The ‘How to Guide’ for the Self-Employed in Malta

Thinking of setting up a new business or going freelance as self-employed in Malta? This article has been written specifically for you, guiding you through the most important steps and tips that you might wish to consider and consult throughout the process.

To start off, whether commencing your self-employment on a part-time or full-time basis, you have to deal with three main aspects:

• Social Security contribution payments
• VAT
• Tax

Where to start?

The first step in the self-employment setup is to register with Jobsplus. If you are a foreigner and will register as a self-employed, you must also apply for a Tax Identification Number (TIN). When doing so, you will start receiving the required income tax return form.

As a self-employed individual, you will also be eligible to employ people with you. This can be possible once you register for a PE (Permission to Employ) number.

National Insurance number (NI) / Social Security

If this is your first employment activity in Malta, whether you are a local or a foreigner, you will have to apply for a social security number, also known as NI number. As opposed to being an employee with a third party, you will have to handle your own social security contribution payments or else seek assistance from a professional firm to do so. Social Security contribution payments should be settled every four months: April, August and December.

A 15% rate is calculated on the yearly income for the previous year. For the first year of operations, the minimum contribution rate as per law will be applied.

VAT

Self-employment trading activity has to be registered with the VAT department. A business can be VAT exempt (known as Article 11), meaning that no VAT will be added to the selling price. Likewise, no VAT will be claimed back on any incurred expense.

If your business will be registered as Article 10, a 5%, 7% or 18% VAT will need to be added to the selling price. The percentage depends on the type of business and products it sells. VAT paid on business-related expenses can be claimed back through the VAT returns.

Tax

The net profit of the self-employment business activity will be considered as the taxable income, taxed at the individual tax rates that vary from 0% to a maximum of 35%.

Through the income tax return form, the declaration of the yearly income and relative tax must be reported by end of June of the following year.

After the second full year as a self-employed individual, you will start receiving the PT1 form (Provisional Tax) from the Inland Revenue Department to pay a provisional income tax and social security contributions. Social Security payments through PT1 form will be definite and final.

Income tax paid more or less than the actual income tax due on the net profit of that year will need to be reimbursed or settled through the income tax return due by end of June.

Assistance

This article has been written for information purposes. More detailed information about business advisory, VAT registration, tax planning, banking, accounting and administration services can be found on www.fairwindsmanagement.net. If you require more information or professional assistance in relation to your new self-employment setup, you can get in touch with a Fairwinds Management Limited representative on info@fairwindsmanagement.net or on +356 2704 0903.

Fairwinds Management Limited Abacus Business Centre, Level 1 Dun Karm Street, B’Kara Bypass Birkirkara BKR 9037