Employee Tax

Daniel Galea St John
Daniel Galea St John
  • Updated

Overview

Malta uses a progressive income tax system, meaning higher earners pay a higher rate. Talexio uses previous payroll data, engagement date, bonuses, and income fluctuations to calculate precise tax amounts each period. By dynamically adjusting for these variables, Talexio ensures year-round accuracy and reduces year-end tax bills or refunds. Tax is handled via a Pay As You Earn (PAYE) framework known as the Final Settlement System (FSS), where your employer deducts the required tax from your payslip.

Permissions

You will need the Manage Payroll permission to access the Payroll section, which is where tax is calculated. 

Tax status

To see which one of these statuses an employee falls under, you will need to refer to their FS4. It is important to note that each employee's tax status is not necessarily the same as the employee's marital status. So if a person is married to another person, the employee does not automatically qualify for the married tax rates. Read on for more details on each tax status.

There are 7 different tax statuses for individual employees:

  • These rates are applicable when the employee is not a parent, and their civil status is single or not currently married (i.e. widowed, separated, annulled or divorced). These rates also apply if the employee is currently married and the couple are both in full time employment.
  • These rates are applicable when the employee does not have children and is married, but also bearing in mind the below criteria:
    • The couple must be living together;
    • The employee is an EU or EEA national who derives at least 90% of their income from Malta; and
    • Only one person from the couple works in full time employment. 

  • These rates are applicable to resident married couples in Malta who maintain one child under their custody (said child must not be over 18 years of age (or not over 23 if in full-time education)) and satisfy the Married Tax Rates criteria above.

    Alternatively, the married rates apply to an employee who is a single parent. In this case, the employee:

    • Must not be married;
    • Must not be living with the other parent of the child;
    • Must be the sole beneficiary of social benefits on behalf of the child; and
    • Must have full custody of the child who has not yet reached their 18th year or has not reached their 23rd year and is studying in tertiary education or has a severe disability. 
  • These rates are applicable to resident married couples in Malta who maintain two or more children under their custody (said children must not be over 18 years of age (or not over 23 if in full-time education)) and satisfy the Married Tax Rates criteria above.
  • These rates apply to resident individuals who do not qualify for the below parent, and who maintain under their custody (or pays maintenance in respect of) childrennwho are not over 18 years of age (or not over 23 if in full-time education).
  • These rates apply to a parent who maintains under their custody (or pays maintenance in respect of) one child who is not over 18 years of age (or not over 23 if in full-time education). Beyond these conditions, the individual must satisfy one of these two criteria
    1. The individual or their spouse must be a Maltese national or a national from an EU/EEA member state; or
    2. The individual or their spouse is a long term resident of Malta as defined in the Status of Long-Term Residents Regulations, and the child is born in Malta and is resident in Malta.
  • These rates apply to a parent who maintains two or more children under their custody (or pays maintenance in respect of) two or more children who are not over 18 years of age (or not over 23 if in full-time education). Beyond these conditions, the individual must satisfy one of these two criteria
    1. The individual or their spouse must be a Maltese national or a national from an EU/EEA member state; or
    2. The individual or their spouse is a long term resident of Malta as defined in the Status of Long-Term Residents Regulations, and the child is born in Malta and is resident in Malta.

The rates for the current and upcoming years in accordance with the Malta Tax and Customs Administration can be found here:

