SHELTONS INTERNATIONAL GROUP
Part-time employment is a common feature of the Maltese labour market, offering flexibility for both employers and employees. However, the part-time employment rules in Malta, particularly from a tax perspective, are often misunderstood or misapplied.
Part-time employment is governed primarily by the Part-Time Work Rules (S.L. 123.39), together with the Income Tax Act (Chapter 123 of the Laws of Malta) and related subsidiary legislation. While these frameworks provide the legal basis, their practical application depends heavily on the individual’s circumstances.
In practice, these rules are intended for individuals whose part-time work is not their primary source of income.
What Are the Part-Time Employment Rules in Malta?
The part-time employment rules allow qualifying income derived from part-time work to be taxed separately at the rate of 10%. This is a final tax and therefore the income derived does not need to be declared in the annual income tax return, and is subject to:
- Applicable income thresholds
- Proper classification of the employment
- Compliance with reporting obligations
However, not all part-time roles qualify, even if described as such contractually.
When Can Part-Time Employment Rules Be Applied?
The legislation allows for a few scenarios where the part-time tax treatment in Malta may apply. These include:
1. Individuals with Full-Time Employment Elsewhere
This is the most common and clear-cut scenario.
- The individual has a primary full-time job, and
- Takes on additional part-time (secondary) work.
✓ In this case, the part-time employment is clearly ancillary, and the rules may be applied, subject to the Income Tax Act provisions.
2. Pensioners & Full Time Students
Individuals who are in receipt of a pension or a stipend may also fall within the scope of the rules:
- The pension is treated as the individual’s main source of income, and
- Any additional activity may be regarded as part-time work.
✓ The part-time rules may therefore be applied to the additional income stream.
3. Individuals Whose Spouse Is in Full-Time Employment
The rules may also apply where:
- The individual does not have full-time employment, but
- Their spouse is employed on a full-time basis.
✓ In such cases, the part-time income may still qualify for the separate tax treatment, provided the relevant conditions are satisfied.
The Core Principle Under Maltese Tax Law
Across the above scenarios, a consistent legal and practical test emerges:
The income derived from part-time work must not constitute the individual’s primary source of income.
This principle underpins the application of the relevant provisions of the Income Tax Act, regardless of the specific qualifying category.
Why Primary Employment Remains the Key Benchmark
While alternative scenarios exist (such as spouse employment or pension income), the presence of full-time employment elsewhere remains the most robust and defensible basis for applying the part-time rules.
Practical Interpretation
- Where primary employment exists
The part-time role is clearly secondary in nature, and the tax treatment can be applied with confidence.
- Where no primary income exists
The part-time role may effectively become the individual’s main income stream, meaning:
- The part-time rules should not apply, and
- The income should be taxed under the standard progressive tax system under the Income Tax Act
Common Compliance Risks for Employers
From a practical and compliance perspective, issues often arise where:
- A role is labelled “part-time” but is in fact the individual’s only employment.
- Employers do not verify whether the employee has another primary source of income.
- Eligibility (e.g. spouse employment or pension status) is assumed rather than confirmed.
- The substance of the arrangement does not reflect the legal classification.
Such situations may result in incorrect application of the final tax and exposure to adjustments or penalties upon review.
Example Scenarios
✓ Eligible – IT Specialist with Secondary International Role
Alex works full-time as an IT specialist for a Maltese company, managing systems and infrastructure during standard working hours. In addition, he provides part-time services to an international company based in a different time zone, which allows him to support their operations during their normal business hours without affecting his primary employment.
Since his primary source of income is his full-time employment, the additional part-time role may qualify for the separate 10% part-time tax treatment, subject to the applicable conditions.
✓ Eligible – Pensioner Staying Professionally Active
Joseph receives a retirement pension and works part-time a few mornings per week as an accounts assistant.
As the pension remains his main source of income, the additional employment income may fall within the scope of the part-time rules.
✓ Eligible – Secondary Household Income
Anna recently moved to Malta with her husband, who works full-time in the aviation sector. She works part-time for a local design studio while settling into the country.
Provided the relevant conditions are met, her income may qualify for the separate part-time tax treatment.
✗ Not Eligible – Sole Employment Treated as “Part-Time”
Daniel works under a part-time contract for a single employer and has no other employment or income source.
Although his working hours are reduced, the income effectively represents his primary source of income. In this case, the standard progressive tax rules would generally apply.
Key Takeaway: It’s Not About Hours, It’s About Income Hierarchy
The most critical point for employers and employees to understand is:
Part-time employment rules in Malta are not triggered simply by reduced working hours; they depend on whether the income qualifies as secondary income under the Income Tax Act.
While multiple qualifying routes exist, the clearest and lowest-risk scenario remains where the individual is already employed full-time elsewhere.
Technical Note
The application of part-time tax treatment is subject to the provisions of the Income Tax Act (Chapter 123) and applicable subsidiary legislation, including the Part-Time Work Rules (S.L. 123.39). Eligibility, thresholds, and reporting obligations must be assessed on a case-by-case basis.
How Sheltons Malta Can Help
At Sheltons Malta, we assist businesses with employment structuring, payroll compliance, and tax advisory services, ensuring that part-time employment arrangements are implemented correctly and in line with Maltese law.
If you would like to confirm whether the part-time employment rules in Malta apply to your specific situation, our team will be happy to assist.
