Self-employment guide to taxes, VAT and social security
Anyone who carries out an economic activity in their own name (i.e. not through employment) is considered to be self-employed. A self-employed worker does not benefit from the payment of his tax and social security by his employer and could also enter the field of VAT registration for the first time. Thus, all responsibility for complying with these various authorities, for making accurate and timely bids and payments, rests with the individual. In an ever-changing business environment, this could be overwhelming. Below is a brief guide to the obligations of a self-employed person to various authorities.
Value added tax (VAT)
Provided that the income generated by the economic activity of the individual is not exempt without credit (a list of all these activities can be found in the VAT law), that individual is required to register for VAT within 30 days of the start of economic activity with the Office of the Revenue Commissioner. Failure to register on time will result in heavy administrative penalties.
A common misconception is that people who fall below a certain annual income threshold are exempt from VAT registration, however, this is not the case.
If the income generated is not exempt without credit, registration is mandatory from the first income generated. The record type may however differ as explained below:
• Article 10 registration – Any natural person can choose to register under this article regardless of income levels. Registration requires the individual to charge VAT on his supplies of goods or services, and he can claim VAT incurred in the course of his taxable activities through mandatory quarterly VAT returns.
• Article 11 registration – A natural person who will generate annual income of less than € 30,000 (in the case of services) and € 35,000 (in the case of goods) may opt for registration under this article. In this case, the individual will not charge VAT on his supplies of goods or services, however, he will not be able to recover the VAT incurred in the course of his taxable activities. Article 11 People are required to submit an annual VAT return.
• Article 12 registration – A natural person not registered under Article 10 who receives goods or services from EU suppliers may be required to register under Article 12. intra-community services (of any value whatsoever) must register under this article in order to pay VAT on these transactions. These people should submit VAT payment notices every time they receive goods / services from the EU, and on an annual basis they have to complete a declaration.
“If the income generated is not exempt without credit, registration is compulsory from the first income generated”
Unless the person is Maltese or already works in Malta and owns one, they must register for a tax number with the Office of the Revenue Commissioner.
On an annual basis, from the first year of economic activity, the individual will be required to file an income tax return and pay income tax. The deadline for filing the tax return and paying any tax (filing is still required if no profit is made) is six months after the end of the calendar year.
If the person is self-employed part-time, they may pay a flat-rate 15 percent profit tax up to € 12,000, provided that the appropriate form is submitted and taxes are paid before the end of the month. April of the following year. If this is filed and paid, the individual will not have to file a tax return at the end of June as explained above, unless the profits from part-time self-employment exceed € 12,000 for the year.
For this to apply, the individual must be registered as a part-time self-employed person with JobsPlus, must not employ more than two people and must be employed full time or be retired or a full-time student.
Unless the person is Maltese or already works in Malta and has one, they must register for a Social Security number with the Department of Social Security. Once registered, the individual must make three annual payments before the end of April, August and December. The required payments are calculated on the basis of the annual net profit for the year preceding the year in which the contributions are paid. If the person is self-employed part-time and has another main source of income (for example, a full-time job), social security contributions are only paid out of that main source of income and no further payments will be made. required on income from part-time self-employment.
Whether the person intends to carry out their economic activity full-time or part-time, JobsPlus must be informed of this before starting the activity. People who are not already working in Malta will need to register with JobsPlus.
The CSB Group assists with all the above mentioned registrations and ongoing requirements to ensure that at all times individuals and businesses are in full compliance with the respective authorities. For more information or assistance, send an email to [email protected]
The above is subject to changes in regulation / legislation, as well as certain exemptions and exceptions to the general rules.
Timothy Hampton is the Senior Director of Accounts Receivable at CSB Group
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