  • Tax Rates 2026
      Chargeable Income (€)
    From To Rate Subtract
    Single Rates
    € 0.00 € 12,000.00 0% € 0.00
    € 12,001.00 € 16,000.00 15% € 1,800.00
    € 16,001.00 € 60,000.00 25% € 3,400.00
    € 60,001.00 and over 35% € 9,400.00
    Married Rates
    € 0.00 € 15,000.00 0% € 0.00
    € 15,001.00 € 23,000.00 15% € 2,250.00
    € 23,001.00 € 60,000.00 25% € 4,550.00
    € 60,001.00 and over 35% € 10,550.00
    Married Computation with One Child
    € 0.00 € 17,500.00 0% € 0.00
    € 17,501.00 € 26,500.00 15% € 2,625.00
    € 26,501.00 € 60,000.00 25% € 5,275.00
    € 60,001.00 and over 35% € 11,275.00
    Married Computation with Two Children or more
    € 0.00 € 22,500.00 0% € 0.00
    € 22,501.00 € 32,000.00 15% € 3,375.00
    € 32,001.00 € 60,000.00 25% € 6,575.00
    € 60,001.00 and over 35% € 12,575.00
    Parent Computation with One Child
    € 0.00 € 14,500.00 0% € 0.00
    € 14,501.00 € 21,000.00 15% € 2,175.00
    € 21,001.00 € 60,000.00 25% € 4,275.00
    € 60,001.00 and over 35% € 10,275.00
    Parent Computation with Two Children or more 
    € 0.00 € 18,500.00 0% € 0.00
    € 18,501.00 € 25,500.00 15% € 2,775.00
    € 25,501.00 € 60,000.00 25% € 5,325.00
    € 60,001.00 and over 35% € 11,325.00
  • Tax Rates 2027
      Chargeable Income (€)
    From To Rate Subtract Maximum Tax Saving
    Married Computation with One Child
    € 0.00 € 20,000.00 0% € 0.00 € 750.00
    € 20,001.00 € 30,000.00 15% € 3,000.00 € 1,450.00
    € 30,001.00 € 60,000.00 25% € 6,000.00 € 1,450.00
    € 60,001.00 and over 35% € 12,000.00 € 1,450.00
    Married Computation with Two children or more
    € 0.00 € 30,000.00 0% € 0.00 € 2,950.00
    € 30,001.00 € 41,000.00 15% € 4,500.00 € 4,050.00
    € 41,001.00 € 60,000.00 25% € 8,600.00 € 4,050.00
    € 60,001.00 and over 35% € 14,600.00 € 4,050.00
    Parent Computation with One Child
    € 0.00 € 16,000.00 0% € 0.00 € 450.00
    € 16,001.00 € 24,500.00 15% € 2,400.00 € 1,150.00
    € 24,501.00 € 60,000.00 25% € 4,850.00 € 1,150.00
    € 60,001.00 and over 35% € 10,850.00 € 1,150.00
    Parent Computation with Two Children or more
    € 0.00 € 24,000.00 0% € 0.00 € 2,300.00
    € 24,001.00 € 33,500.00 15% € 3,600.00 € 3,250.00
    € 33,501.00 € 60,000.00 25% € 6,950.00 € 3,250.00
    € 60,001.00 and over 35% € 12,950.00 € 3,250.00
  • Tax Rates 2028
      Chargeable Income (€)
    From To Rate Subtract Maximum Tax Saving
    Married Computation with One Child
    € 0.00 € 22,500.00 0% € 0.00 € 1,125.00
    € 22,501.00 € 33,500.00 15% € 3,375.00 € 2,175.00
    € 33,501.00 € 60,000.00 25% € 6,725.00 € 2,175.00
    € 60,001.00 and over 35% € 12,725.00 € 2,175.00
    Married Computation with Two children or more
    € 0.00 € 37,000.00 0% € 0.00 € 4,700.00
    € 37,001.00 € 50,000.00 15% € 5,550.00 € 6,000.00
    € 50,000.00 € 60,000.00 25% € 10,550.00 € 6,000.00
    € 60,001.00 and over 35% € 16,550.00 € 6,000.00
    Parent Computation with One Child
    € 0.00 € 18,000.00 0% € 0.00 € 800.00
    € 18,001.00 € 28,000.00 15% € 2,700.00 € 1,800.00
    € 28,001.00 € 60,000.00 25% € 5,500.00 € 1,800.00
    € 60,001.00 and over 35% € 11,500.00 € 1,800.00
    Parent Computation with Two Children or more
    € 0.00 € 30,000.00 0% € 0.00 € 3,800.00
    € 30,001.00 € 42,000.00 15% € 4,500.00 € 5,000.00
    € 42,001.00 € 60,000.00 25% € 8,700.00 € 5,000.00
    € 60,001.00 and over 35% € 14,700.00 € 5,000.00

Different Tax Rate Types

There are different tax rates. On Talexio, these can be selected from the employee's position (under 'Other Payroll Information').

The Tax Rate Type is different to the Tax Status. The former relates to the rate of tax an individual will be paying (such as Qualified person rates which are fixed at 15% or Part time rates which are fixed at 10%). Tax Status is essentially a subset of the Standard/Main tax rates, and determines the rate of tax which a person who falls under such tax rate will pay.

