Tax deductions are expenses that can be deducted from income legitimately when calculating taxable income for a relative period. Maltese income tax legislation provides specific rules for determining the types of expense that are deductible against income.

Legal Notice 67 of 2018 on tax deductions for employee transportation costs provides for a new tax deduction.

Under Rule 3 of the notice, an undertaking may claim a deduction against its income equivalent to 150% of the employee transportation costs incurred in the relevant year.

An 'undertaking' is defined as a person carrying on a trade, business, profession or vocation as set out in Article (4)(1)(a) of the Income Tax Act. 'Employee transportation costs' are defined as costs incurred by an undertaking for transporting employees to and from the workplace using a mode of transport that is capable of carrying more than eight people, whether organised by the undertaking or any other entity.

The deduction may be claimed only on the lower of:

  • €25,000 of the employee transportation costs incurred by the undertaking in the year preceding the assessment year; or
  • €300 per employee whose transportation costs have been incurred by the undertaking in the year preceding the assessment year.

The employee transportation costs in respect of which a deduction is claimed under the rules may not benefit from any other deduction and the deduction available under the rules applies only if the undertaking benefiting thereunder:

  • maintains proper records of the employee transportation costs in respect of which the deduction is claimed;
  • claims the deduction in its income tax return relative to the basis year in which the employee transportation costs were incurred; and
  • submits with its income tax return a declaration by a certified public accountant confirming that the undertaking has correctly computed the said costs, in such manner as the commissioner may require.

These rules will apply to transportation costs incurred for the transport of employees from assessment year 2018 and will remain in effect until assessment year 2020.

For further information on this topic please contact Sarah Rausi at Fenech & Fenech Advocates by telephone (+356 2124 1232) or email (sarah.rausi@fenlex.com). The Fenech & Fenech website can be accessed at www.fenechlaw.com.

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