FINAL SETTLEMENT SYSTEM (FSS) [ S.L.372.14 1
SUBSIDIARY LEGISLATION 372.14
FINAL SETTLEMENT SYSTEM (FSS) RULES
1st January, 1998
LEGAL NOTICE 88 of 1998, as amended by Legal Notices 128 of 1999, 39 of 2000 and 297
of 2001.
ARRAGEMENT OF RULES
Rules
General 1 - 2
Payee Status Declaration 3
Payer’s Registration 4 - 5
Deduction of Tax by Payers 6 - 14
Remittance to the Commissioner of deductions made by payers 15 - 17
Records to be kept and information to be forwarded by payers 18 - 23
Imposition of FSS Additional Tax and Contestation Procedure 24
Collection, Set-Off and Refunds 25 - 27
Miscellaneous 28 - 37
Schedule A: FS4 Payee Status Declaration
Schedule B: FSS Main Declaration Method
Schedule C: FSS Additional Tax
2 [ S.L.372.14 FINAL SETTLEMENT SYSTEM (FSS)
Title. 1. The title of these rules is the Final Settlement System
(FSS) Rules.
Interpretation.
Amended by:
L.N. 128 of 1999;
L.N. 39 of 2000;
L.N. 297 of 2001.
Cap. 372.
2. In these rules, unless the context otherwise requires -
"Act" means the Income Tax Management Act;
"emoluments" means:
Cap. 123.
(i) any income, including any fringe benefits,
chargeable to tax under article 4(1)( b ) of the
Income Tax Act; and
(ii) any pension arising or received in Malta
chargeable to tax under paragraph ( d ) of the said
subarticle; and
Cap. 406.
(iii) any other remuneration payable or fringe
benefits that are provided to an individual for
services rendered by him except where such
individual receives such payment in the course
of his trade, business, profession or vocation or
is otherwise required to be registered for the
purposes of the Value Added Tax Act, in respect
of such services, or where he renders such
services to any individual for domestic and
private purposes;
Cap. 123.
"fringe benefits" means any benefits provided or deemed to be
provided by reason of an employment or office in terms of the
provisions of article 4(1)( b ) of the Income Tax Act or of
regulations prescribed under that paragraph;
"paid" means paid directly or indirectly in cash or in kind, and
includes the provision of a fringe benefit, and the terms "payable"
and "payment" shall be construed accordingly;
"paid in cash" includes paid by cheque or draft, credited or
deposited in a bank or other account elsewhere for the benefit, use
or advantage of the payee and any set off against any liability of the
payee, and the terms "payable in cash" and "payment in cash" shall
be construed accordingly;
"payee" means any person to whom emoluments are paid;
Cap. 123.
"payer" means any person by whom emoluments are paid or
deemed to be paid in terms of the provisions of article 4(1)( b ) of
the Income Tax Act or of regulations prescribed under that
paragraph, or who pays, or is liable to pay emoluments whether on
his own account or on behalf of another person and includes
government departments, persons in the public service of Malta,
public corporations and their officials, and other bodies of persons
and their officials;
"rate of tax" includes a nil rate;
Cap. 123.
"value of fringe benefits" means the value of fringe benefits
determined in accordance with regulations prescribed for the
purposes of article 4(1)( b ) of the Income Tax Act.
FINAL SETTLEMENT SYSTEM (FSS) [ S.L.372.14 3
Payee Status Declaration
Completion sad 
submission of 
payee status 
declaration form.
3. (1) A payee in receipt of emoluments, being emoluments
as defined under rule 2(i) and (iii), shall be required to complete
Section 1 of a Payee Status Declaration on the prescribed form set
out in Schedule A and forward the said form in triplicate to the
payer by the 1st January, 1998, and thereafter within seven days
from the commencement of a new source giving rise to such
emoluments or upon any change in the information required to be
given in Part B, C or D of Section 1 thereof.
Cap. 123.
(2) Failure on the part of the payee to comply with the
provisions of sub-rule (1) shall render any emoluments due to be
paid to him subject to tax deduction at a rate equal to the maximum
rate of tax provided under article 56(1) of the Income Tax Act.
Such rate of deduction shall remain applicable for the period during
which the default continues.
(3) A payer to whom a Payee Status Declaration form has been
forwarded as aforesaid by the payee shall be required to complete
Section 2 of such form. The payer shall submit to the
Commissioner the original copy of such form by the last working
day of the month following that during which the said form was
forwarded to him, retain the payer’s copy for the purposes of any
inspection which may be carried out from time to time in terms of
rule 31, and forward the remaining copy to the payee.
