Contracting in Malta: A Guide for International Contractors
The archipelago nation of Malta located in the Mediterranean Sea can easily capture the imagination of international contractors looking for clients in a unique setting. There is a demand for talented workers in many industries, and it can be worthwhile to look into Malta as your next destination. Malta is a member of the European Union, which will smooth the process for EU nationals.
As you search for clients, it is advised to review what will be required to work in Malta as a contractor, and what options you have for getting paid, establishing residence, and managing taxes. This guide will give you an idea of how to begin, and set yourself up for a successful stay.
Do I need a visa to be a contractor in Malta?
EU nationals do not need a work visa in Malta and only must apply for a residence permit. Non-EU citizens from ‘third countries’ (including the UK post-Brexit) can apply for a self-employment visa. However, the requirements are onerous, including a EUR 500,000 investment of capital, so most likely not suited to the average contractor. Still, there are options for a non-EU citizen to work in Malta.
How do I get paid as a contractor in Malta?
The way that you structure your contracts and choose to get paid is crucial, as it will affect immigration, taxes, and retained earnings. Here are the primary choices;
Work as a self-employed freelancer
This option is really only viable for EU nationals given the work visa barriers unless you can convince your client to sponsor a visa for you. This might take the form of employment in that case, which is fine if you only work with one Maltese client and don’t mind giving up the independence of contracting.
If you can enter and work as a self-employed, you will contract directly with your clients and arrange the milestone and payment terms. You might have to take some time to gain a new client’s trust if it’s your first experience contracting in Malta.
Set up your own limited company
Once again, EU citizens can set up a limited company, either in their own country or Malta, and use that entity to contract with clients. In Malta, that requires capitalization of EUR 1200, along with typical business registration steps. Having a limited company can give your clients some assurance that you are reliable and take contracting seriously.
Your limited company will contract with the client, and you may also be responsible for corporate tax or VAT if your earnings are high enough.
Work with an umbrella company in Malta
An umbrella company in Malta can be a real asset for a contractor of any nationality, as they can sponsor work visas, set up the local contract, and facilitate timely payment. They are a third party to your relationship with the client, which can be helpful to minimize any cultural differences and to establish trust.
The client would contract with the umbrella company, which would in turn issue payment to the contractor after withholding taxes and social contributions. This all saves you the tasks of contract administration and payment, allowing you to focus on your work.
How do taxes work for contractors in Malta?
Like most countries, Malta has its own unique system of taxation and some special provisions for non-resident workers.
Tax rates are progressive in Malta, based on annual income and ranging from 0-35%. The rates are the same for residents and non-residents, but each has different income thresholds (the tax rates kick in at lower thresholds for non-residents). There is also a special ‘part-time self-employment’ rate of 15% if your income is less than EUR 12,000 per year.
Tax residency rule in Malta
Malta uses the 183-day rule for tax residency, and any stays beyond that will result in taxation of worldwide income. You would then have to look to a tax treaty with your home country to avoid double taxation. If you can show that you are domiciled in another country, Malta may only tax Malta-sourced income.
How to file taxes in Malta
Every foreign individual that works in Malta must register and obtain a nine-digit tax id number, either in person, by post, or online.
If you work through an umbrella company, they will withhold taxes using the PAYE system, based on projected annual income. Then, all you have to do is file a year-end tax return, assuming the withholding covers your tax liability. In some cases, the tax authorities will issue a Tax Statement of what is owed, which if you find accurate you don’t have to file a return.
Those working as self-employed or through a limited company will have to handle tax payments and filing on their own, or with a local accountant.
If filing on your own as self-employed, you must make three payments of 20%, 30%, and 50% throughout the year, based on your self-assessment of tax liability. This would be arrived at based on projected earnings minus expenses, and applying the correct tax rate based on residency status.
The tax return must be filed by June of the following year, and any owed taxes paid immediately. All tax payments can be made online at the government tax authority’s website.
What are the social security contributions in Malta?
The social security contribution for self-employed contractors is 15% of earnings, although EU citizens may be able to avoid this if they remain on their home country social security program. Social security contributions can be made online just as with tax payments.
How do I stay compliant while contracting in Malta?
The main compliance concerns for international contractors in Malta are making correct tax payments, meeting immigration requirements and paying social contributions. Each of these can apply to expat contractors in Malta, and depend on a number of criteria that may be difficult to learn if you are new to the country.
The easiest way to remain compliant given all the variables is to use an umbrella company as your local partner in Malta. They are already well-versed in the rules for self-employed contractors and can help you get started with the contract, and then facilitate all of the compliance-related steps on your behalf.
Using an umbrella company is the best way to avoid any misclassification issues or violating any self-employment rules. Aside from compliance, here are the other benefits of using an umbrella company:
- Handles all client payments, tax withholding, and any social contributions
- Issues you a payslip each month, to a local or foreign account
- Sponsors work permits for non-EU citizens
- Helps set up the contract with the client
- Moderates any disputes with your client
- Advises on access to totalization and double taxation treaties
Contractor Taxation has experienced umbrella companies in Malta who are ready to help you right away, even before you leave home. Please contact us for more information on how an umbrella company can be your essential partner in international contracting.