The different options here are:

  • Main Tax (or standard) rate type refers to the progressive income tax rates. This applies to employees whose position refers to their principal source of income. 

    The tax statuses (Single, Married, Married with 1 Child, Married with 2 or more Children, Parent, Parent with 1 Child, and Parent with 2 or more Children) only apply to this tax rate type. 

    The calculation also considers previous employment income within that same year, which is why it is crucial that FS3 data is uploaded when onboarding a new employee after 1st of January. Below you will find an explanation of the tax calculation for such tax rate type. 

  • Part Time Tax rate type applies in the below scenarios:

    • The employee has a full time employment elsewhere or is married to someone who is in full time employment; and
    • The employee's part time role is not more than 30 hours per week 

    or

    • The employee's part time role is not more than 30 hours per week; and
    • The employee is a locally taxed pensioner or is a student.

    This is applicable up to the first €10,000 which an employee earns from part time work. This is not applicable on fringe benefits. 

    The rate is 10% of the gross. Once the €10,000 is skipped, the employee is taxed at 25%. 

    If an employee is on the part time tax rates and is also earning fringe benefits as part of their salary package, these are taxed at the main tax rates. Click here to read more on Fringe Benefits. 

  • A Highly Qualified Person is a specialised professional from abroad who has at least 5 years of experience and the specific qualifications required to fill top-level executive or technical roles. Such employees' employment income is taxed at a flat 15% provided they earn more than the minimum indexed threshold.
  • Income from Sports activities is taxed at a flat 7.5% rate.
  • This refers to a special tax scheme designed for creative practioners and artists who work for themselves on a full or part time basis. If eligible for this tax rate, artists are taxed a flat 7.5% rate on their first €50,000 in respect of artistic earnings, provided such work has been officially certified by the Arts Council Malta.

  • Non-Residents are taxed as follows:

    Annual Income Multiply By Subtract
    €0 - €700 0.00 €0
    €701 - €3100 0.20 €140
    €3101 - €7800 0.30 €450
    €7801 and over  0.35 €840
  • This relates to any other specific tax rate. By selecting this option, you will also be prompted to specify the tax rate:

Tax Calculations

As a general rule, tax is calculated as:
 

Calculation

Tax Due = (Annual Income x Tax Rate Percentage) - Deduction (*where the tax is not a flat rate)

But let's break this down further:

  1. Annual income. With the exception of the last payroll of the year, the Annual income is not a figure you will have available. Therefore, for all other payrolls, the Annual income is replaced by the Projected Annual Income. This refers to the taxable gross income you have received to date divided by the number of payrolls to date and multiplied by the number of payrolls in a year. The taxable gross income to date also includes income from a previous company (for the same year).  
  2. Tax Rate Percentage. The Projected Annual income is then assigned to a tax bracket depending on the tax status. You may refer to the tax bands mentioned before. The Projected Annual income is then multiplied by the relevant tax rate.
  3. Deduction: The result of the Projected Annual Income multiplied by the Tax Rate Percentage is then deducted by the amount applicable to this bracket. The result is the Projected Annual Tax. *If the tax rate being applied is a flat rate, no deduction is removed.
  4. Tax Due. The final step is to calculate the tax due for that particular payroll period. This is done by getting the projected annual tax and dividing it by the number of payrolls in a year. The result is then multiplied by the payroll periods so far (including the current payroll). From this, the tax paid so far is deducted. The result is the Tax Due for this period.

Calculation

Tax Due for each payroll period = (Projected Annual Tax Due/Number of payrolls in a year x Number of payrolls (including the current payroll) so far) - Tax paid so far.

Let's look at this using a few practical examples:

  • Bert Attard started employment with your company on the 1st of January 2026. The employee's gross income from the January payslip is €2,200 euro. He is paid on a monthly basis and is on the Single Tax Rates. His tax due is calculated as follows:
    1. Projected Annual income: €2,200/1 payrolls so far x 12 payrolls in a year = €26,400.

    2. Tax Rate Percentage: according to the tax rates, Bert's projected annual income falls under this bracket:

      From

      To

      Rate

      Deduction
      €16,001 €60,000 25% €3,400
    3. Projected Annual Tax Due: €26,400 x 25% - €3,400 = €3,200 due for the year.
    4. Tax due for January: (€3,200/12 x 1) - €0 tax paid so far = €266.67, rounded to €267.
  • Mark Borg started with your company on the 1st of June 2026. The employee's gross income from a previous employment for January-May 2026 was €11,500. The tax paid from that employment was €1,000. The employee earned €2,500 in June 2026 with your company and paid €450 of tax. You are currently working on the July payroll and the employee earned €2,500 in July 2025. The employee's tax status is Parent with 1 child. 
    1. Total emoluments to date = €11,500 + €2,500 + €2,500 = €16,500.

