DEDUCTION OF TAX (P.A.Y.E) RULES

SUBSIDIARY LEGISLATION 123.02

DEDUCTION OF TAX (P.A.Y.E) RULES

1st January, 1973

LEGAL NOTICE 79 of 1972, as amended by Legal Notices 101 of 1975,

12 of 1976, 132 and 143 of 1977, 135 of 1981, 62 of 1984, 38 of 1987, 25 of

1989 and 409 of 2007.

The title of these Rules is the Deduction of Tax (P.A.Y.E.)

Rules.

In these Rules, unless the context otherwise requires -

"emoluments" means any income chargeable to tax under article

4(1)(b) and (e) of the Income Tax Act;

"paid" means paid directly or indirectly whether in cash or in

kind, and includes crediting or depositing in a bank or other

account or elsewhere for the benefit, use or advantage of the payee;

"payee" means any person to whom emoluments are paid;

"payer" means any person by whom emoluments are paid or who

pays, or is liable to pay emoluments whether on his own account or

on behalf of another person and includes government departments,

persons in the public service of malta, public corporations and their

officials, and other bodies of persons and their officials;

"rate of tax" includes a nil rate.

Determination and deduction of tax

(1) The Commissioner shall determine and direct the rate

at which tax is to be deducted by a payer on any occasion when

emoluments are paid by him to a payee: provided that unless article

71 of the Income Tax Act is applicable or article 46 of the Income

Tax Management Act has been applied, the Commissioner shall

not, without the consent of the payee, direct the deduction of tax in

excess of fifty per cent of the emoluments.

(2) The rate of tax determined by the Commissioner shall be

communicated as soon as may be both to the payer and the payee.

(3) Directions for the deduction of tax may include directions

regarding the manner in which the tax shall be deducted, the period

over which the deduction shall be made and such other directions

as the Commissioner may think fit.

(1) When emoluments are paid to a payee, the payer shall

deduct therefrom a tax at the rate determined and communicated to

him by the Commissioner

Provided that no such deduction shall be made from any

payment to which article 23 of the Employment and Industrial

Relations Act and the Weekly Allowance National Standard Order,

refer unless the Commissioner otherwise directs.

(2)

(a) In cases where the payer has not received directions

from the Commissioner regarding the rate at which tax

is to be deducted, he shall notify the Commissioner

accordingly on the form supplied for this purpose by

the Commissioner.

(b) The notification required by this sub-rule shall be

made within three days of the coming into operation of

the contract under which emoluments are paid by the

payer.

(3) Where the payer has not received from the Commissioner

directions regarding the rate at which tax is to be deducted he shall,

until such time as directions are received, deduct tax at the rate of

ten per cent: provided that if the payee is not resident in Malta, the

payer shall deduct tax at the rate of twenty-five per cent.

(4) Notwithstanding the provisions of sub-rule (3), but saving

the provisions of sub-rule (6), no deductions shall be made from

emoluments paid to a resident payee where directions have not

been received by the payer in the following cases

(a) where the payee is unmarried or a widower and the

emoluments, if expressed to be due -

(i)

on an annual basis, represent an income of less

than two thousand and three hundred and ninety-

nine euros and twenty-five cents (2,399.25) per

annum;

(ii) on a monthly basis, represent an income of less

than one hundred and ninety-eight euros

(198.00) per month;

(iii) on a fortnightly basis, represent an income of

less than ninety euros and eighty-five cents

(90.85) per fortnight;

(iv) on a weekly basis, represent an income of less

than forty-five euros and forty-two cents (45.42)

per week;

(v) on a daily basis, represent an income of less than

nine euros and twenty-two cents (9.22) per day;

(b) where the payee to the best of the payer’s knowledge

is living with and maintaining a wife and the

emoluments, if expressed to be due -

(i)

on an annual basis, represent an income of less

than four thousand and twenty-nine euros and

eighty-two cents (4,029.82) per annum;

(ii) on a monthly basis represent an income of less

than three hundred and thirty-five euros and

forty-three cents (335.43) per month;

(iii) on a fortnightly basis, represent an income of

less than one hundred and fifty-three euros and

seventy-four cents (153.74) per fortnight;

(iv) on a weekly basis, represent an income of less

than seventy-six euros and eighty-seven cents

(76.87) per week;

(v) on a daily basis, represent an income of less than

fifteen euros and forty-nine cents (15.49) per

day.

