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Money matters

Tax deduction - how does it work?

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Tax deduction - how does it work?

Postby blodinek » Sun 16 Oct 2011 06:45 GMT

Hi guys,

I have a pretty simple question in my opinion, but I haven't found answer anywhere, so I will try there.

I am EU citizen moving to Malta. Let's say I have income €30.000 per year. Therefore, my tax rate is 35% and deduction amount is €4.675.

How does the deduction work?

a) 35% from €30.000 is €10.500 minus €4.675 deduction, so I pay €5.825 income tax.

b) €4.675 is dedcuted from my €30.000 income = €25.325 and then I pay 35% of that amount -> €8.863,75 income tax

Do you have answer for that? :-)

Thanks a lot and enjoy Malta!
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Postby gozomark » Sun 16 Oct 2011 09:09 GMT

Hi, and welcome to the forum :-)

I presume you are considering taking ordinary residency (OR), and not the new high net worth individual residency ?

If so, you are taxed on a sliding scale, and if you are single then tax on 30K of income either earned in Malta or brought into Malta is € 5,825

the tax rates and a tax calculator are on the IR website http://www.gov.mt/frame.asp?l=2&url=htt ... ird.gov.mt
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Postby blodinek » Sun 16 Oct 2011 09:24 GMT

Hi,

Thank you for welcome.

Yes, I am considering OR...I am not eligible for new high net worth individual residency if I understand it right as I wont pay €20.000+ per annum for rent.

So it is the first option a), which is lot better for me than b) , thanks.

Then I will be paying SCC, which has limit €53/week if I am right (I wont be employed, but working on a contract) and thats about it. Health care is included in that? Can you please confirm that SCC amount too, if I calculated and found it right.

Thanks a lot for answers.
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Postby gozomark » Sun 16 Oct 2011 09:33 GMT

There is an SSC calculator on the same link above - "I wont be employed, but working on a contract" - do you mean you will be self employed then (or confusingly what IR calls self occupied, self employed meaning something else) ?

http://www.ird.gov.mt/v1/services/ssc/sscrates.aspx

self occupied - € 49.37 max per week
employed - € 32.91 max per week from both employee and employer (ie max of € 65.82

not sure where your €53 comes from, unless the 2011 rates are different to the 2010 ones given on the IR website

yes, healthcare cover is incl as part of paying SSC
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Postby gozomark » Sun 16 Oct 2011 09:38 GMT

Self occupied contributions are based on your previous years income, so it maybe in your first year you pay no SSC, and in your 2nd year less than the full amount if your first year income is only say 30k x 3 months as move during the year - not sure on that, but I believe thats the case
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Postby blodinek » Sun 16 Oct 2011 09:47 GMT

Great, thanks for answers, should be all for now.

BTW I found €53 amount there:

http://ird.gov.mt/services/ssc/class2rates.aspx

When I clicked at "SSC Class Two Rates for 2011" which I believe is my case.

Yes, I will be self-employed or something like that, point is I wont be employee, thats important I think.

Thanks again 8-)
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Postby gozomark » Sun 16 Oct 2011 09:56 GMT

Ah, so IR haven't bothered updating all their pages......

so for 2011 there is a different rate according to whether born before 31/12/1961( max of € 49.54) or born after, (max of € 53.08)
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Postby gozomark » Sun 16 Oct 2011 10:09 GMT

The employed rates are also age dependent from 2011 onwards

http://ird.gov.mt/services/ssc/class1rates.aspx
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Postby blodinek » Sun 16 Oct 2011 10:11 GMT

OK...BTW I got nice explanation of taxes in another forum:

"the first 8500 is tax free the next 6000 is taxed at 15% the next 5000 is taxed at 25% and every eurocent over that is taxed at 35%...how it gets paid (weekly monthly or annually depends on your employer systems)".

The same amount as you told me, but here I can see how exactly does that work.
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Postby gozomark » Sun 16 Oct 2011 10:12 GMT

the info you posted is as per the sliding scale on the IR website link I gave
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