On April 4, 2020, Malta released payroll tax-related guidance for employers on the Government’s responses to the COVID-19 epidemic.
Malta has introduced a wage supplement, of EUR800 or less according to eligibility. The payment is intended to replace the normal wages of an employee. It is taxable in the hands of the employee.
The guidance advises that, for payroll purposes, the income should be added to any income received by the employee during the pay period and tax and social security contributions liability should be calculated using the standard method.
The employer should record receiving the wage supplement and pay this gross to the employee. The payslip should show the gross paid (that is, EUR800 or the amount eligible), the guidance states.
The wage supplement paid to employers will not be treated as income or grant to the employer for Income Tax purposes. It is therefore not taxable or tax deductible for the employer.
Government will give EUR800 (or less according to eligibility) to the employer for each employee, though it will retain 10 percent SSC (EUR80 or less) as prepaid employees’ share of social security contribution (SSC).
The employer will then calculate what is due in totality to CFR (that is, the employer’s and employee’s share, Maternity Contribution, and taxes) and deduct therefrom the amount of SSC prepaid to the Commissioner for Revenue (CFR).
On Form FS5, the total due to CFR less the SSC when the wage supplement is paid, will be shown in box D5.
On FS7/FS3 reporting, the Government said Malta Enterprise will provide the full details of the applications to the CFR. Therefore, employers will report the wages supplement paid to employees in the normal FS3 forms. FS7 will be modified to show the amounts paid to employers and the SSC withheld from the wage supplement, the guidance concludes.