15% taxation on Employment outside Malta

Article 56 (17) of the Income Tax Act provides for a special 15% flat tax rate on employment income derived in terms of an employment contract which requires the individual to carry the employment activities wholly and exclusively outside of Malta.

The special tax rate is not available to any service on board a ship, aircraft or road vehicle owned, chartered or leased by a Maltese company and any service for the Government of Malta. Moreover, the article is subject to an onerous anti abuse rule which requires the employee not to be present in Malta for more than 30 days in any particular year, disregarding presences in Malta when the person is on vacation or sick leave.

One of the conditions for the applicability of the special provisions of article 56(17) (Employment outside Malta) is that during the relevant year the employee is not present in Malta for a period or periods that in aggregate exceed 30 days. In calculating the 30-day period for the purpose of this provision, presence in Malta on vacation leave or sick leave is to be disregarded. Presence in Malta in the following scenarios will be treated as if the employee were in Malta on vacation leave and will therefore also be disregarded:

  • an employee works abroad on a shift basis and stays in Malta in between shifts
  • an employee works abroad on a time-on / time-off basis and stays in Malta during the time-off periods
  • an employee works regularly abroad and stays in Malta during weekends and public holidays