Deferment of Taxes – Update
The Office of the CfR has updated the guidelines concerning the deferral of certain taxes, one of the measures announced in March 2020 to assist businesses that suffered a significant downturn in their turnover as a result of the economic constraints arising from the coronavirus pandemic.
The guidelines clarify that the measure applies to eligible taxes which fell due in March up to and including June 2020.
The eligible taxes are:
- Provisional tax, social security contributions of self-employed persons and Value Added Tax which fall due in March up to and including August 2020;
- Employee taxes, maternity fund payments and social security contributions which fall due in March up to and including June 2020.
The taxes due are to be settled by 31 May 2021.
How can we help?
We are monitoring developments on an ongoing basis and will provide further updates as more information becomes available. Meanwhile, should you require any assistance relative to how your business may benefit from COVID-19 related incentives, the Economic Stimulus Package, Malta’s Financial Aid package and the various Malta Enterprise support measures generally, please do not hesitate to reach out to us personally.
Re-opening of Share Transfers Section
The Commissioner for Revenue has notified that the front office that processes share transfer documents for income tax and duty purposes housed within the premises of the Malta Business Registry (MBR) will re-open to the public on the 1st of June.
The CfR explained that clients are being advised to wear medical face masks or face shields to visit or premises. Furthermore, clients will be asked to follow the precautionary instructions such as hand sanitizing and abiding by social distancing markings.
A very limited number of customers will be allowed in the premises at any one time and therefore, and therefore clients are being encouraged to leave their documents in the MBR document deposit box which will be situated at the MBR ground floor.
COVID-19 Tax Deferral Scheme ‘Settlement Date’ announced
During the course of yesterday, the Office of the CfR has updated the Notice of the Tax Deferral Scheme to include the Settlement Date for the payment of all deferred taxes. All eligible taxes for the periods of April through to June 2020, namely provisional tax, employee taxes, maternity fund payments, social security contributions (both of employed persons as well as self-employed persons) and VAT, which have benefitted from a deferral in terms of this measure, must be settled by the 31st October 2020.
All tax forms should have been, and must be, submitted according to normal deadlines and the benefit granted under this Scheme shall not remove the obligation of beneficiaries to submit documents and returns by the due date as required by law.
By way of recap, companies and self-employed persons that suffered a significant downturn in their turnover as a result of the economic constraints arising from the coronavirus pandemic and, as a result, faced substantial cash flow difficulties, were entitled to apply to benefit from the Tax Deferral Scheme. The deadline for applications to benefit from this Scheme was 15th May 2020.
How can we help?
We are monitoring developments on an ongoing basis and will provide further updates as more information becomes available. Meanwhile, should you require any assistance relative to how your business may benefit from the various measures introduced by Government and Malta Enterprise to support businesses impacted by the COVID-19 virus, please do not hesitate to reach out to us personally.
Class 2 SSC Implications of COVID-19 Wage Supplement
On 20th May, the Revenue published a notice providing a number of clarifications on the social security contribution (SSC) implications of the COVID-19 Wage Supplement for self-employed individuals. In summary:
- The Wage Supplement is taxable in the hands of the self-employed recipient;
- The self-employed person will receive the applicable Wage Supplement less a deduction of 10% which will be withheld by Government as prepaid SSC;
- The self-employed person should compute the Class 2 SSC for each social security payment period;
- From the amount computed as aforesaid, the self-employed person should deduct the SSC that would have already been withheld by Government on the Wage Supplement received during the relevant social security payment period. Thus, the amount due would be the resulting difference;
- Similarly, where employees are still liable to pay the Class 2 social security rates even though they are employed persons (for instance, in the case of directors owning the employer company), the 10% Class 1 social security contribution withheld from the Wage Supplement shall be treated as a prepaid contribution. Consequently, the amount of Class 2 SSC contributions due by such individuals shall be calculated in the same manner indicated above for self-employed persons. The emoluments earned and tax paid are required to be declared on the relative FSS forms; however, the Class 2 SSC should be omitted from such forms in line with the usual procedure.
Given that the COVID Wage Supplement scheme currently covers the period from March till June 2020, it is likely that the above will affect the social security payment periods of January-April 2020 and May-August 2020.
Guideline in relation to the deadline of reporting of Financial Account information
The CfR has announced that due to the current exceptional circumstances brought about by the COVID-19 pandemic it is increasingly difficult for Reporting Malta Financial Institutions to ensure operational continuity while simultaneously adhering to the reporting obligations as outlined in regulations 30 and 41 of the Cooperation with Other Jurisdictions on Tax Matters Regulations. Consequently, an extension for the submission of the report containing Financial Account information relating to Reporting Year 2019 will be granted, to provide sufficient flexibility to such Reporting Malta Financial Institutions whilst ensuring that there will not be a negative impact on Malta’s international commitments in relation to the automatic exchange of Financial Account information. The following shall have immediate effect and shall supersede Section 12.1.1 of the Implementing Guidelines on Automatic Exchange of Financial Account Information [Version 2] for Reporting Year 2019 only.
The CfR announced that in line with regulations 30, 41 and 45 of the Cooperation with other Jurisdictions on Tax Matters Regulations, Reporting Malta Financial Institutions must report the information specified in Section I of Annex I to the Regulations and the information specified in Article 2(2)(a) and Article 3(2) of the FATCA Agreement on U.S. Reportable Accounts by not later than 30th June 2020 in relation to Reporting Year 2019.
Moreover, the announcement reads that tt is within the responsibility of the Malta Reporting Financial Institution to submit the required information within ample time prior to the deadline to ensure a successful submission. Failure to submit the required information by the specified deadline will result in imposition of penalties in terms of Regulation 44(1)(d) of the Regulations.
COVID Wage Supplement Payroll implications
The Office of the CfR has, on Saturday 4th April 2020, published guidance on the implications of the wage supplement on Payroll and SSC reporting.
The guidance clarifies that the wage supplement (€800 or less according to eligibility) will replace the normal wages of the employee and is therefore taxable in the hands of the employee. For payroll purposes the amount of the supplement will be added to any income received by the employee during the pay period.
The wage supplement paid to employers will not be treated as income of the employer for Income Tax purposes, hence is not taxable nor tax deductible in the hands of the employer.
Regarding Social Security Contributions, the guidance clarifies that upon transfer of the wage supplement to the employer, the Government will retain 10% SSC which will in effect constitute a ‘prepayment’ of the employee’s share of SSC. The employer will then calculate what is due in totality to CFR i.e. the employer’s and employee’s share (Maternity Contribution and taxes) and deduct from that total amount the amount of SSC retained by CFR as a prepayment. The total due to CFR less the SSC retained when the wage supplement was paid, will be shown in box D5 on the Form FS5.
With regard to FS3/FS7 Reporting, employers will report the wages supplement paid to employees in the normal FS3 forms. The FS7 will be modified to show the amounts paid to employers and the SSC withheld from the wage supplement.
©Fenech & Fenech Advocates 2020
Disclaimer │ The information provided on this Update does not, and is not intended to, constitute legal advice. All information, content, and materials available are for general informational purposes only. This Update may not constitute the most up-to-date legal or other information and you are advised to seek updated advice.