By means of LN 228 of 2017, entitled ‘Voluntary Occupational Pension Scheme Rules’, the Government has finally launched the long awaited tax incentives for Malta pension plans where an employer is also a contributor to the pension plan.

The incentives available under the legal notice are essentially three:

  1. A maximum deduction from the employer’s taxable income of €2,000 per employee, per annum for employer contributions;
  2. A maximum tax credit on the employer’s tax bill of €150 per employee, per annum in connection with employer contributions; and
  3. A maximum tax credit on the employee’s personal tax bill of €150 per employee, per annum, in connection with employee contributions.

These long awaited rules that apply as from this year (2017) have therefore established that once an employer or an employee decides to contribute in a so called ‘qualifying scheme’, the abovementioned tax credits or deductions become available.

This means that employers in Malta may now seriously consider the number of options that are available to them in order to potentially create pension schemes for their employees.

A ‘qualifying scheme’ is defined in the rules as either a retirement scheme licensed under the Retirement Pensions Act or a long-term contract of insurance which qualifies in terms of the rules themselves.

The rules also make it clear that any contributions to a pension scheme by either the employer or the employee shall not qualify as a fringe benefit in relation to the employee’s taxable income as, until now, contributions into such pension schemes where considered to be a taxable fringe benefit.