Owners of property may rent their property as long as a letting licence is obtained from the Ministry of Tourism. Licence will be issued once the property meets first class standard requirements. Properties may be rented under a long let or holiday licence. For details of licence fees and application forms please visit Malta Tourism Authority website.
Lessors would also have to register with the VAT and Income Tax Department.
INCOME TAX IMPLICATIONS
- Income derived from the letting of immovable property can be of two types – investment income and income derived from a trading. Typically, the difference between the two is distinguished by whether the rental agreement is for short periods (usually for furnished premises for a few weeks or months) or for long periods.
- The tax deductions taken against these two types of rental income is different. Any expense incurred in the production of income derived from trading rental income is an allowable tax deduction, given that upon demand, the taxpayer would be in a position to present to the Inland Revenue Authorities supporting documentation.
- In the case of rental income derived from long lets where the rental activity is not a trade, the allowable deductions are (1) the MTA (formerly HCEB) licence fees if any, (2) ground rent and rents payable on property rented out, (3) any interest incurred on a loan specifically taken to finance the purchase (and perhaps the renovation) of the property from which rental income is derived, and (4) a further deduction equal to 20% of the rental income received less rents and ground rents payable and less the MTA licence fees.
The applicable income tax rates are, however, the normal rates of income tax applicable to residents, which are as follows.