What is the 15% tax on rental income in Malta?

Article 31D of the Income Tax Act lets a person who rents out a tenement opt to pay fifteen cents on every euro of the gross rental income received. The tax is final: no set-off and no refund is given against it, the income is separate chargeable income, and an individual who takes the option does not declare that income in the return.

Can I deduct expenses from the 15%?

No. The fifteen per cent is charged on gross rental income received, and no deduction is available against it. Nor can the choice be split: a taxpayer may not put part of a year's rental income through the final tax and the rest through the return in the same year of assessment.

Does the 15% apply if I let more than one property?

Article 31D(4) says that where the option is exercised for a year, it applies to the total rental income received that year from all the tenements let by that person. It is a choice about the year rather than about one property.

Is there a rebate for long residential leases in Malta?

Yes. Article 31D carries a proviso that tax on rent from a long private residential lease is abated as prescribed, and the Private Residential Leases (Tax Rebate) Rules do the prescribing. The rebate applies to registered leases of not less than two years where the fifteen per cent option is taken, is worth between 200 and 500 euro depending on the duration of the lease and the number of bedrooms, cannot exceed fifteen per cent of the rent from that lease, and is reduced proportionately where a lease runs for part of a year.

What happens if rental income is not declared in Malta?

Article 31D(5) says that where an enquiry has been conducted and the Commissioner determines that rental income which should have been declared was not declared, it is charged at thirty-five cents on every euro of the gross rental income received. That tax is final and is in addition to any interest and additional tax payable.

Does the 15% apply to a short let in Malta?

It is the wrong provision for a licensed short let. The Commissioner for Revenue's own manual draws the line: long lets are investment in nature and taxable under article 4(1)(e), while short lets are trading in nature and taxable under article 4(1)(a). Article 31D and its fifteen per cent attach to the investment side, and a letting requiring an MTA licence is treated as a commercial tenement outside the definition article 31D uses.

Article 31D

Fifteen per cent of the rent, and no deductions.

Article 31D of the Income Tax Act lets a landlord pay fifteen cents on every euro of gross rent as a final tax. Nothing comes off it, nothing is refunded against it, and the income never appears in the return.

What it comes to

The rent, and the tax on it.

The rent a monthMonths let this year

Your marginal rate, if you want the comparisonThe rate your next euro of income meets. Declaring the rent in the return taxes it as part of your total income, so what it costs depends on everything else you earn. We cannot know that, and we do not guess it.

Gross rent this year

€10200.00

The final tax at 15%

€1530.00

A registered lease of two years or more may take a rebate off the fifteen per cent, worth between €200 and €500 by the duration of the lease and the number of bedrooms. It cannot exceed fifteen per cent of that lease's rent, and it is reduced for a lease that runs part of a year. We have not read the table itself, so it is not in the figure above.

Three things people get wrong

What the fifteen per cent does not let you do.

Deduct anything

It is charged on gross rent received. No expense comes off it, and no set-off or refund is granted against it.

Split the year

Taking the option applies it to the total rental income from every tenement you let that year. You cannot put one property through it and another through the return.

Leave it undeclared

Where an enquiry finds rental income that should have been declared and was not, article 31D(5) charges it at thirty-five per cent, final, on top of interest and additional tax.

And it is the wrong provision for a licensed short let. The Commissioner for Revenue's own manual puts long lets on the investment side under article 4(1)(e) and short lets on the trading side under article 4(1)(a), and article 31D attaches to the first.

What a short let owes instead The rent ceiling and the dates

Questions

Questions about the tax.

What is the 15% tax on rental income in Malta?: Article 31D of the Income Tax Act lets a person who rents out a tenement opt to pay fifteen cents on every euro of the gross rental income received. The tax is final: no set-off and no refund is given against it, the income is separate chargeable income, and an individual who takes the option does not declare that income in the return.
Can I deduct expenses from the 15%?: No. The fifteen per cent is charged on gross rental income received, and no deduction is available against it. Nor can the choice be split: a taxpayer may not put part of a year's rental income through the final tax and the rest through the return in the same year of assessment.
Does the 15% apply if I let more than one property?: Article 31D(4) says that where the option is exercised for a year, it applies to the total rental income received that year from all the tenements let by that person. It is a choice about the year rather than about one property.
Is there a rebate for long residential leases in Malta?: Yes. Article 31D carries a proviso that tax on rent from a long private residential lease is abated as prescribed, and the Private Residential Leases (Tax Rebate) Rules do the prescribing. The rebate applies to registered leases of not less than two years where the fifteen per cent option is taken, is worth between 200 and 500 euro depending on the duration of the lease and the number of bedrooms, cannot exceed fifteen per cent of the rent from that lease, and is reduced proportionately where a lease runs for part of a year.
What happens if rental income is not declared in Malta?: Article 31D(5) says that where an enquiry has been conducted and the Commissioner determines that rental income which should have been declared was not declared, it is charged at thirty-five cents on every euro of the gross rental income received. That tax is final and is in addition to any interest and additional tax payable.
Does the 15% apply to a short let in Malta?: It is the wrong provision for a licensed short let. The Commissioner for Revenue's own manual draws the line: long lets are investment in nature and taxable under article 4(1)(e), while short lets are trading in nature and taxable under article 4(1)(a). Article 31D and its fifteen per cent attach to the investment side, and a letting requiring an MTA licence is treated as a commercial tenement outside the definition article 31D uses.

This is the rate the Act sets and the arithmetic on it. It is not tax advice, we are not the Commissioner for Revenue, and what is right for you depends on your other income and on what you would have deducted. Take it to an accountant before you choose.