A report issued in May 2012 by Eurostat titled “Taxation trends in the European Union” confirms that the Implicit Tax Rate on Labour of 21.7% in Malta is the lowest rate in the EU by a significant percentage, and is considerably lower than the EU average. This contrasts significantly with the countries on the other end of the scale, such as France, Belgium and Italy where the Implicit Tax Rate of Labour imposed was that of 41%, 42.5% and 42.6% respectively.
At 6% of GDP, Social Security contributions in Malta amount to only slightly more than half of the EU average, which stands at 10.9%. A further analysis of this figure shows that at 2.7% of the GDP, the burden carried by employers for the payment of social security contributions is also lower than half of the EU average of 6.5%, whilst the contributions effected by employees stood at 2.7% (lower than the EU average of 3.3%). Consequently, in Malta the cost of labour is significantly lower than in other EU countries.
While Malta has one of the highest corporate tax rates, namely a tax rate of 35% compared to an EU average of 31.9%, tax refunds e.g. on dividend payments lead to significantly lower effective tax rates.
With regards to the VAT, Malta’s standard rate of 18% is also lower than the EU average of 20.7% in 2012. The rates across the EU member states range from 15% in Luxembourg to 25% in Denmark and Sweden and 27% in Hungary, with only Malta, Luxembourg, Cyprus and Spain imposing standard rates which are not higher than 18%.
These results impressively document Malta’s attractiveness as location for operational and investment activities.