The Minister for Finance Prof. Edward Scicluna launched a new withholding tax on rent on Thursday 30 October 2014.
Minister Scicluna explained that by means of the new scheme, whereby the rate of tax on income from rented properties would be reduced from a maximum of 35% to 15%, tax evasion will be discouraged and government revenue will increase.
Press Statement by the Ministry for Finance
Minister Scicluna also explained that the 15% tax rate would be applicable to rented properties for residential purposes, including garages. Both individuals and companies are eligible for this new reduced tax rate, which is applicable on rental income earned as from 1st January 2014.
Once an individual or company registers with the Commissioner of Revenue the property that is being rented out, and declares the annual income from such rented property, the individual or company will pay a flat rate of 15% in tax on the total rental revenue received.
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While introducing this scheme, the Minister also said that it is a voluntary one, explaining that the Government is allowing rental earners to opt to retain the existing tax regime for rental income.
Should they opt to take up this opportunity to regularise their tax position they will have to declare income from rent for the period 2005-2012 and pay a fine equivalent to 15% VAT on a two year averaged rental revenue received for the mentioned period of time. No interest or penalties would be charged on such declarations.
However, Minister Scicluna noted, should these individuals persist in not declaring income from rent, or declare only part of their undeclared rental income, they will be obliged to pay the full 35% tax rate, in addition to any penalties and interests, following an investigation carried out by tax authorities.
Minister Scicluna underlined that the Government is determined to tackle tax evasion, and is undertaking various measures to rectify as much as possible this undeclared income, such as the currently ongoing Asset Registration Scheme.
He noted that just the day before, Malta joined 50 states and jurisdictions in signing a multilateral agreement on the automatic exchange of tax information on Wednesday 29th October 2014, in Berlin, under the aegis of the OECD.
Prof. Scicluna underlined that the signing was an important step in the fight against tax evasion as it equips revenue authorities with greater tools with which to uncover instances of undeclared assets.
– Monday, 3rd November, 2014