We also advise clients on employment tax optimization and the application of several specialist schemes relating to employment. 

FF International can also assist clients to provide employment cost budgets, forecasts and modelling. 

Through our networks and contacts, we have successfully assisted international clients on employment issues in various jurisdictions.

Our payroll services include the following services:

• Drafting of employment agreements, policies and manuals
• Advising on employment issues such as terminations, statutory leave, bonuses, social security contributions 
• Advisory on Fringe Benefits including stock-options
• Employee registration with Jobs Plus and the Commissioner of Inland Revenue
• Registration of employers with the Commissioner for Revenue
• Pay-slips (prepared in accordance with the requirements of Maltese law)
• Preparation of general reports and absences reports
• Electronic Tax reporting under the FSS system – FS5s, FS3s and FS7s
• Employee work permits and residence applications based on employment and self-employment
• Advisory services on special employment scheme such as the Highly Qualified Scheme
• Advisory services on the taxation of non-resident employees
• Representation with Malta tax authorities during investigations and / or compliance reviews

Payroll Requirements in Malta

Any employer, whether an individual, corporate, or other body of persons, is regulated by the Final Settlement System Rules. Under the FSS system, employers are obliged to deduct FSS tax and Social Security Contributions from their employees’ salaries and wages and forward such payments to the Commissioner on a monthly basis.

An end-of-year reconciliation exercise is carried out by each employer and should be completed by the 15th of February of the following year to ensure that no balances or refunds are due. This annual procedure involves the creation of FS3s for each employee and a reconciliation of the payments made throughout the year with the annual totals for all employees through the FS7 form.

FF International provides specialist payroll and employment outsourcing services.

Learn more on Employment and Payroll Services 

Small to Medium Employers

Small and Medium Employees (SMEs) may benefit from opting to submit the FSS end-of-year documents either manually or electronically.

This option applies when an SME has 9 or less FS3 forms for the year. This provision seeks to reduce the administrative burden on SMEs and streamline their compliance requirements when acting as an employer.

Large Employers

Employers having 10 or more employees are considered as large employers.

Employers having 10 or more FS3 forms are required to submit their end-of-year documents electronically. No option is available to large employers to submit documents manually.

We assist client to outsourcing their payroll function.

Due to legal complexities payroll calculations can be quite a complex task which cannot be performed manually.

Our Malta payroll services include:

• Drafting of employment agreements, policies and manuals
• Advising on employment issues such as terminations, statutory leave, bonuses, social security contributions
• Advisory on Fringe Benefits (including stock-options)
• Employee registration with Jobs Plus and the Commissioner of Inland Revenue
• Registration of employers with the Commissioner for Revenue
• Pay-slips (prepared in accordance with the requirements of Maltese law)
• Preparation of general reports and absences reports
• Electronic Tax reporting under the FSS system – FS5s, FS3s and FS7s
• Employee work permits and residence applications based on employment and self-employment
• Advisory services on special employment scheme such as the Highly Qualified Scheme
• Advisory services on the taxation of non-resident employees
• Representation with Malta tax authorities during investigations and / or compliance reviews

Social Security Contributions in Malta

Under the Social Security Act any contract of service or apprenticeship, written or oral, whether expressed or implied, by or under the Government of Malta, is insurable employment.

The term “gainfully occupied” also refers to persons who are employed in insurable employment or are self-occupied. Social security contributions are payable on every insurable employment.

There can only be one insurable employment at the same time, and in case of more than one concurrent employment, the insurable employment will be that which provides the highest income or earnings. nsurable employments are classified into 2 categories:

• Employed Persons (employed with a provider of employment or employer)
• Self-Occupied Persons (earning income from a Trade or Skill)

Under specific cases as prescribed by the Social Security Act (Cap. 318.) persons can also be insured as:

• Self-Employed Persons earning income from rents, interests, and investments)

All persons who are over the age of 16 and who have not yet attained retirement age of 65 years, and who are in insurable employment, are liable to pay Social Security Contributions.

Social Security Contributions are paid in weekly rates, and each year of gainful occupation will carry 52 or 53 Social Security Contributions (depending on the annual number of Mondays) on the payee’s contribution record.

There are 3 Class types:

Class 1 – paid by employed persons

Class 2 – paid by self-occupied persons

Class 3 – paid by Self Employed Persons (with income just from rents, interests, and investments – i.e. not from a Jobsplus considered occupation or trade), and under certain conditions.