(4) Where the form referred to in this rule has not been
forwarded by the payee, the payer shall nevertheless complete to
the best of his knowledge Section 2 and Part A of Section 1 of the
said form and submit it to the Commissioner for the purposes of
sub-rule (3).
(5) Where the payer submits to the Commissioner the form
referred to in this rule in accordance with sub-rule (4), the
provisions of sub-rule (2) shall still apply.
(6) A payer who, without reasonable excuse, provides
incomplete or incorrect information on the form required to be
submitted under sub-rules (3) or (4), or who fails to submit such
form to the Commissioner shall, in addition to the corresponding
additional tax prescribed in Schedule C, be liable to the payment of
any underdeduction of tax, consequent to such default made in
respect of emoluments paid by him to any payee unless such
amount of tax is otherwise recovered by the Commissioner by the
31st December of the year in respect of which the deduction should
have been made.
Cap. 123.
(7) Where the form required to be submitted under paragraph
(3) hereof is, for any reason, not considered acceptable by the
Commissioner due to any default on the part of the payee, it shall
be returned to the payer for correction, and unless the payee effects
the necessary corrections in time for the payer to resubmit the form
within fourteen days, the payer shall deduct tax, from any
emoluments subsequently due to be paid to the payee, at a rate
equal to the maximum rate of tax provided under article 56(1) of
the Income Tax Act and such rate of tax deduction shall remain
applicable until the Commissioner otherwise directs.
4 [ S.L.372.14 FINAL SETTLEMENT SYSTEM (FSS)
(8) Where, due to the operation of sub-rules (2) and (7), any tax
has been deducted from emoluments payable to the payee, it shall
be set off against the tax charged on the payee or refunded to him,
as the case may be, in accordance with article 23(2) of the Act.
Payer’s Registration
Registration as a 
payer.
S.L. 123.02
4. (1) Every person shall, as from the 1st day of January,
1998, register as a payer with the Commissioner within fifteen days
from the date the first emoluments due to be paid by him to a payee
start to accrue, unless such person was registered for the purposes
of the Deduction of Tax (P.A.Y.E.) Rules, prior to the said date and
such registration has not since been cancelled.
(2) A request for registration as a payer shall be made by the
individual carrying on a trading, business, professional or
vocational activity or, in the case of a body of persons, by the
manager or other principal officer, and such registration shall be
effected by completing the appropriate form supplied by the
Commissioner to whom it shall be forwarded together with any
required supporting documentation.
(3) Every person shall, following registration as a payer in
accordance with this rule, report to the Commissioner on the
appropriate form any substantial change affecting the information
previously submitted by him upon registration, and failure to report
such change shall constitute a default against the provisions of sub-
rule (1).
(4) Without prejudice to the obligations imposed on the payer
under the other provisions of these rules, the provisions of sub-
rules (1), (2) and (3) shall likewise apply to a person who has
acquired a going concern which engages individuals to whom
emoluments are payable.
Cancellation and 
re-registration.
5. (1) A payer shall, upon ceasing to carry out his functions
as a payer, request the Commissioner to cancel his registration as a
payer. 
(2) A request for cancellation in accordance with sub-rule (1)
shall be made by an individual carrying on a trading, business,
professional or vocational activity or, in the case of a body of
persons, by the manager, other principal officer or liquidator, and
such cancellation shall be effected by completing the appropriate
form supplied by the Commissioner wherein the obligations of the
payer requesting cancellation under this rule are clearly set out.
(3) Prior to any cancellation as a payer, the person making the
request under this rule shall, unless the Commissioner otherwise
directs, be required:
( a ) to furnish a statement of earnings to all his payees in
accordance with rule 21;
( b ) to remit to the Commissioner all outstanding tax
deductions and to forward the relative monthly
payment advice as required under rule 15;
( c ) to submit to the Commissioner his annual
reconciliation statement in accordance with rule 22
FINAL SETTLEMENT SYSTEM (FSS) [ S.L.372.14 5
together with a copy of each statement of earnings
required to be furnished under paragraph ( a ); and
( d ) to provide any other details or information which the
Commissioner may require.
(4) Where a person ceases to carry out his functions as a payer
for a temporary period only, he shall notify the Commissioner
accordingly on the form referred to in sub-rule (2) and unless
otherwise directed by the Commissioner, he shall nonetheless
comply with the provisions of sub-rule (3).
