Tax Credit (Higher Educational Qualifications) Rules

The Maltese Government has issued new rules to provide for tax credits to individuals who are in possession of qualifications as outlined below, who derive income from full time employment (or full time employment with reduced hours as defined in the Employment and Industrial Relations Act) and perform their services wholly or mainly in Malta. 

A Relevant Qualification is defined as an MQF 7 or  MQF 8 qualification, which is awarded to individuals who would not have attained the age of 40 on the date of commencement of the course or programme and which is completed on or after 1st January 2018. 

In the case of an MQF 7 qualification, the tax credits are allowed against the tax due on the income derived during the year immediately following the year in which the course or programme is successfully completed, while in the case of an MQF 8 qualification, the tax credits are allowed against the tax due on the income derived during the two years immediately following the year in which the studies were successfully completed.  With respect to an individual who completes an MQF 8 qualification and who would have already benefitted from the tax credits in respect of an MQF 7 qualification, the tax credit shall only be allowed against the tax due on the income derived during the year immediately following the year in which the studies leading to the MQF 8 qualification were successfully completed. 

In the case of studies which commenced in 2017 or later, the tax credit is equivalent to the tax chargeable on the income derived by the individual from his full time employment.  When the income exceeds Eur60,000, the tax credits shall be calculated as if the said income was Eur60,000.  If the employee had undertaken his studies on a part time basis, then the tax credits are reduced by 50%. 

In the case of studies on a full time basis, which commenced before 2017, the tax credits shall be computed as follows: 

(A – 2017) / (A – B) X C where ‘A’ is the year in which the studies are successfully completed, ‘B’ is the year of commencement of such studies and ‘C’ is the amount of tax credits calculated as above. 

The employment income is considered to be the first part of the employee’s chargeable income.  The beneficiary of the tax credits must remain in full time employment up to the end of the 4th year (end of the 5th year in the case of an individual who would have benefitted from the tax credits in respect of both MQF 7 and 8 qualifications) following the year in which the studies were successfully completed.  In case the employee no longer complies with this condition, then he or she must inform the tax authorities of such breach and refund back an amount equal to the tax credit together with interest.  No interest would be charged if the individual informs the tax authorities of such non-compliance within 4 months and effects the refund due within 12 months from the date of breach.  The employee will not be deemed to be in breach of this condition if he or she takes up full employment in Malta again within 3 months or the employment is terminated on account of certified sickness or injury. 

For further details and information, you may contact the firm’s tax partners Stephen Balzan on sbalzan@act.com.mt or Elaine Camilleri on ecamilleri@act.com.mt.

Apart from its offices in St. Julian’s Malta, ACT operates from a second office in Gozo, which is situated in the capital city of Victoria.  For an appointment in our Gozo office, please call on 00356 21378672 or send us an email on info@act.com.mt.

 

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