15% Tax Rate under Article 56(17) of the Maltese Income Tax Act

Article 56(17) provides that employment income derived under a qualifying contract of employment may, at the option of the taxpayer, be subject to a final tax at the rate of 15%. This regime applies only where the following statutory conditions are satisfied:

1. Qualifying Employment Contract
   The contract must require the individual to perform duties wholly or mainly outside Malta for a continuous period of not less than 12 months.
2. Physical Presence in Malta
   The individual must not be present in Malta for more than 30 days in any calendar year, excluding periods attributable to vacation, illness, or immediately before or after the commencement or termination of the contract.
3. Specific Exclusions
   The reduced rate does not apply to services performed on ships, aircraft, or road vehicles owned, chartered, or leased by persons resident in Malta, nor to services rendered to the Government of Malta or any of its agencies.
4. Anti-Avoidance Measures
   The Commissioner retains discretion to disregard any arrangement or transaction that seeks to circumvent the conditions or purpose of this provision.
5. Other Income
   Income taxed under these provisions is treated as the first part of the individual’s total income for the relevant year, with any remaining income taxed at the applicable progressive rates.

The provisions of Article 56(17) offer a great opportunity for Maltese residents engaged in overseas employment to significantly reduce their tax burden. By opting for the 15% final tax rate, individuals can enjoy certainty and simplicity in their tax affairs, avoiding the complexity of progressive rates. This regime is particularly advantageous for professionals undertaking long-term assignments abroad, as it ensures that income earned outside Malta is taxed at a competitive rate while maintaining compliance with Maltese law.

Employers can leverage this provision as a strategic tool to attract and retain talent for international projects. Offering employees the benefit of a reduced tax rate enhances the overall remuneration package and positions Maltese businesses as globally competitive employers. Furthermore, the clear statutory framework and optional nature of the regime provide flexibility for both employees and employers in structuring overseas engagements.

Forvis Mazars’ views

The provisions of Article 56(17)  are designed to support Malta’s global workforce and strengthen its economic footprint abroad. By providing a favourable tax rate on qualifying foreign employment income, the regime encourages mobility, fosters international business relationships, and enhances Malta’s attractiveness as a base for global operations. For individuals, it represents a straightforward and beneficial option to optimise tax outcomes; for employers, it is a powerful incentive to deploy talent internationally without imposing undue financial burdens.