(5) Subject to the other provisions of this rule the
Commissioner may at any time cancel the registration as a payer of
the person making the request and notify him accordingly.
(6) A person who, following his cancellation as a payer in
accordance with the provisions of this rule, recommences paying
emoluments shall be required to request a new registration as a
payer in terms of rule 4.
Deduction of Tax by Payers
Payers to deduct 
tax by applying the 
appropriate 
method.
Amended by:
L.N. 297 of 2001.
6. (1) Save as provided under rule 3(2) or as otherwise
directed by the Commissioner under sub-rule (2), every payer shall
deduct tax from each payment of emoluments made to a payee, to
the extent that it consists of or includes a payment in cash by
applying, as the case may be, one of the following tax deduction
methods:
( a ) the FSS Main Tax Deduction Method, in the manner
provided under rule 7 and as set out in Schedule B;
( b ) the FSS Part-Time Tax Deduction Method, in the
manner provided under rule 8;
( c ) the FSS Other Emoluments Tax Deduction Method, in
the manner provided under rule 9.
(2) Notwithstanding the provisions of sub-rule (1) regarding
the deduction of tax by payers, the Commissioner may, whenever
he thinks fit, determine a method of tax deduction or direct the
deduction of the amount which should be made or the rate at which
tax is to be deducted in such manner to cover the tax due by the
payee for the year and instruct the payer in writing to effect such
deduction accordingly.
(3) In computing the amount of tax to be deducted in
accordance with sub-rule (1) or as directed by the Commissioner
under sub-rule (2), the payer shall disregard any fraction of a lira
being equal to or less than fifty cents, and round up to one lira any
fraction of a lira exceeding fifty cents.
Application of the 
FSS Main Tax 
Deduction Method.
Amended by:
L.N. 39 of 2000.
7. (1) Tax deduction under the FSS Main Tax Deduction
Method referred to under rule 6(1)( a ) and computed in accordance
with Schedule B shall apply in respect of:
( a ) all local pensions receivable by the payee other than
those regulated by the provisions of sub-rule (3); and
6 [ S.L.372.14 FINAL SETTLEMENT SYSTEM (FSS)
Cap. 123.
S.L. 123.39
( b ) any income from emoluments as defined under rule
2(i) (excluding those payable in respect of part-time
work to which the provisions of article 90A of the
Income Tax Act and of the Part-time Work Rules
apply) indicated by the payee in his Payee Status
Declaration form as constituting the main source of his
emoluments:
Provided that where the payee is in receipt of one or more
local pensions as aforesaid, no further emoluments arising to him
shall qualify for tax deduction under the FSS Main Tax Deduction
Method:
Provided further that where the payee is not in receipt of
any such pension, he shall, at any one time, indicate only one
source of income from emoluments, as defined under rule 2(i), as
constituting the source to which the said method applies.
(2) Where any payment of emoluments made to a payee is to be
considered for deduction purposes under the FSS Main Tax
Deduction Method referred to in sub-rule (1), the payer shall
compute the amount of tax deduction therefrom by applying either -
( a ) the Main Cumulative Tax Deduction Formula; or
( b ) the Main Tax Deduction Tables,
in the manner set out in Part I and Part II of Schedule B,
respectively, and in accordance with sub-rule (3).
Cap. 138.
(3) Notwithstanding the other provisions of this rule, where the
Director of Social Security effects payment of a pension payable
under the Social Security Act to a payee, who is also the recipient
of one or more pensions from any other source, such Director shall,
subject to appropriate information being brought to his notice by
the Commissioner, take into account, for the purpose of tax
deduction, the aggregate amount of the pensions receivable by such
payee and compute the relative amount of the tax to be deducted in
the manner directed by the Commissioner.
(4) Unless the Commissioner otherwise directs, payers paying
emoluments which fall to be considered under the FSS Main Tax
Deduction Method shall, for the purposes of sub-rule (2), compute
the amount of tax deduction by applying the Main Cumulative Tax
Deduction Formula, so however that payers paying emoluments to
less than ten full-time payees may, at any time, on their own
account, opt to make use of the Main Tax Deduction Tables:
Provided that no payer may concurrently apply both
methods of computation referred to in sub-rule (2).
(5) For the purposes of this rule:
"full-time payee" means any individual whose emoluments are
subject to tax deduction under the FSS Main Tax Deduction
Method.
