Employees in Malta may receive car cash allowances if they use their vehicle while on official business. This type of perk is considered a fringe benefit in terms of taxation law. However, the fringe benefit component is calculated at 50% of what the company pays the employee. This is as long as the total allowance does not exceed €1,170.
The total amount deductible is capped at €1,170.
The tax contribution also includes any reimbursement for fuel, including signup schemes, vouchers and repaid receipts. Note that the fuel reimbursement will count towards the threshold mentioned above of €1,170.
The car cash allowance in Malta is given provided that the employee uses their own vehicle and not a company-owned vehicle.
The said allowance criteria must be laid out in terms of any collective agreement that the employee signs up to. The same applies to the case of niche and non-union affiliated employees in their written contract.
To benefit from the car cash allowance in Malta, employees must not use another car owned by the employer. If the employee breaches the laid out conditions, the Tax Department will tax the benefit amount in full.
Multiple car cash allowances
When a car cash allowance beneficiary receives more than one car cash allowance, whether from the same employer or a different one, the employee can only use the 50% deduction once.
For example, when an employee exhausts the €1,170 threshold, the remaining of the other allowance becomes 100% taxable. It is up to the employee to declare any additional car cash allowances to their employers to apply for the allowance correctly.
Rate per kilometre basis
Some reimbursements are made on a rate per kilometre basis.
This form of reimbursement is not treated as a fringe benefit, provided that the rate agreed on is 35 cents per kilometre or less. This covers only business travel in the employee’s car.
All business travel must be recorded in a logbook that the tax authorities can verify and is held securely by the employer for a six-year period. If the above criteria are not adhered to, the full value will be treated as a fringe benefit and taxed under the same criteria as a car cash allowance.