(5) For the purposes of sub-rule (4), where emoluments are

expressed to be due on some basis other than one of the alternatives

therein contemplated, the test as to whether tax is to be deducted or

not shall be made by using the alternative which is most

appropriate.

(6) Where the emoluments are gains or profits chargeable

under article 4(1)(b) of the Income Tax Act, the provisions of sub-

rules (4) and (5) shall not be applicable if the emoluments are paid

to an employee who -

(a) to the best of the payer’s knowledge is a married

woman; or

(b) is not expected to render full time services to the payer

by whom the emoluments are paid during the period or

periods in respect of which they are expressed to be

payable.

The provisions contained in rule 4(1) shall also apply to

emoluments paid after the determination of the relative contract

under which the emoluments have been paid.

(1) Where the payer is an employer and the payee is a

newly engaged employee, and the emoluments paid to the payee are

gains or profits chargeable to tax under article 4(1)(b) of the

Income Tax Act, the payer shall, until such time as he receives

directions from the Commissioner in terms of rule 3, deduct tax

from emoluments paid to the said payee on the basis of directions

regarding such deductions issued by the Comm issioner to a

previous employer of the payee.

(2) Notwithstanding the provisions of sub-rule (1), the

provisions of rule 4(3) and (4) shall be applicable -

(a) if conclusive proof regarding directions issued to the

previous employer is not made available to the payer

by the payee;

(b) if the directions were issued by the Commissioner to a

previous employer on a date anteceding by more than

eighteen months that on which emoluments are first

paid by the payer to his new employee;

(c) in respect of any emoluments paid three months or

more after a new employee has been engaged where

the directions referred to in paragraphs (a) and (b)

notified a rate of ten per cent or less.

Notwithstanding any obligation laid upon him under any

o th er law, in t he eve nt of any em o lu m en ts accr ui ng t o any

individual being payable at any time after his death, the payer shall

deduct tax therefrom in accordance with the provisions of these

Rules as if the deceased individual were still alive and payment was

being made to him.

If any question shall arise as to -

(a) the applicability or otherwise of these Rules in respect

of any class of income, and/or

(b) the rate at which tax is to be deducted when any

emoluments are paid,

such question shall be determined by the Commissioner, but

subject to the provisions of these Rules.

(1)(a) Any payee who feels aggrieved by the rate of tax

determined by the Commissioner, or any payer on his

behalf, may request the Commissioner to direct a

reduction in the rate at which tax is deducted. The

request shall be made in writing and shall include

sufficient details so as to enable the Commissioner to

decide whether a reduction in the rate at which tax is to

be deducted is justified.

(b) Any request made under the provisions of this rule

shall not be valid if made with regard to a rate or in

relation to any part of a rate certified by the

Commissioner to have been determined for the

collection of unpaid tax for a year or years of

assessment other than the year of assessment following

that during which the deduction is being made.

(2) Any request to the Commissioner made under the

provisions of this rule -

(a) shall not require him to direct the payer to cease

making deductions of tax or to deduct tax at a lower

rate; and

(b) shall not enable the payer to cease deducting tax or to

deduct tax at a lower rate before he is instructed to do

so by the Commissioner.

(3) The Commissioner as soon as may be following receipt of

a request made under the provisions of this rule may require the

p ayer to p r od uce s uch fu r ther in fo r matio n as h e may deem

necessary. If the Commissioner is satisfied that a reduction in the

rate is justified, he shall determine and direct in accordance with

rule 3(1) the new rate at which tax is to be deducted, and he shall

communicate it in accordance with rule 3(2).