FINAL SETTLEMENT SYSTEM (FSS) [ S.L.372.14 7
Application of the 
FSS Part-Time Tax 
Deduction Method.
Cap. 123.
S.L. 123.39
8. (1) Tax deduction under the FSS Part-Time Tax Deduction
Method referred to under rule 6(1)( b ) shall apply in respect of
emoluments payable to a payee  in respect of part-time work which
qualifies under the provisions of article 90A of the Income Tax Act
and under the Part-time Work Rules, and shall operate in
accordance with the provisions therein contained:
Provided that where the payee has reason to believe that his
total income for the relevant year is not expected to exceed the sum
over which he would be liable to tax, he may, at any time, direct the
payer, on the Payee Status Declaration form, to have such
emoluments paid to him without tax deduction as provided in
article 90A(3) of the said Act.
(2) Where the payee who has availed himself of the option
under the proviso to sub-rule (1), has reason to believe that his total
income has reached a sum as would render him liable to tax he
shall, in accordance with the provisions of article 90A(5) of the
Income Tax Act, either:
( a ) direct the payer, on the Payee Status Declaration form,
to make such deductions from his income deriving
from part-time work for the relevant year so as to
cover the relative tax due by the 31st December of that
year; or
( b ) pay such tax due to the Commissioner by not later than
the 31st December of that year.
(3) Where, for the purposes of this rule, the payee fails to direct
the payer on the Payee Status Declaration form, the provisions of
rule 3(2) shall apply.
Application of the 
FSS Other 
Emoluments Tax 
Deduction Method.
Amended by:
L.N. 297 of 2001.
9. (1) Tax deduction under the FSS Other Emoluments Tax
Deduction Method referred to under rule 6(1)( c ) shall apply in
respect of:
( a ) any remuneration referred to under rule 2(iii); and
( b ) any emoluments considered by the payee as
constituting his other emolument income provided that
such method shall only be availed of where the tax
deduction provisions of rule 7 or of rule 8 do not
apply, or where the Commissioner has so directed in
accordance with rule 6(2).
(2) Save as provided under rule 3(2), emoluments to which the
FSS Other Emoluments Tax Deduction Method applies shall be
subject to tax deduction at a standard rate equivalent to twenty per
cent of the said emoluments:
Provided that all payees may, at any time, direct their payer
on the prescribed form to deduct tax at a higher rate.
(3) Notwithstanding the provisions of sub-rule (2), pensioners
and students receiving full-time instruction at any university,
college or other educational establishment or serving an
apprenticeship with a view to qualifying in a trade or profession, in
receipt of emoluments to which the tax deduction method referred
to in this rule applies may, at any time, direct their payer as
8 [ S.L.372.14 FINAL SETTLEMENT SYSTEM (FSS)
aforesaid on the prescribed form not to deduct tax or to deduct tax
from such emoluments at a lower rate than the standard rate laid
down under the said sub-rule:
Provided that payees, other than pensioners and students,
may direct their payer to deduct tax from such emoluments at a
lower rate than the said standard rate only after written approval
has been obtained from the Commissioner.
Deduction of tax in 
respect of arrears.
10. Further to the deductions which a payer shall be required to
make under the FSS Tax Deduction Methods referred to under rule
6(1), the Commissioner may, whenever he thinks fit, determine and
direct the deduction of an amount which should be made
periodically, for the duration of a stated period of time, from any
emoluments paid by a payer to cover any outstanding tax due by a
payee. Notice of this requirement shall be given by the
Commissioner in writing.
Maximum amount 
of tax deduction.
Amended by:
L.N. 297 of 2001.
Cap. 123.
11. (1) Where deductions of tax fall to be made from any
emoluments payable to a payee in accordance with rules 7, 8 or 9,
the amount so deducted shall not, without the consent of the payee,
exceed fifty per cent of that part of the emoluments payable to him
that is payable in cash on any occasion unless article 71 of the
Income Tax Act is applicable or where article 46 of the Act has
been applied. 
(2) Without prejudice to the provisions of sub-rule (1) where,
due to the operation of rule 10, the aggregate amount of tax
deductions which falls to be made exceeds fifty per cent of that part
of the gross emoluments payable to a payee that is payable in cash
for any period, the payer shall reduce the amount of the tax
otherwise deductible under rule 10 by an amount equivalent to such
excess.
Termination of 
contract and 
deceased payees.
