Tax Deductions in plain English

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Tax Deductions in plain English

Postby adam777 » Mon 29 Jan 2007 14:26

After receiving a nasty shock this weekend when I realised that as I will be working in Malta I don't qualify for the 'Permanent Resident' 15% tax bracket and will be taxed on the higher sliding scale I've been researching the tax regulations. Boy does that make a difference!!!

I have found mention in the tax laws of allowable deductions for housing and car use (if provided by your employer) but the legalese is more than I can take. This is the only mention of such deductions I can find so I'm 'assuming' that they are negligible or so complex to implement that they are effectively useless. Or of course they are very narrow in their focus and could not be applied to most tax payers.

Does anyone know if there are indeed applicable deductions for housing anc car allowances/stipends or if this is just me interpreting the very difficult to follow tax laws incorrectly?
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Postby adam777 » Mon 29 Jan 2007 15:57

Not to worry I found an answer to my own question. The answer is that any monies paid in the form of an allowance are taxable at the same rates as income.

If the employer pays for a car or accommodation then there is a seperate tax strucutre for those items which is slightly less than just paying the income tax on the same amount in cash - so not much of a saving there, at least not by my math.

Ah well I hope the roads, police service and medical care are good as I'm certainly going to be paying for them.
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Postby peterj » Sat 03 Feb 2007 10:05

Just a quick comment, as far as I make out the break even point between "permanent resident flat 15%" and the normal sliding scale is Lm8500 a year approx. Considering that a typical senior professional salary working for a Maltese company seems to be about Lm7000 or less, I didn't think the tax rates were too bad. There aren't many countries I can think of that are taxing senior employees at under 15%.

To (probably mis)quote Dick Smith from Australia - "Don't spend too much time worrying about tax rate's, put your energy into making more money"

You do also I suppose have to take into account social security payments which wouldn't be levied for a non working "permanent resident", but if you're game to take advantage of free health care without insurance that would be cost neutral roughly too I think. You can also look forward to a Maltese pension (ahem - fairly modest I would expect)...........

Me? Pay tax? not if I can avoid it though.
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Postby gozomark » Sat 03 Feb 2007 11:29

tax rates are



Single Married
income income tax rate
0 - 3250 0-4500 0%
3251 - 5500 4501-8000 15%
5501 - 6750 8001-10000 25%
6751 & Over 10000 & over 35%

in working out a breakeven rate, permanent v normal, remember the 1800 minimum tax for permanent, so breakeven for single person is 10,036, for married couple 12,929 (atleast, I think I've got it right !)
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Postby peterj » Sun 04 Feb 2007 21:45

You're right Mark, I had forgotten that fun part of the "Permanent Residents" scheme.

Thinking some more though, it would be even worse for most married couples who are able to income split (certainly a significant proportion of financially independent "retirees" I would think), as they would be able, as I understand it, to opt for being taxed as two singles under the normal scheme.

Just really reinforces my point that Malta is a fairly low taxing country even if you don't consider the total absense of property or other local council taxes.

It also makes me wonder if it could be a much nicer place to be if a little (and I really do mean a little) more tax were raised and spent on infrastructure improvements. I wonder how many folk would, like me, still be attracted by low general cost of living and advantageous geographical position even if the tax take was significantly higher.

Interesting little Skype related wrinkle has appeared on my screen in your post - I have the Skype "call direct from web page" feature enabled, and it has identified the first line of your table as a phone number in Australia :o
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Postby gozomark » Mon 05 Feb 2007 07:44

wierd about the skype bit !

AFAIK, yes, you are right that a married couple are able to be taxed as singles - certainly I know Maltese citizens who both work, and are taxed separately, so I presume foreigners would be the same.

you might find this interesting

http://www.heritage.org/index/country.cfm?id=Malta
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Postby peterj » Mon 05 Feb 2007 08:26

Malta has burdensome tax rates. Both the top income tax rate and the top corporate tax rate are 35 percent. Other taxes include a value-added tax (VAT) and a capital gains tax. In the most recent year, overall tax revenue as a percentage of GDP was 38 percent.



Interesting report. The relevant bit to this thread for me is the quote above. However, from my quick check, that is a bit less than the european average, and a lot less than many other countries. It would also be interesting to know whether local council or property taxes are included in the calculation as I note these aren't mentioned in the narrative for any of the countries I looked at, nor in the methodology statement.

I did note in the methodology statement that the score in this section only looks at the top personal and business tax rates as well as the % of GDP. The top tax rate on it's own is of little interest to me personally.

Also interesting that the European country that scored best in the report on tax take was Ireland, which has much higher personal taxation, but very low company tax.

The score in the Corruption index was also interesting btw. It was perhaps not as bad as I expected from comments made to me by several Maltese on the subject.[/url]
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