(4)

(a) Not more than one request under this rule shall be

made by or on behalf of a payee during any period of

twelve consecutive months.

(b) Nothing in this rule contained shall impair the payee’s

r i g h t u n d e r P a r t s V a n d V I o f t h e I n c o m e Ta x

Management Act following service of the notice of

assessment upon him in terms of article 33(1).

Accounting of deductions

(1) Every payer shall at all times maintain an up-to-date

record complete with monthly totals showing the following details

in respect of each payee -

(a) full name and address;

(b) the date of payment and the gross emoluments paid;

(c) the tax, if any, deducted; and

(d) other details or information which the Commissioner

may require.

(2) The record to be maintained in accordance with the

provisions of sub-rule (1) shall be retained and preserved as laid

down in article 19 of the Income Tax Management Act. Such

record shall be kept on the forms supplied by the Commissioner for

this purpose.

11.(1)(a) On every occasion that emoluments are paid by a

payer, he shall furnish the payee in receipt of such

em o lu m en ts with a st atem en t s h ow in g th e g r os s

amount of those emoluments and the amount of tax, if

any, deducted therefrom in accordance with these

Rules. The statement shall be given on a form

approved by the Commissioner.

(b) The payer shall also furnish the payee, within twenty

days from the 31st day of December of any year, with a

statement in duplicate (one copy to be retained by the

payee and the other copy to be forwarded by him to the

Commissioner together with the return required to be

filed under the provisions of article 10 of the Income

Tax Management Act) showing the gross amount of the

emoluments paid to hum during that year and the

amount of tax, if any, deducted therefrom

Provided that, where the contract under which

the emoluments are paid is determined prior to the 31st

day of December of any year, unless the provisions of

rule 19 or of rule 26 apply, the said statement in

duplicate shall be furnished to the payee or, in the

event of his decease, to his heirs or legal

representative, within twelve days of such

determination.

(2) Subject to the provisions of rule 10(2), a payee shall for the

purposes of these rules or of the Payment of Provisional Tax (PT)

Rules, be entitled to require any person who has at any time paid to

him emoluments to furnish him with a statement within twelve days

of demand showing the total gross emoluments paid to him and the

amount of tax, if any, deducted therefrom during any specific year

or part thereof. This statement shall be given on the form approved

by the Commissioner and it shall be furnished to the payee in

duplicate.

12.(1)(a) Every payer shall submit a return to the Commissioner

(including a nil return) on the form approved by him by

the tenth day of each month containing the following

details in respect of each payee to whom he has paid

emoluments at one or more times during the preceding

month -

(i) the full name and address;

(ii) the gross emoluments paid during that preceding

month;

(iii) the rate at which tax is deductible;

(iv) the tax if any, deducted during that preceding

month; and

(v) any other details or information which the

Commissioner may consider necessary.

The total tax which should have been deducted

during the said preceding month as shown on the said

return, less any amount recouped under paragraph (b),

shall be remitted to the Commissioner together with

the return. Such return shall be delivered on the form

to be supplied or approved by the Commissioner.

(b) Where the payer has deducted tax at a rate higher than

that applicable under these Rules and in consequence

excess tax has been deducted and also remitted to the

Commissioner, and such over-deduction and over-

remittance becomes known to the payer, he shall make

immediately a payment to the payee out of his own

funds of an amount corresponding to such excess

Provided that where the circumstances of the

case warrant an adjustment to the satisfaction of the

Commissioner and that repayment to the payee has

been made, the payer shall on the occasion of the next

remittance to the Commissioner be entitled to set off

and recoup from the total amount of tax to be remitted

to the Commissioner an amount corresponding to the

amount so repaid to the payee.

