Payroll Services in Malta

The Malta PE number enables companies to engage individuals for employment within their company. The PE number must be obtained by Maltese employers in order to calculate and pay the correct tax and social security contributions of all employed personnel with the Commissioner for Revenue (CIR).

The potential employer should register with the Commissioner for Revenue within fifteen days from the date the first emoluments due to be paid by him to the payee start to accrue.

As from June 2020, the Commissioner for Revenue has introduced the new PE e-Services which will enable Employers and Tax Practitioners to register for new PE numbers through the online services portal. This new service will replace the current e-forms and hence, significantly reduce CFR Staff intervention. With this new service, applicants can easily apply for the PE number which will be issued instantly at the end of the online application process.

The ‘Employer Number’ enables companies to register the engagement or termination of their employees with Jobsplus.

Applying for the Employer Number is fairly simple. One must send an email to Jobsplus with the following information and documents:

1. A copy of the company’s MBR Certificate of Incorporation
2. A copy of the Company’s M&A submitted with the MBR
3. PE Number obtained from the Inland Revenue Department
4. Contact person’s e-mail address & mobile number

Jobsplus will reply back via email confirming that the company has been registered with Jobsplus and will provide the ‘Employer Number’. Once received, the company can start engaging employees and registering them with Jobsplus by means of the Jobsplus engagement form.

The Social Security Number is awarded to Maltese residents and Maltese citizens to keep track of their lifetime earnings, the number of years worked, and the amount of social security contributions paid through the FSS System (Final Settlement System).

When the time comes to retire, the government uses this information about your contributions paid to determine your eligibility and to calculate your pension entitlement.

Failing to pay national insurance can result in a negative effect on the employee’s:

• Contribution Average (this is based on the number of social security contributions paid)
• Pension Entitlement which is based on an average of the best ten full years of SSC paid
• Eligibility to benefit from hospital and local health care centre services
• The possibility of retiring earlier at the age of 61 (if eligible)
• Invalidity Pension (if eligible)
• Opportunity to benefit from the ‘Full Percentage Increase Measure’ scheme.

Individuals already in possession of a Maltese ID card number or e-residence card number shall consider this number as their Social Security Number. There is no need to re-apply for the social security number in this case.

For employment purposes, EU Nationals who are living in Malta but are not yet in possession of their e-residence card can apply for a social security number. One can complete the online e-application which is available on the Social Security Department’s website https://socialsecurity.gov.mt/. The documents below must be uploaded as part of the application:

• Jobsplus Engagement Form or Employment Contract showing that the person will be engaging in an employment activity
• Official Identification Photo – This needs to be a passport or National Identity Document
• Applicant must have a residential address in Malta

Once the application is processed, the social security number will be issued in 3-5 days.

Persons are aged between 16 and 65 and who are in full-time employment, are liable to pay social security contributions. Social security contributions are paid in weekly rates and will result in either 52 or 53 contributions depending on the annual number of Mondays in that calendar year.

Part-time employees are not liable to pay any social security contributions since the contributions would have already been deducted through their full-time employment.

There are two classes of social security applicable to full-time employees in Malta.

Class 1 Social Security Contributions

This applies to employed persons who occupy a full-time job within a Maltese Company. One can refer to the link below for more information on how to re-check or calculate the social security contribution due weekly accordingly to the seven categories listed:

https://cfr.gov.mt/en/rates/Pages/SSC1/SSC1-2020.aspx

Class 2 Social Security Contributions

This applies to self-employed and self-occupied individuals who derive an income of more than EUR 910 in a calendar year and who are not in full-time employment.

One can refer to the link below for more information on how to calculate the social security contributions which are due to be paid every four months:

https://cfr.gov.mt/en/rates/Pages/SSC2/SSC2-2020.aspx

Companies in possession of a valid Employer Number are required to comply with the legislation which implies to withhold the necessary contributions resulting in tax and social security contributions due to the Commissioner for revenue.

When in full-time employment, employees will have their social security contributions (National Insurance) deducted on a monthly basis from their salary. The employee’s computation is then summarised in a monthly return referred to as the FS5 (Final Settlement Tax).

There are three different tax rates implemented for individual resident in Malta.

1. 1. Single Rates – Single Computation
   2. Married Rates Computation – Applicable to married couples who opt for joint tax computation. This option should be considered when only one of the spouses is in employment. If both spouses are working and do not maintain a child, the single tax rates would be the most beneficial.
   3. Parent Rates Computation – Applicable to individuals maintaining a child below the age of 18 years (or 23, if the child is attending tertiary education) and who is not earning an income of more than €3400 per annum.

Part-Time rates may also apply if the employee is employed full time elsewhere.

One can refer to the official CFR link below, with the different tax computations, brackets and percentage rates to be able to manually calculate their tax:

https://cfr.gov.mt/en/rates/Pages/TaxRates/Tax-Rates-2020.aspx

Alternatively, the Commissioner for Revenue has also issued an official FSS spreadsheet which automatically calculates the income tax amount due on the gross monthly income, bonuses and fringe benefits. The spreadsheet can be downloaded from the CFR link below:

https://cfr.gov.mt/en/eServices/Pages/IRD-Services-Online-Employers.aspx

Non-Resident Tax Rates in Malta

If an employee spends less than 183 days (6 months) in Malta, he might become liable to pay tax under the Non-Resident rates as per the CFR link below:

https://cfr.gov.mt/en/rates/Pages/TaxRates/Tax-Rates-for-NonResidents.aspx