Employer Tax Contributions

Tax Type	Rate	Base
Income Tax (PAYE)	Progressive (0% - 35%)	Employee's taxable income
Social Security Contributions (SSC) - Employer	10%	Employee's basic weekly wage, capped
Social Security Contributions (SSC) - Employee	10%	Employee's basic weekly wage, capped (withheld by employer)

Filing & Compliance

• Submit FS5 form monthly: Due by the last day of the month following the payroll month.
• Submit FS7 and FS3 forms annually: Due by February 15 of the following year.
• Employers must apply for a PE number and submit an FS4 form for new hires or changes in tax status.

In Malta, employee tax deductions are determined by income tax brackets, social security contributions, and specific allowable deductions.

Income Tax

• Tax Bands: For 2025, the first €12,000 of annual income is tax-free. Income tax is then calculated on the remaining income based on progressive tax bands. These bands are subject to change annually, so it's essential to refer to the latest official rates.
• Rates: General income tax rates range from 15% to 35%. A reduced rate of 7.5% applies to registered professional football or water polo players, athletes, or licensed coaches. Certain individuals meeting specific employment conditions may qualify for a 15% tax rate. These conditions include having an employment contract subject to Maltese law for genuine and effective work in Malta, possessing professional qualifications, and having at least five years of professional experience.
• Final Tax: Some income sources, like dividends, might be subject to a final withholding tax, which the taxpayer can opt for. This means no further tax is due on that specific income.
• Filing and Payment: Tax on employment income is deducted directly from wages under the Final Settlement System (FSS). The employer remits these deductions to the tax authorities.

Social Security Contributions

• Employee Contribution: Both employers and employees contribute to social security. For 2025, the employee's contribution is generally 10% of their salary. For those born on or after 1 January 1962 and earning over €28,303 annually, the contribution is a fixed rate of €54.43 per week.
• Employer Contribution: Employers also contribute 10% of the employee's salary, capped at the same levels as the employee's contribution.
• Self-Employed: Self-employed individuals contribute 15% of their annual net income from the previous year, up to a maximum of €81.64 per week for those born on or after 1 January 1962.
• Deduction: Social security contributions are deducted directly from the employee's salary, similar to income tax.

Deductible Expenses and Allowances

• Limited Deductibility: While certain business expenses are deductible for self-employed individuals and business owners, employee expense deductions are limited to costs "wholly, exclusively, and necessarily" incurred in performing job duties. This means the expense must be directly related to work, not also for personal use, and essential for doing the job. Reimbursed expenses are typically not taxable unless they result in a gain for the employee.
• Specific Deductions: Some specific deductions are available for individuals, including:
  • Fees for private independent schools, childcare, and tertiary education
  • Facilitator services fees
  • Approved sports activities fees
  • Fees for private homes for the elderly or disabled
  • Approved creative or cultural course fees
  • School transport fees
• Pension Income Exemption: For 2025, 80% of pension income, up to €13,309, is exempt from taxation for pensioners who continue working.
• Alimony Payments: Alimony paid to an estranged spouse is deductible for the payer and taxable for the recipient.

General Information

• Tax Year and Assessment: The tax year in Malta is the calendar year. Income earned in a given year is assessed and taxed the following year. For example, 2025 income is assessed in 2026.
• Registration: Employees must register with the Inland Revenue Department and obtain a tax number for their employer to process payroll correctly.

This overview provides a general summary of employee tax deductions in Malta. Tax laws are complex and can change, so it's always advisable to consult with a tax professional for personalized advice.