Tax Calculations

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 Check this out for more info on Tax Statuses and Rates.

Permissions

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

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

Simplify your HR with Talexio. Learn more.

Share: