How is rental income on immovable property taxed?

Lessors of immovable property in Malta have more flexible options when it comes to rental income.

Malta changed its rental withholding tax options in 2015. Lessors now have even more flexible options for going about things related to rental income. And when people hear ‘flexible’, they often think ‘complicated.’ But in Malta, it is not.

Before 2015, lessors of immovable property were subject to taxation on rental income lesser deductions under the Income Tax Act. The total rent income is reported on the rental property owner’s tax return and is subject to tax on standard progressive or corporate tax rates.

However, there was a reduced tax on income from rented properties in 2015: from a maximum of 35% to a flat rate of 15%. This rate is calculated on gross income, the total amount of incomings before deducting expenses.

If you opt for the flat 15% rate, you do not have to declare this income in your tax return as it is filed separately through a different system.

Is the flat-rate income tax the best one for you?

You can opt for this rate as an individual or as a company. It is applicable on incomings from letting of residential and commercial properties, including garages.

The 15% flat rate is not applicable for related parties (anyone who co-owns 25% of the property). The 15% tax rate is optional, meaning that with the correct advice from an accountant, you can decide whether it is beneficial to you or not every year.

If it is beneficial to you, you will need to apply for it by filling in Form TA24, available on the Inland Revenue website. If you have obtained a loan to finance your property, you choose to declare your rental income as part of normal income.

Some expenses can be claimed, including ground rent, MTA license fees, loan interest, and a 20% maintenance allowance. It may be more beneficial to add this income to your total income instead of applying for the flat 15% rate.