Implications of Renting in Malta. Are you looking to invest or rent an office in Malta? If so, it is important that you also take into consideration the legal requirements, in terms of licences, VAT and tax implications. The following information should help regarding the requirements and what to expect however, please always refer to the respective authorities.
VAT IMPLICATIONS
When considering the rent of property in Malta, landlords do not usually charge VAT except for to two exceptions. These are:
- holiday or short stay accommodations, VAT is chargeable @ 7% and
- letting of immovable property by a limited liability company to another tax-registered person to carry out an economic activity. VAT chargeable on such transaction will be 18%. Such commercial activity is typical with office rentals, shops and any other activity which is registered under a company. Such VAT can be claimed back at the end of year.
Tax Implications
Residential Long Lets Malta Tax Implications
Renting out a property as a long-term residence, landlords have two options to follow in terms of a tax procedure:
- Pay a flat rate of 15% as final tax on the gross rental income
The 15% option only applies given that the property is rented out to an individual or individuals who occupy the property as a home or residence (and not as a holiday stay or for commercial purposes). Holders of more than one residential tenement must tax all the tenements at the same option. - Pay at the progressive rates of tax, less the deductions provided for by Maltese tax legislation, which includes any ground rent paid on the rental property, license fees and interest on money borrowed in relation to such immovable property and a further deduction equal to 20% of the net rental income.
Holiday Short Lets Malta Tax Implications
Holiday rentals refer to the rental of a property for short periods for periods less than 6 months and usually weekly or daily rents. Tax is payable on the net rental income. This is determined after deducting any expense incurred in the production of income derived from such activity, given that upon demand, the taxpayer would be in a position to present to the Inland Revenue Authorities supporting documentation. Deductible expenses include among others, license fees, ground rent payable on the property, as well as renovation and maintenance costs.
Tax is payable according to the tax progressive rates applicable to the individual. One may also qualify for a preferential rate of 15%, applicable on rental income up to €12,000, with any additional rental income being charged according to the tax progressive rates.
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