12. The provisions contained in rule 6 shall likewise apply:
( a ) where emoluments, other than pensions, are paid to a
payee after the termination of the relative contract
under which such emoluments are due;
( b ) in the event of any emoluments accruing to an
individual being payable at any time after his death to
his heirs or his legal representative, as if the deceased
individual were still alive and payment was being
made to him, notwithstanding any obligation laid upon
the payer under any other law.
Power of the 
Commissioner to 
determine 
questions.
13. (1) Where the payee has reason to believe that the
deductions made by the payer from his emoluments have not been
effected in accordance with these rules, he may in writing bring the
matter to the notice of the Commissioner who shall as soon as may
be, determine the question raised, inform the payee of his decision
and, where necessary, direct action to be taken accordingly:
Provided that nothing in this rule contained shall impair the
payee’s rights under Parts V and VI of the Act following service of
the notice of assessment upon him in terms of article 33(1) of the
said Act.
FINAL SETTLEMENT SYSTEM (FSS) [ S.L.372.14 9
(2) Any matter brought to the notice of the Commissioner in
accordance with sub-rule (1) shall not enable the payer to change
the rate of tax deduction or the amount of tax deductible, before he
is so directed in writing by the Commissioner.
(3) Questions regarding the applicability or otherwise of these
rules in respect of any class of income shall be determined by the
Commissioner.
The Commissioner 
may direct the 
payer not to make 
payer further 
deductions.
14. (1) Where it appears to the Commissioner that the
provisions of these rules have been misapplied or abused by any
person he may, with immediate effect, direct the payer not to make
any further deductions until otherwise directed by him in writing.
(2) Any action taken by the Commissioner in accordance with
sub-rule (1) shall in no way prevent the Commissioner from
imposing any additional tax prescribed under these rules or from
commencing proceedings for any offence against the Income Tax
Acts.
Remittance to the Commissioner of deductions made by payers
Monthly 
remittance of 
deductions and 
payment advice.
15. (1) Every payer shall, by the last working day of the
month following that during which he has made payments of
emoluments, remit to the Commissioner the total amount of tax
deducted or which should have been deducted therefrom in
accordance with these rules.
(2) The remittance due to be made to the Commissioner under
sub-rule (1) shall be forwarded by the payer together with the
information required to be given on the form referred to in rule 20
which shall be completed and signed by the payer.
(3) If the remittance required by sub-rule (1) is not received by
the Commissioner by the due date, or if the amount received is less
than that which should have been remitted, the Commissioner shall
determine to the best of his judgement the total amount of the
deduction of tax which should have been remitted by the payer and
serve a default notice upon him in accordance with rule 24
requiring him to pay, in addition to any additional tax imposed
thereby, the amount or the difference, as the case may be, within
the time to be limited by such notice.
Recovery by 
payers of amounts 
not deducted but 
paid.
16. Where a payer fails to deduct tax in accordance with the
provisions of these rules from any emoluments and he subsequently
pays to the Commissioner the amount which should have been so
deducted, he may recover that amount, but only that amount, in a
manner approved by the Commissioner, from the payee from whose
emoluments it should have been deducted.
Tax ovadeducted 
and remitted by 
payers.
17. Where the payer has deducted tax at a rate or by an amount
higher than that applicable under these rules and in consequence
excess by tax has been deducted and also remitted to the
Commissioner, and such over-deduction and over-remittance
becomes known to the payer, he shall make immediately a payment
to the payee out of his own funds of an amount corresponding to
such excess:
10 [ S.L.372.14 FINAL SETTLEMENT SYSTEM (FSS)
Provided that where the circumstances of the case warrant
an adjustment, and repayment to the payee has been made to the
satisfaction of the Commissioner, the payer shall, on the occasion
of the next remittance to the Commissioner, be entitled to set off
and recoup, from the total amount of tax to be remitted to the
Commissioner, an amount corresponding to that so repaid to the
payee or to claim a refund of the said amount from the
Commissioner.
Records to be kept and information to be forwarded by payers
Payers to keep 
records.
Amended by:
L.N. 297 of 2001.
18. (1) Every payer shall at all times maintain in respect of
each payee an up-to-date record, showing the following details and
indicating separately the monthly and cumulative totals, as
applicable, relating to emoluments to which any of the three tax
deduction methods referred to under rule 6(1) applies:
( a ) full name and address;
( b ) identity card or income tax registration number;
( c ) date of payment;
( d ) the gross amount paid, distinguishing between the
value of fringe benefits and other emoluments, and the
relative tax deduction made;
( e ) the tax, if any, deducted in respect of the payee’s
outstanding tax liability, as directed by the
Commissioner under rule 10; and
( f ) other details or information which the Commissioner
may require.