Pro Rata Contributions

Employees – Part-time employees who earn less than the weekly National Minimum Wage can opt to have their share on Social Security Contributions, paid at the rate of 10% of their actual basic weekly wage, instead of the default Class 1 Category B rate which is 10% of the National Minimum Wage. This contribution rate is called the Class 1 Pro-rata rate. The Pro Rata contribution rate does not apply to the employer’s share, because the employer is still obliged to pay his/her share of Class 1 contributions in full. One should also consider that when paying Social Security Contributions by 10% pro-rata, these will not be considered as 1 contribution per week for records purposes but carry a lesser proportional weight against the Standard applicable rate.

Self-Occupied Persons – Part-time Self-Occupied Females, students and pensioners, who earn less than the minimum income threshold of Class 2 Rate SA, can opt to have their share on Social Security Contributions, paid at the rate of 15% of their basic weekly income instead of the default Class 2 Rate SA that is the Minimum Standard Class 2 Rate. This contribution rate is called the Class 2 Pro-rata rate. One should also consider that when paying Social Security Contributions by 15% pro-rata, these will not be considered as 1 contribution per week for records purposes but carry a lesser proportional weight against the applicable full weekly rate.

Article 13(i) Contributions – Maltese Residents Employed Abroad

Article 13(i) of the Social Security Act provides for persons employed under a contract of service outside Malta, but who retain their ordinary residence in Malta, may request the Director – DSS to pay Class 1 (Employed person) contributions instead of Class 2 contributions.

For this purpose, Article 13(1) provides that no social security contribution shall be payable by or on behalf of the employer. Following a request, the Department issues Social Security Contribution bills to cover the period of foreign employment as requested to the Director – Department of Social Security.

Although equivalent to Class 1 contributions, Social Security Contributions under Article 13(1) are paid in the same manner as Self-Occupied Class 2 contributions. That is, to the Commissioner of Inland Revenue every 4 months; namely in April, August and December respectively, or until the same employment conditions continue to apply.

The provisions of Article 13 (i) are also applicable in the case of a person partaking in a traineeship scheme with a European Institution where a grant is paid in lieu of a salary.

Learn more on Employment and Payroll Services 

The Final Settlement System

The Final Settlement System is a tax deduction methodology designed to produce accurate tax deductions from emoluments. This methodology ensures that the correct amount of tax is deducted from gross emoluments as they are received thus reducing the incidence of large refunds or tax bills arising from end of year tax assessments.

The Final Settlement System (FSS) was created to regulate the collection of such tax as prescribed in Articles 4(1)(b) and 4(1)(d) of the ITA. These provisions bring to charge any income in respect of:

• Gains or profits from any employment or office, including the value of any benefit provided by reason of any employment or office; and
• Any pension, charge annuity or annual payment.

Fringe Benefits in Malta

Fringe benefit” means any benefit provided or deemed to be provided by reason of an employment or office. The basis for the taxation of fringe benefits is article 4(1)(b) of the Income Tax Act, which applies to all gains or profits derived from an employment or office, regardless of whether they are received in cash or in kind and whether they are received in terms of the normal conditions of the contract of service or by way of a special or ex gratia allowance.

The income from an employment or office reported in tax returns must therefore include the value of fringe benefits, and employers must account for fringe benefits provided to their employees under the FSS system. Beneficiaries who fail to declare the fringe benefit will be liable to additional tax for omission as contemplated by the Income Tax Acts. Employers who fail to report the fringe benefits properly and in time will be subject to penalties.

The following types of benefits are subject to tax in Malta:

Car benefits (Category 1)

• The use of cars owned, leased or hired by employers and made available to their employees for their private use; and
• Cash allowances paid to employees in respect of the use of their own cars.

Use of assets including accommodation (Category 2)

This refers to the use of assets owned or leased by employers and made available to their employees for their private use including private use of residences, boats, airplanes, furniture, machinery.

Other benefits (Category 3)

These are any other benefits provided to employees that do not fall in the two categories above. Such benefits would include:

• Transfers of assets at subsidised prices
• Low interest rate loans, payment or reimbursement by the employer of private costs (utility bills, school fees etc),
• Provision of free or discounted goods and services
• Share Options

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