    2. Projected annual income = €16,500/7 payroll periods so far x 12 payroll periods in total = €28,285.70. According to the tax rates, Mark's projected annual income falls under this bracket:

      From

      To

      Rate

      Deduction
      €21,001 €60,000 25% €4,275
    3. Projected annual tax = €28,285.7 x 25% = €7,071.43 - €4,275 = €2,796.43, rounded to €2,796.
    4. Tax for this period = €2,796/12 payroll periods in a year x 7 payroll periods so far - €1,450 (€1000 + €450) (tax paid so far) = €181 tax for July

  • Roberta Camilleri started with your company on the 11th of May 2026. This is the employee's first employment of 2026 and her contract states that she will be paid €28,000 per year. Her tax status is Single. In May, her basic pay is €1666.67.

    1. Total emoluments to date = €0 + €1,666.67 = €1,666.67.

    2. Projected annual income = €1,666.67/5 payroll periods so far x 12 payroll periods in total = €4,000. According to the tax rates, Mark's projected annual income falls under this bracket:

      From

      To

      Rate

      Deduction
      €0 €12,000 0% €0
    3. Projected annual tax = €4,000 x 0% = €0 - €4,275 = €0. So in May, Roberta does not pay any tax.

    You might say, Roberta's salary is €28,000. Why isn't she paying tax? Surely her income will exceed €4,000 by the end of the year.
    The second point is probably correct. 'Probably' because this is dependent on her working in future months.

    • If Roberta is still employed with the company in June, her projected annual income will increase: €1,666.67 + €2,333.33 (monthly basic for a full month of work) = €4,000/6 payrolls x 12 months = €8,000. While this amount is still within the 0% tax bracket, it is significantly higher than the projected annual income in May.
    • If Roberta is still employed in July, the projected annual income will now be: €1,666.67 + €2,333.33 + €2,333.33 = €6,333.33/7 payrolls x 12 months = €10,857.13.
    • By August, the employee will reach the taxable threshold: €6,333.33 + €2,333.33 = €8,666.66/8 x 12 = €12,999.99. The tax due will then be €12,999.99 x 15% - €1,800 = €150.

You can refer to the FSS calculation report for these workings
 

Employees who get married (Non-Responsible Spouse)

If an employee gets married, their Tax Status will not necessarily change. As explained above, not all married employees are eligible for the married rates. If an employee gets married and maintains the same Tax Status, one member of the newly wed couple is eligible for a tax rebate. But how does this work?

Upon marriage, one of the spouses is chosen to be the Responsible Spouse, whilst the other is the Non-Responsible Spouse. The responsible spouse is chosen by the couple. The non-responsible spouse will have 2 FS3s for the month of marriage (one before the marriage date, and one after). The responsible spouse's FS3 will not be split (there are no changes in payroll for such person). 

Upon the date of marriage, the non-responsible spouse's tax calculation resets to €0. Therefore, this spouse will have 2 payslips and 2 FS3s for the year (for that company): 1 will be from the beginning of the year (or engagement date) until the day before marriage; the other will be from the date of marriage until the end of the year (or earlier if the employee is terminated). For the second payslip and FS3, the tax resets to €0, so the employee will enjoy a period of less tax (up to €12,000 is tax free for employees under the single tax status, up to €15,000 is tax free for employees under the married tax status, and up to €13,000 is tax free for employees under the parent tax status). 

To set up an employee as the non-responsible spouse, please follow the below steps:

  • Search for the employee from the People section or from the search bar on the top, and go to the employee's Details tab.
  • Scroll down until you see Payroll.
  • Select Married or Civil Union from the dropdown menu in the Marital Status field.
  • Tick Not the Responsible Spouse.
  • Fill in the spouse's ID card number and the date of marriage.
  • Press Save.

We recommend that the above steps are actioned during the same month of the marriage (before the relevant payroll is closed). Doing so after the payroll is closed will not result in 2 payslips being generated. The system will still create 2 FS3s. 

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