(2) The record to be maintained in accordance with the
provisions of sub-rule (1) shall be retained and preserved as laid
down in article 23(12) of the Act.
Payers to furnish 
information to 
payees.
Amended by:
L.N. 297 of 2001.
19. On every occasion that a payer pays emoluments he shall
furnish the payee in receipt of such emoluments with a statement
showing separately:
( a ) the gross amount for each category of emoluments,
distinguishing between the value of fringe benefits and
other emoluments;
( b ) the corresponding amount of tax, if any, deducted
therefrom in accordance with rule 6;
( c ) the amount of tax deducted, if any, in respect of the
payee’s outstanding tax liability as directed by the
Commissioner under rule 10;
( d ) any other details or information which the
Commissioner may require.
Payers to submit 
monthly payment 
advice.
Amended by:
L.N. 297 of 2001.
20. Every payer shall prepare and forward, on a form supplied
or approved by the Commissioner, a monthly payment advice
(including a nil advice) for the purposes of rule 15(2) which, apart
from the details relating to the payer’s identity and the name and
place of business, shall contain the following information:
FINAL SETTLEMENT SYSTEM (FSS) [ S.L.372.14 11
( a ) the number of payees to whom emoluments have been
paid during the previous month showing separately the
number of payees receiving emoluments referred to
under paragraphs ( b ) and ( c );
Cap. 123.
( b ) the gross amount of emoluments paid to the payees in
respect of part-time employment qualifying under
article 90A of the Income Tax Act;
( c ) the gross amount paid to the payees in respect of
emoluments arising from any other source,
distinguishing between the value of fringe benefits and
other emoluments and showing sub-totals for different
categories of fringe benefits;
( d ) the total amount of tax, if any, deducted in respect of
the emoluments referred to under paragraph ( b );
( e ) the total amount of tax, if any, deducted in respect of
the emoluments referred to under paragraph ( c ); and
( f ) the total amount of tax, if any, deducted in respect of
the payees’ outstanding tax liability as directed by the
Commissioner under rule 10.
Payers to forward 
statement of 
earnings.
21. (1) Every payer shall, in respect of each year, prepare and
forward, for the purposes of and in the manner set out in sub-rule
(2) and on a form supplied or approved by the Commissioner, a
complete and correct Payee Statement of Earnings in quadruplicate
which shall be utilized as follows:
( a ) the original statement referring to each payee shall be
forwarded to the Commissioner together with the
Payer’s Annual Reconciliation Statement required to
be submitted in accordance with rule 22;
( b ) the duplicate and triplicate copies relating to the year
1998 shall be given to the payee by the 31st January of
the following year (one copy to be retained by the
payee and the other copy to be forwarded by the said
payee to the Commissioner together with the return
required to be filed under the provisions of article 10
or 11 of the Act) and similarly for each subsequent
year:
Provided that where the contract under which the
emoluments are paid is terminated prior to the 31st day
of December of any year, such copies shall, subject to
the provisions of rule 28, be furnished to the payee or,
in the event of his decease, to his heirs or legal
representative, within seven days from the date of the
said termination;
( c ) the quadruplicate copy shall be retained by the payer
for his own records.
(2) The statement of earnings referred to in sub-rule (1) shall
contain the personal particulars concerning the payee's identity and
other information required for income tax purposes and shall show,
as applicable, separate amounts in respect of:
12 [ S.L.372.14 FINAL SETTLEMENT SYSTEM (FSS)
Cap. 123.
( a ) the gross amount of the emoluments paid to the payee
in respect of part-time employment qualifying under
article 90A of the Income Tax Act;
( b ) the gross amount paid to the payee in respect of
emoluments arising from any other source;
( c ) the tax, if any, deducted in respect of the emoluments
referred to under paragraph ( a );
( d ) the tax, if any, deducted in respect of the emoluments
referred to under paragraph ( b ); and
( e ) the tax, if any, deducted in respect of the payee's
outstanding tax liability, as directed by the
Commissioner under rule 10.
(3) Where a payee has not been provided by his payer with a
Payee Statement of Earnings in accordance with sub-rules (1) and
(2), he may bring the matter to the notice of the Commissioner who
may take remedial action accordingly: however, such omission on
the part of the payer shall not release the payee from his obligation
to forward the return required to be filed under the provisions of
article 10 or 11 of the Act.
