qualifying rental income for the year and establish whether it would be beneficial for the Company to opt for the provisions of Art 31D ITA.
The deadline to avail of this final tax of 15% is the 30th April of each year, by which date, details must be filled on a prescribed form and filed together with the payment to the Maltese Tax Authorities.
Call our specialists for any help you may need on this matter. Let’s make the right choice together.
Jonathan Bellizzi / Owner
The most important thing in this industry is to deliver results in a correct and timely manner. Our clients, having JB Finance on board, will have peace of mind with a brand that they can trust to deliver this great service at all times.
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