Malta Tax Deductions

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Malta Tax Deductions

The tax system in Malta allows the deduction of expenses that are directly connected with the creation of income.
This allowance includes, as well, payments to affiliated bodies while strictly checking that the amount of the expense is reasonable in relation to the accepted market prices.

  • Bad debts - Provision for bad and doubtful debts is not allowable expenditure.
    A bad debt is recognized only in the year in which documents are presented to show beyond any doubt that the debt is not collectable.
  • Insurance - In general, an insurance premium is fully allowable as an expense.
    The subject of insurance of key personnel is particularly problematic.
  • Royalties - Royalties of a capital nature are not fully allowable in the tax year during which they were paid.
    The royalties are allowed in relation to the economic useful life of the source in respect of which the royalties are paid.
  • Offsetting Losses - A business loss may be offset forward without limit in the number of years.
    It is not possible to offset tax retrospectively on any amount.
  • Thin Capitalisation - Interest is deductible up to 30% of the income before EBITDA.
    The excess can be carried forward indefinitely.

Depreciation of Fives Assets in Malta

  • The accepted method of depreciation in Malta is the straight line method.
    (Depreciation is not allowed on the value of the land).
  • Oil and shipping companies have special rates of depreciation.
  • In the first year of purchase, depreciation in allowed for the entire year even when the purchase was made during the course of the year and not at its start.
  • On the sale of fixed assets, when a capital gain is created, the profit may be set against the cost of purchasing an alternative asset.
  • Depreciation expenses that may not be deducted in the current year, as a result of current business losses, may be offset in the coming years against income from that asset only.

Rates of Depreciation in Malta

Class of Asset %
Industrial Building 2
Machinery and Equipment 6.67-16.67
Electrical Equipment 6.67
Furniture 10
Vehicles 20 (subject to a limit)
Computers and Software 25
Aircrafts 8.33

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