Payers to submit 
annual 
reconciliation 
statement.
Amended by:
L.N. 297 of 2001.
22. (1) Every payer shall, by the 15th February of every year,
submit to the Commissioner a complete and correct Payer’s Annual
Reconciliation Statement relating respectively to the preceding
year, together with the Payee Statement of Earnings required to be
forwarded in respect of each payee in accordance with rule
21(1)( a ):
Provided that where a person ceases to carry out his
function as a payer he shall, subject to the provisions of rule 28,
submit such statement by the last working day of the month
following that during which he has last made payments of
emoluments.
(2) Such annual reconciliation statement shall be submitted on
a form supplied or approved by the Commissioner and, apart from
the details relating to the payer's identity and to the name and place
of business, shall contain the following information:
( a ) the number of payee statements of earnings issued by
the payer in respect of the previous year;
Cap. 123.
( b ) the gross amount of emoluments paid to the payees in
respect of part-time employment qualifying under
article 90A of the Income Tax Act;
( c ) the gross amount paid to the payees in respect of
emoluments arising from any other source;
( d ) the total amount of tax, if any, deducted in respect of
the emoluments referred to under paragraph ( b );
( e ) the total amount of tax, if any, deducted in respect of
emoluments referred to under paragraph ( c ); and
( f ) the total amount of tax, if any, deducted in respect of
the payees' outstanding tax liability as directed by the
Commissioner under rule 10.
FINAL SETTLEMENT SYSTEM (FSS) [ S.L.372.14 13
Submission of 
returns or 
statements.
Amended by:
L.N. 128 of 1999.
23. (1) The Commissioner may, at any time, request further
returns or statements for the purposes of these rules in relation to
any specific period or periods and may, furthermore, direct the
payer to provide electronically, in a format approved by the
Commissioner, any information required to be forwarded under
these rules in addition to or in substitution for the requirement to
submit such information on the appropriate form or other statement
in accordance with the provisions of these rules:
Provided that where such data is required to be furnished
electronically in substitution for its submission on a form or other
statement, as aforesaid, the payer shall authenticate such data in a
manner as the Commissioner may deem fit.
(2) The Commissioner may exempt any person or class of
persons from complying with any of the provisions of these rules
regarding the submission of returns or statements. Any such
exemption may, at any time, be revoked by the Commissioner.
Imposition of FSS Additional Tax and Contestation Procedure
Imposition of FSS 
additional tax and 
payer’s right to 
contest.
24. (1) Where a payer is in default regarding any of the
provisions of these rules as indicated in Schedule C the
Commissioner may, without prejudice to any other action which he
is empowered to take under the provisions of the Income Tax Acts,
impose upon such payer the respective FSS additional tax
prescribed in the said Schedule, advise the payer by means of a
default notice regarding the amount of such additional tax and the
reason for its imposition and require him or his representative to
rectify the default and pay the said tax within ten days from the
date such notice is served upon him in accordance with sub-rule
(2).
(2) The notice referred to in sub-rule (1) may be served on a
payer either personally or by being sent by registered post to his
usual place of abode or business informing him of his rights under
the provisions of sub-rule (3).
(3) If any payer feels aggrieved by a default notice served upon
him under sub-rule (1), he may apply to the Commissioner by a
letter of contestation within ten days from the date the default
notice is served upon him by the Commissioner in accordance with
sub-rule (2).
(4) Where the Commissioner refuses the contestation submitted
by the payer against a default notice or where the payer has failed
to contest such notice as provided in sub-rule (3), the
Commissioner shall inform the payer accordingly and serve him
with a demand notice advising him that unless the latter notice is
contested in a court of law within fifteen days from its date of
service it shall constitute an executive title in terms of article
40(1)( b ) of the Act.
(5) Where the Commissioner is satisfied that the default in
respect of which FSS additional tax has been imposed under sub-
rule (1) was not due to any fault or neglect on the part of the payer,
he shall remit the whole of the said additional tax and, in any other
case, may remit such part or all of the said tax as he may think fit
14 [ S.L.372.14 FINAL SETTLEMENT SYSTEM (FSS)
and, in every case he shall inform the payer accordingly.
(6) The payment by a payer of any amount of FSS additional
tax imposed under sub-rule (1) shall in no way exonerate such
payer from paying any outstanding amount due to the
Commissioner or from submitting any documentation, in
accordance with the provisions of these rules.
