The Commissioner for Revenue has on the 4th April 2020 issued a notice to all employers who will be receiving a wage supplement from the Government to support the wages of their employees. The notice clarifies that the supplement is taxable in the hands of the employees and should be added to any other income received by the said employees during the tax period, when calculating the tax due in terms of the Final Settlement System rules. The supplement is received by the employer from the Government and is paid back to the employee by the employer, so this will neither be considered to be taxable income nor a deductible expense in the books of the employer.
The employer will be required to pay its share of social security and maternity fund contributions on such a supplement, while the Government will withhold the employee’s share before effecting payment to the employer. The employer will also be required to withhold tax and maternity fund contributions. When preparing the monthly Form FS5, the employer will deduct the employee’s share of social security contributions withheld by the Government before effecting payment. The wage supplement should also be reported by the employer in the annual Forms FS3. Forms FS7 will be modified accordingly.
Malta Enterprise will be providing the Commissioner for Revenue with full details of the COVID wage supplements paid to the employers.