COMPLETING YOUR TAX RETURN A Step-by-Step Guide Basis YYeearar 2020 Ye ar of Assessment 2021 1 2 This information booklet has been produced by the Office of the Commissioner for Revenue to help you fill in your tax return for the basis year 2020 in a complete and correct manner. Please note that the booklet is a guide only and has no legal force whatsoever. For further information: • Visit our website: www.cfr.gov.mt • Call: Freephone 153 • Email: [email protected] The Office of the Commissioner for Revenue uses the information provided to process your Income Tax Return and Self-Assessment in accordance with the Income Tax Acts and subsidiary legislation. We may check information provided by you, or information about you provided by a third party, with other information held by us. We will not disclose information about you to anyone outside the Office of the Commissioner for Revenue unless permitted by law. The Office of the Commissioner for Revenue treats your personal information in accordance with the Regulation (EU) 2016/679 (General Data Protection Regulation) and the Data Protection Act (Cap 586) to protect your privacy. Any queries may be addressed to The Data Controller, Office of the Commissioner for Revenue, Floriana, FRN 1700. 3 CONTENTS GENERAL INFORMATION 6 YOUR TAX RETURN: THE SELF-ASSESSMENT SYSTEM 6 MARRIED COUPLES 8 SEPARATED / DIVORCED COUPLES 9 PARENTS 9 SINGLE PARENTS 9 PERSONAL DETAILS 10 OTHER INFORMATION 11 EMOLUMENT AND BUSINESS INCOME 13 1. Employment or Office 13 2. Trade, Business, Profession or Vocation 14 3. Pensions and Social Security Benefits 16 4. Overseas Employment 16 5. Sub Total 16 6. Deductions from Employment or Office 16 7. Tax Exemptions 17 8. Total Emolument and Business Income 17 INVESTMENTS, CAPITAL GAINS AND OTHER INCOME 18 9. Local Investment Income 18 10. Foreign Investment Income 21 11. Rental Income 21 12. Capital Gains Income 22 13. Income from Alimony 22 14. Other Income 22 15. Total 22 DEDUCTIONS 23 16. Rental Deductions 23 17. Interest Payable on Capital 23 18. Alimony Payments 23 19. Deduction of Fees Paid. 23 20. Other Allowable Deductions 26 4 21. Trading Losses Brought Forward 28 22. Total Deductions 28 23. Total After Deductions 28 TAX COMPUTATION 28 24. Chargeable Income 28 25. Total Chargeable Income 29 26. Tax on Chargeable Income 29 26A. Tax Rebate for Certain Income Brackets 36 26A. Tax Rebate on Pensions 37 26B. Tax After Tax Rebate 38 27. Total Tax on Chargeable Income 38 TAX CREDITS 39 28. Persons Returning to Employment Tax Credit 39 29. Sale of Agricultural Produce 40 30. Other Tax Credits 40 31. Total Tax Credits 42 32. Tax Due After Deducting Tax Credits 42 33. Relief from Double Taxation 43 34. Tax Due After Relief of Double Taxation 44 TAX PAYMENTS 45 35. FSS Tax Deductions 45 36. Provisional Tax Payments 45 37. Provisional Tax Paid on Capital Gains 45 38. Tax at Source on Local Dividends 46 39. Tax at Source on Sale of Agricultural Produce 46 40. Other Tax Payments 46 41. Total Tax Payments 46 TAX UNDERPAID OR OVERPAID 46 42. Tax Underpaid or Tax Overpaid 46 TAX RATES 48 5 GENERAL INFORMATION YOUR TAX RETURN: Income tax rates Income tax rates are explained in THE SELF - this booklet and a table listing all ASSESSMENT available income tax rates can be SYSTEM found at the back of the booklet. Language choice The income tax return is available Deadline and submission in either Maltese or English. The Your income tax return should reach language version you receive is the Commissioner for Revenue by based on the language choice no later than 30th June 2021. If you made when you registered as a do not submit your tax return by this taxpayer in Malta. If you require your date, the Commissioner for Revenue tax return in the second available will issue a tax statement based language, contact the Office of the on estimated amounts rather than Commissioner for Revenue. accurate figures. Checks and enquiries You may send your tax return to the Although the Commissioner for Commissioner for Revenue by post Revenue will be accepting your tax from anywhere in Malta by using the return as declared by you, he may envelope enclosed, free of charge. make additional checks deemed necessary by certain circumstances. If the results of these checks show that you have not paid all chargeable 6 tax, penalties may have to be imposed. The additional tax and interest will be charged as from the income tax return’s due date (30th June 2021). Further assistance Should you require further assistance with completing your personal income tax return, please call our Freephone 153 to set up an appointment with one of our representatives. 