Malta is an incredibly beautiful island nation with a lot of history. Although just 430,000 people call Malta home, its stunning scenery is familiar around the world from films like Troy, The Count of Monte Cristo, and Gladiator as well as hit TV shows such as Game of Thrones. In fact, tourism plays a starring role in Malta’s economy, alongside foreign trade and manufacturing, which contribute to the country’s GDP of around $9.5 billion.
Malta's payroll regulations are complicated by a few important rules specific to the country. While the government entices major corporations to invest in new operations by offering attractive tax refunds, government officials consistently evaluate how workers are being treated every year. This type of climate needs a global payroll expert to ensure maximum revenue without compromising employee law.
Companies will start with the Registry of Companies, before drafting their articles of association and memorandum. All organizations doing business in Malta must have an in-country bank account, which will take around a day to open if you have all of the necessary paperwork. From there, businesses may obtain a Tax Identification Number from the Registry of Companies and a trade license from the Trade Licensing Directorate. Companies can then register for VAT at the VAT Department and for an Employee Identification Number at the Inland Revenue Department. The final stops are the Employment Training Corporation agency and the Office of the Information and Data Protection Commissioner, where companies can register for data protection.
Employment Laws & Employee Rights
Malta values hard work and mandates fair compensation for all workers. The standard work week is 40 hours, with overtime hours capped at a maximum of 8 per week. Approximately a third of Malta's workforce is represented in collective bargaining, mostly in the public sector. Unions are normally found only at the company level in the private sector. While companies don't have to grant unions recognition, they normally will if at least half the workforce has signed up for its benefits.
Worker rights are typically outlined in their contracts, which are mandatory and must be done in writing. Employment contracts state the details of what both the employee and employer can expect from each other. Probationary periods are standard rather than the exception, and are normally the first six months of employment unless otherwise negotiated in the contract.
Compensation & Severance
Minimum wage for employees over 18 years of age is € 169.76 (~$201.68,~ £155.47) for a 40-hour week. The government will periodically issue cost-of-living mandates, whereby employers must increase employee wages to keep up with standard inflation. This normally occurs once a year, with nominal per week raises. Other bonuses and raises are discussed prior to signing the employee contract. There is no mandatory compensation when it comes to severance, other than what is stipulated by the contract. If a fixed-term contract is terminated early, the terminating party is required to pay a penalty equal to half the wages an employee would have earned had the contract been fulfilled. If an employee is let go due to redundancy, they must be given a chance to work between when notice was given and their final departure date or else be compensated in full during that time.
Tax Requirements & Withholding
Personal income tax is calculated according to a scalable system, which goes up to 35%, and is withheld at the source from employee paychecks. VAT is a standard 18% on all goods and services, though certain industries (e.g., electricity) are charged at far lower rates. Employers are required to withhold 10% social security tax from employee paychecks. Malta has an interesting way of enticing foreign entities to do business in the country: The corporate tax is 35%, but a refund system gives much of that money back to entrepreneurs. In practice, corporations are often taxed only around 5% or less.
Time Off & Paid Leave
Malta employees are entitled to at least 24 days of paid time off, plus up to 20 days of paid leave for extended illness. New mothers are required to take off at least six weeks, but are eligible for up to 126 days of paid leave. The employer is required to pay for the first 14 weeks off for new mothers, with the government paying for any additional time off. In addition to sick and vacation time, Malta has 14 public holidays.
|Date||Malta Public Holiday Schedule|
|January 1st||New Year's Day|
|February 10th||Feast of St. Paul's shipwreck|
|March 9th||St. Joseph's Day|
|March 31st||Freedom Day|
|Friday before Easter||Good Friday|
|May 1st||Labor Day|
|June 7th||Sette Giugno|
|June 29th||Feasts of St. Paul and St. Peter|
|August 15th||Assumption Day|
|September 8th||Feast of Our Lady of Victories|
|September 21st||Independence Day|
|December 8th||Immaculate Conception Day|
|December 13th||Republic Day|
|December 25th||Christmas Day|
Benefitting Both Sides
Malta tries to walk a fine line when it comes to keeping both employees and employers happy. Corporations can expect some financial perks they won't find in other countries, but they should be prepared to treat employees with a certain amount of generosity as well.
A payroll solution needs to take into account the unique tax laws of Malta. Between wage increases and refund policies, it's often necessary to let a third party do a lot of the heavy research necessary to keep up. If you can't navigate the financial waters of this country, you may end up paying much higher rates than you need to. An international payroll company makes it easy to get the maximum refund while still being able to pay employees their fair share.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.