Tax Rebate on Income Derived from Private Residential Leases

NEWS

15 Jul 2020

The Private Residential Leases (Tax Rebate) Rules (“Rules”) which have been introduced by L.N. 258 of 2020, are applicable to certain Long Private Residential Leases (“LPRL”); i.e. leases which are governed by the Private Residential Leases Act (Chapter 604 of the Laws of Malta).

The Rules are applicable to persons deriving income, on or after 1 January 2020, from LPRLs which are registered with the Housing Authority, having a duration of two (2) years or more. By duration of the lease, one is to understand the term originally agreed upon in the LPRL agreement and not any period of renewal or extension thereof – thus, no tax rebate shall be granted to persons deriving rental income from an LPRL having an original term of one (1) year and which is subsequently renewed for an additional one (1) year period.

Furthermore, the Rules stipulate that the tax rebate shall be entitled to persons who choose to tax their rental income at a rate of fifteen percent (15%) as provided for in article 31D of the Income Tax Act (“ITA”) (Chapter 123 of the Laws of Malta). The tax rebate shall be granted to eligible individuals in the form of a deduction from the tax chargeable on the rental income from each LPRL, whereby the rebate to be granted shall depend on the duration of the lease and the number of bedrooms of the leased property. Persons wishing to make a claim for the tax rebate in question may do so by filling up the TA 24 – Tax from Rents from Residential & Commercial Lets Form, along with submitting the payment of tax due in terms of article 31D of the ITA.

The tax rebate shall be as follows:

- For LPRLs having a duration of at least two (2) years but less than three (3) years:

  • One bedroom – Tax Rebate of two hundred Euro (€ 200);
  • Two bedrooms – Tax Rebate of three hundred Euro (€ 300);
  • Three bedrooms or more – Tax Rebate of four hundred Euro (€ 400).

- For LPRLs having a duration of three (3) years or more:

  • One bedroom – Tax Rebate of three hundred Euro (€ 300);
  • Two bedrooms – Tax Rebate of four hundred Euro (€ 400);
  • Three bedrooms or more – Tax Rebate of five hundred Euro (€ 500).

The tax rebate shall be granted on a pro rata basis, relative to the number of days for which the LPRL is in force for that year, depending on when the LPRL commences or is terminated. Moreover, the rebate for any year in respect of an LPRL cannot exceed fifteen percent (15%) of the rent derived in that year from that lease.