Overview
Taxation of individual Maltese employees' income is progressive. This means that high earners pay more tax than low earners. Talexio calculates employees' tax amounts each payroll period. The taxable amount per period can vary depending on previous payroll data, start date, bonuses and changes in income. Talexio takes all these factors into consideration to ensure that the tax calculation is correct and eliminate the need for tax bills/refunds at the end of the year. Tax calculations, at times, can be a bit complicated to understand. Below, you can find a list of different types of scenarios:
Frequently Asked Questions
Question |
Answer |
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1. An employee was engaged in the middle of the year. How is tax being calculated and why? Example: Joe Borg earns a gross annual salary of €45,000. He started employment on the 8th of March 2025 and was not employed previously in 2025. He earns a gross figure of €2,784.14 in March (including bonuses), why is the tax in his March payslips €0? |
The progressive tax rates work this way: each month, the payroll will estimate the employee's annual wage based on what they have earned so far. In this example, Joe Borg's projected annual income in March is: €2,784.14 (earned so far in 2025) divided by 3* payrolls in the year (this refers to the number of payrolls computed so far in the year for the company, not for the employee) multiplied by the total number of payrolls in the year (12) = €11,136.56. This means the employee is below the taxable threshold. *We divide by 3 because this is the 3rd payroll of the year, regardless of whether it is the employee's 1st payroll of the year. |
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2. Will Joe Borg pay taxes next month? |
Joe Borg's annual income of €45,000 means he earns €3,750 per month (€45,000/12). The projected annual income in April is: €2,784.14 + €3,750 = €6,534.14/4 payrolls x 12 payrolls = €19,602.42. Suddenly, the employee is above the taxable threshold. Joe is on the single rates. Therefore, the €19,602.42 is taxed at 25% with a deduction of €3,400 = €1,500.61 projected annual tax. In April, he will pay €1,500.61/12 months x 4 months so far - tax paid so far (€0) = €500. This figure will continue to change until his projected annual income stablises. |
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3. Why do TCNs pay so much tax? Ibrahim, a non-European person, set foot in Europe on the 1st of January 2025. He started working at your company on the 3rd of March 2025 and earns €7.50/hr, why is almost 1/3rd of his salary being deducted as tax? |
Third Country Nationals pay non-resident tax rates during the first 6 months of their stay in Malta. It is important to note that these 6 months start from the moment they set foot in the country, and not the date of employment (unless these are the same). After 6 months are over, if the employee is still working in Malta, Talexio will automatically switch the employee to the resident rates (based on their tax status of Single, Married, Parent). Since this is a progressive tax system, they will have overpaid tax up to this point (given that the non-resident rates are higher than the resident rates), so they are likely to enjoy a couple of payslips (depending on their hourly rate and worked hours) at €0 tax. |
| 4. Why is 0 tax being deducted this month if he paid tax last month? | Since tax is recalculated during each payroll, the amount of tax will vary if the employee's earnings vary. Let's take an example of an employee who earned a sizeable bonus/commission in the March 2025 payroll. In the following month, the employee did not receive any bonuses/commissions, and his/her gross was relatively low when compared to the previous payslip. When this happens, the projected annual income is recalculated. If, using this annual income, the projected annual tax is lower than before, then the tax will decrease from the amount paid in the previous payroll. If the difference in pay from March to April was significant enough, the April payroll might be calculated with €0 tax due to the payment in March. |
| 5. Why are employees paying different amounts of tax each month? |
Tax deductions will vary if an employee's gross pay varies month-in month-out. Taking the example in Question 4, if an employee's salary changes, or else the employee receives an adjustment in a payroll, the projected annual income will fluctuate. If an employee is employed with a company on the 1st of January, and earns a yearly salary of €24,000, tax will remain the same each month. For example:
If, on the other hand, an employee started with a company on the 1st of February, that employee will not earn €24,000 in year. For example:
Therefore, since the employee was not employed for the full year, the projected annual income will vary. |