The pressure on employers to recruit and retain individuals with the necessary skill set continued to sustain the significant increase in remote working originally brought about by the pandemic.
In recent years, Maltese businesses experienced an increase both in individuals working remotely from Malta and those working remotely from outside Malta. This may create complexities for both employers and remote workers.
Key considerations for employees working remotely from Malta and their employers
- Maltese income tax considerations applicable to the remote worker
- Maltese Social Security Contributions applicable to the remote worker
- Payroll obligations/contributions
- Maltese tax considerations that may arise for the non-Maltese employer
- Immigration considerations
- Employment law considerations
- Employees vs Contractors
- Employment/teleworking considerations
Maltese income tax considerations applicable to the remote worker
Employment income, including certain fringe benefits, in connection with employment activities performed from Malta, should be considered as income arising in Malta and should therefore, in general, be taxable in Malta at the tax rates applicable to the individual, tax treaty considerations aside.
The employee may also have income tax compliance obligations in Malta, including registering for a Maltese income tax number and submitting an annual Maltese income tax return.
Maltese Social Security Contributions applicable to the remote worker
In principle, employees working from Malta should pay social security contributions in Malta. However, in certain cases, non-Maltese employees may opt to continue paying social security contributions in their home country.
Payroll obligations/contributions
Employers employing employees working remotely from Malta may have the obligation to register as a Maltese employer and to withhold Maltese income tax and/or social security contributions and forward such tax/contributions to the Maltese Authorities together with the necessary documentation.
Unless exempt, the non-Maltese employer may have the obligation to pay his share of social security and other contributions in relation to the employee working remotely from Malta.
Maltese tax considerations that may arise for the non-Maltese employer
Certain activities that an employee may be performing from Malta may create a taxable presence for the non-Maltese employer in Malta (i.e. a permanent/fixed establishment). Therefore, the non-Maltese employer may have a income tax charge/VAT considerations and certain corporate compliance obligations in Malta.
Having a taxable presence in Malta may create additional complexities, including withholding tax obligations on payors making payments to the non-Maltese employer when such payments are attributable to the Maltese activity.
Immigration considerations
EU/EEA and Swiss nationals may freely reside and work from Malta, though certain administrative formalities may still apply. Subject to the satisfaction of a number of conditions and the approval of the application, the Nomad Residence Permit allows third-country nationals to reside and work remotely from Malta.
Employment law considerations
From an employment law perspective, rights and obligations differ across borders, and parties may generally agree on the applicable law which should regulate the employment relationship in question. Employers should consider whether such a choice of law may give rise to Maltese employment implications regarding employment conditions which cannot be derogated from, regardless of the law selected by the parties.
Employees vs Contractors
Some employers may seek to bypass the complexities emerging from an employment contract with a Maltese resident employee by instead entering into a service agreement with such an individual. Maltese employment law provides that an individual may still be presumed to be an employee for employment law purposes in the case that a number of specific conditions exist - triggering the applicability of employer and employee rights and obligations and possibly including fiscal obligations.
Employment/teleworking considerations
Recent updates to Maltese employment law stipulate that information on the place or places where employees carry out their work should be provided in writing to the employees. On a separate note, any teleworking/remote working arrangements and related specifications should also be recorded in writing and should include legally required information, including information relating to the location from where the employee will telework. Furthermore, in the case that the parties agree that the teleworking arrangement is of a temporary nature, the termination conditions should also be specified in writing.
The above is highlighting some of the considerations that employees working remotely from Malta and their non-Maltese employers should consider. Similarly, employees working remotely from outside Malta should keep in mind tax and employment considerations that may arise in the jurisdiction from which they are working remotely. Furthermore, Maltese employees need to consider if they will continue having tax and employment considerations/obligations in Malta.
Likewise, Maltese employers employing employees working remotely in foreign jurisdictions need to consider the tax and employment aspects that may arise to them in that specific jurisdiction, and what obligations this imposes on them.
How can we help?
Our team of specialists can help you, in Malta or elsewhere, with:
considering if the presence of the remote worker may create a taxable presence;
any payroll obligations and help with complying with such obligations;
the remote worker’s income tax obligations and if applicable claiming double tax relief;
social security matters;
applying for the Maltese Nomad Residence Permit for both the applicant and dependents, concerning the original application and the renewal process (and same in other territories, if applicable);
applying for a VISA application and guiding the applicant and dependents on the next steps;
updating/implementing a company policy to cater for remote working;
updating/implementing contracts; and
any VAT/transfer pricing or other attendant considerations as may be applicable;
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