(2)

(a) If the remittance required by sub-rule (1) is not

received by the Commissioner by the due date, or if the

amount received is less than that which should have

been remitted, the Commissioner shall determine to the

best of his judgement the total amount of the

deductions of tax which should have been made by the

payer during the preceding month, and he shall serve a

notice upon the payer requiring him to pay the full

amount, or the difference, as the case may be, within

the time to be limited in such notice. Such full amount

or difference, as the case may be, shall thereupon

become a debt due to the Government and recoverable

from the payer as set out in rule 17(2).

(b) Where, following service of a notice issued under

paragraph (a), the Commissioner, having regard to the

relevant return submitted by the payer under sub-rule

(1) is satisfied that the total amount received by him

exceeds the deduction of tax which should have been

made, such excess shall be refunded or set off wholly

or in part against the next or any other such remittance

still due.

Where a payer fails to deduct tax in accordance with the

provisions of these Rules from any emoluments, and he

subsequently pays to the Commissioner the amount which should

have been so deducted, he may recover that amount, but only that

amount, in a manner approved by the Commissioner from the payee

from whose emoluments it should have been deducted.

(1) Not later than the 30th day of January of each year,

every payer shall furnish the Commissioner with the following

documents -

(a) a separate return for each payee on the form supplied

or approved by the Commissioner providing the

following details in respect of each payee to whom he

has paid emoluments at one or more times during the

year ending on the preceding 31st day of December

(i)

the full name and address;

(ii)

the gross emoluments paid during that year;

(iii)

the tax, if any, deducted during that year; and

(iv)

any other details or information which the

Commissioner may consider necessary; and

(b) a statement on the form supplied or approved by the

Commissioner which shall include the following

(i)

a list showing the names and addresses of all

payees in respect of whom a return was

submitted under paragraph (a), the total gross

emoluments paid during that year, and the total

tax deducted therefrom; and

(ii) a reconciliation of the sum of the total tax

deducted from each payee listed in the statement

at sub-paragraph (i) with the sum of the monthly

remittances made by the payer for the said year.

(2) The documents required under sub-rule (1)(a) and (b) shall

be furnished in addition to any other return required under rule

12(1)(a).

(3) The Commissioner may at any time require further returns

or statements in relation to any specific period or periods.

(4) The Commissioner may exempt any person or class of

persons from complying with any of the provisions of this rule.

Any exemption may, at any time, be revoked by the Commissioner.

Where a payer, before the end of a year, ceases for any

reason to exercise the functions of a payer, and the provisions of

rule 26 are not applicable, the returns required in terms of rule 14

shall be furnished within one month of such cessation.

Any deduction made under these Rules shall, where the

relative amount has been paid to the Commissioner, be set off for

the purpose of collection against the tax charged in respect of the

year of assessment immediately following that during which the

deduction was made

Provided that where the deductions to be set off as

aforesaid exceed the tax charged for the said year of assessment, as

reduced by any other payments made in its respect, such excess

shall be set off against any outstanding liability for any other year

of assessment, and any remaining excess shall be refunded.

Collection and refunds

(1) Any tax deducted or which should have been deducted

by payers under these Rules during any month shall be a debt due

to Government by the tenth day of the succeeding month and shall

be recoverable as such.

(2) Without prejudice to any other powers vested in him, the

C o m m i s s i o n er m a y s u e an y p a y er i n a c o u r t o f c o m p e t e n t

jurisdiction for the recovery of any tax deducted or which should

have been deducted by a payer under these Rules and not remitted

to the Commissioner within the prescribed period.

(1) A payee shall be entitled to claim a refund of tax

deducted by payers from his emoluments and paid to the

Commissioner under these Rules, in excess of the amount with

which he is properly chargeable.

(2) Subject to rule 16 claims for refunds under this rule shall

be governed by article 48 of the Income Tax Management Act.

Miscellaneous

If any payer dies, anything which he would have been

liable to do under these Rules shall be done by his heirs, legal

representatives or successors, or, in the case of a payer who paid

emoluments on behalf of another person, by the person succeeding

him, or, if no person succeeds him, by the person on whose behalf

he paid the emoluments.