7 MARRIED COUPLES Separate computation A married couple may apply the single (or parent, if applicable) rates of tax if they consider Joint tax return these to be more advantageous to them. A married couple’s income is to be “Separate tax computation” applies only to declared in a joint return. For the income from employment, trade, business, purposes of this self-assessment, the profession, vocation or pension income definition of “married couple” includes received in view of past employment. two partners who have registered All other income is chargeable in the their partnership as a civil union. hands of the spouse with the higher total emolument and business income. Responsible spouse The married couple may choose Directors’ fees are always chargeable which of the two spouses is to be the in the hands of the responsible spouse responsible spouse by filling in the – whether these are earned by the appropriate form, which is available responsible spouse or by the other spouse. from the Office of the Commissioner for Revenue’s Taxpayer Service. The income tax return and the tax statement of a married couple will be issued in the In a joint tax return, the word “Self” name of the responsible spouse. However, refers to the responsible spouse. responsibility for the payment of tax lies with Therefore, steps 1 to 8 in the tax both spouses jointly and severally. return must show the emolument and business income of the responsible Taxpayers who married spouse in the left-hand column during 2020 (under “Self”). The emolument and For those couples who got married in 2020, business income of the other spouse the income tax return of the responsible is to be shown in the right-hand spouse is to include (1) the income of the column (under “Spouse”). responsible spouse for the whole of 2020 and (2) the income of the other spouse from The income and relative deductions the date of marriage to 31st December of a dependent child (i.e. a child who 2020. The “Married” rates, or separate tax is not required to fill in an income tax computation, are to be applied thereon. return in his or her own right) are to be included with the income of the The tax return of the other spouse is to responsible spouse. include his or her income from 1st January 2020 to the date of marriage. The “Single” rates are to be applied on this income. 8 SEPARATED / In cases of separation or divorce, it is important that the Office of the DIVORCED COUPLES Commissioner for Revenue is notified regarding any change in the residential addresses of the respective spouses as In cases where a couple has separated soon as the change of address occurs. (both de facto and de jure), both spouses are required to register separately as taxpayers with the Commissioner for Revenue. This can be PARENTS done by informing the Commissioner for Revenue, by means of a declaration signed by a lawyer. The declaration Parent tax rates apply to parents should include the following information: who maintained under their custody a child, or who paid maintenance in • Date of Separation respect of their child, during 2020. • Registration number of separation contract (where applicable) Parent tax rates apply only when the • Name of notary who issued the child was not over 18 years old (or not contract over 23 years old, if receiving full-time • Information referring to custody instruction at a tertiary education and payment of maintenance. establishment) and not gainfully occupied. Or, if the child was gainfully Please note that where such occupied, he or she did not earn an declaration is not submitted, the whole income in excess of €3,400. Students’ contract needs to be submitted. grants are excluded from this amount because they are not income received Each spouse is responsible for filing through gainful occupation. his or her own tax return covering income earned from 1st January to 31st December. Each individual will be taxed as a single person and will SINGLE PARENTS be responsible for paying the relative tax on the income he or she earned. Unmarried individuals, widows or “Married” rates will apply only if the separated/divorced individuals individual qualifies as a single parent (both de facto and de jure) who (see following sections). maintained a child during 2020 may compute their tax charge by applying the “Married” tax rates instead of 9 9 the “Parent” rates. To qualify for the “Married” rates, each of the following conditions must be met: PERSONAL • The parent must have maintained DETAILS a child who, during 2020, was not over 16 years old. If the child was over 16 years old, the parent Identity details might still qualify for the benefit Check the identity details printed on provided the child was a full-time page 1 of your income tax return and student or incapacitated from make the appropriate corrections maintaining him or herself.