Where two or more persons are concurrently to be

considered to be the payer in relation to any payee for the purposes

of these Rules, the obligations, duties and liabilities imposed on

payers by these Rules shall be deemed to have been imposed on

them jointly and severally.

Every payer, when called upon to do so by the

Co m mis sio ner, sh all p ro du ce fo r in sp ection , at the p ay er ’s

premises or, when the Commissioner shall so require, at the Office

of Inland Revenue, all wage sheets, lists and other documents and

records whatsoever relating to the calculation or payment of

emoluments paid by him, or the deduction of tax therefrom, or the

accounting of any tax so deducted.

Where the payer pays emoluments on behalf of another

person the latter shall provide the payer with all the information

necessary to enable the payer to comply in every way with the

provisions of the Income Tax Act, the Income Tax Management

Act and of these Rules.

(1) Where any amount is paid by the payer to or for the

benefit of a payee in respect of any tax which may be due by the

latter, the emoluments shall be deemed to be increased by a sum

equivalent to the amount so paid.

(2) The provisions of this rule shall also apply in cases where

the payer remits tax to the Commissioner which should have been

deducted from emoluments paid by him but which has not been

deducted, and which is not subsequently recovered by the payer

from the payee.

(1) Where any payment of emoluments to a resident payee

represents or includes amounts payable on the determination of a

contract giving rise to the payment of emoluments, the rate of

deduction of tax therefrom, notwithstanding the provisions of rule

3(1) and rule 4(3) shall be as set out hereunder -

(a) where the terminal payment is less than one thousand

and one hundred and sixty-four euros and sixty-nine

cents (1,164.69) ................................................. 15%;

(b) where it is one thousand and one hundred and sixty-

four euros and sixty-nine cents (1,164.69) or over, but

less than two thousand and three hundred and twenty-

nine euros and thirty-seven cents (2,329.37) ....... 20%;

(c) where it is two thousand and three hundred and

twenty-nine euros and thirty-seven cents (2,329.37) or

over but less than four thousand and six hundred and

fifty-eight euros and seventy-five cents (4,658.75)

30%;

(d) where it is four thousand and six hundred and fifty-

eight euros and seventy-five cents (4,658.75) or over

but less than eleven thousand and six hundred and

forty-six euros and eighty-seven cents (11,646.87)

45%;

(e) where it is eleven thousand and six hundred and forty-

six euros and eighty-seven cents (11,646.87) or over

but less than seventeen thousand and four hundred and

seventy euros and thirty cents (17,470.30) .......... 50%;

(f)

where it is seventeen thousand and four hundred and

seventy euros and thirty cents (17,470.30) or over

55%.

(2) The rates of deduction of tax under sub-rule (1) shall in

such instance be increased by ten per cent where payment is made

to a non-resident payee or to a resident person on behalf of a non-

resident payee.

Every payer is hereby indemnified against any person

whatsoever for all deductions and payments made by him in

pursuance of and by virtue of these Rules.

Where there has been a change in the payer from whom a

payee receives emoluments without there having been an effective

change in the contract under which the emoluments are paid, the

payer after the change shall be liable to do anything which the

payer before the change would have been liable to do under these

Rules.

Saving arrangements such as are provided for in rule 23,

any arrangement whereby a payer undertakes not to deduct tax as

required by these Rules from any part or all of the emoluments paid

to a payee shall be null and void.

The manager or other principal officer of any body of

persons shall be personally answerable for all matters required to

be done under these Rules by or on behalf of the body of persons.

Every payer who is obliged to give notice to the

Commissioner within three days of the coming into operation of the

contract under which emoluments are first payable by him to any

payee. This notice shall be given by every payer on the form

supplied by the Commissioner.

A sufficient number of forms referred to in these Rules

shall be made available free of charge by the Commissioner to

every payer on his request. No return, statement, certificate or other

information required to be submitted by these Rules shall be

deemed to have been submitted unless it is made on a form supplied

or approved by the Commissioner.