(7) Where, notwithstanding any action taken by the
Commissioner under this rule, the FSS additional tax remains
outstanding or the default in respect of which such additional tax
has been imposed continues to subsist, as the case may be, the
Commissioner may serve further default notices in accordance with
this rule on the said payer imposing with each successive notice
double the amount of the said additional tax otherwise applicable in
accordance with Schedule C subject to the maximum amount
provided for under article 23(5) of the Act in respect of each
specific default:
Provided that each such further notice shall supersede the
previous notice served on the payer for the same default but any
payment made in respect of that previous notice shall be taken into
account accordingly.
Collection, Set-Off and Refunds
Recovery by 
Commissioner of 
tax deductible by 
payers.
25. (1) Any amount of tax deducted or which should have
been deducted by a payer under these rules during any month shall
be a debt due to Government by the last working day of the month
following that during which the deduction was or should have been
made and shall be recoverable as such.
(2) Without prejudice to any other power vested in him, the
Commissioner may sue any payer in a court of competent
jurisdiction with cost of suit for the recovery of any tax deducted or
which should have been deducted by a payer under these rules and
not remitted to the Commissioner within the prescribed period.
Deductions of tax 
to be set off against 
payee’s liabilities.
26. Any tax deduction made in accordance with rule 6 and
remitted to the Commissioner shall, where the relative income has
been declared for tax purposes, be set off for the purpose of
collection against the tax charged in respect of the year of
assessment immediately following that during which the deduction
was made:
Provided that where the deductions to be set off as
aforesaid exceed the tax charged for the said year of assessment, as
reduced by any other payment made in its respect, such excess shall
be set off against any outstanding liability for any other year of
assessment, and any remaining excess shall be refunded.
Claim for refund of 
tax overdeducted.
27. (1) A payee shall be entitled to claim a refund of tax
deducted by payers from his emoluments and paid to the
Commissioner under these rules in excess of the amount with
which he is properly chargeable.
(2) Subject to rule 26, claims for refund under this rule shall be
governed by article 48 of the Act.
FINAL SETTLEMENT SYSTEM (FSS) [ S.L.372.14 15
Miscellaneous
Deceased payer.
liable to do under these rules shall be done by his heirs, legal
representatives or successors, or, in the case of a payer who paid
emoluments on behalf of another person, by the person succeeding
him, or, if no person succeeds him, by the person on whose behalf
he paid the emoluments.
Joint 
responsibility.
29. Where two or more persons are concurrently to be
considered to be the payer in relation to any payee for the purposes
of these rules, the obligations, duties and liabilities imposed on
payers by these rules shall be deemed to have been imposed on
them jointly and severally.
Principal officers 
personally 
responsible.
30. The manager, other principal officer or liquidator of any
body of persons shall be personally answerable for all matters
required to be done under these rules by or on behalf of the body of
persons.
Power of the 
Commissioner 
inspect records.
31. Every payer, when called upon to do so by the
Commissioner or by any person authorised by him in writing, shall
produce for inspection any document or record which he is required
to maintain for the purposes of these rules and, where necessary,
provide copies of such document or record.
Payment on behalf 
of another person.
32. Where a payer pays emoluments on behalf of another
person the latter shall provide the payer with all the information
necessary to enable the payer to comply in every way with the
provisions of the Act and of these rules.
Tax free 
emoluments.
33. (1) Where any amount is paid by the payer to or for the
benefit of a payee in respect of any tax which may be due by the
latter, the gross emoluments from which tax is to be deducted in
accordance with these rules shall be deemed to be equivalent to the
aggregate of the net sum received by the payee and the amount of
tax so paid by the payer.
(2) The provisions of this rule shall also apply in cases where
the payer remits tax to the Commissioner which should have been
deducted from emoluments paid by him but which has not been
deducted, and which is not subsequently recovered by the payer
from the payee.
Terminal 
payments.
34. Where any payment of emoluments to a payee represents
and includes amounts payable on the termination of a contract
giving rise to the payment of emoluments, the amount so payable
shall be subject to tax deduction in accordance with rule 6 and/or
rule 10, and the provisions of rule 11 shall not apply.
Indemnification of 
payers.
35. Every payer is hereby indemnified against any person
whatsoever for all deductions and payments made by him in
pursuance and by virtue of these rules.
Certain 
arrangements to be 
null and void.
36. Saving arrangements such as are provided for in rule 33,
any arrangement whereby a payer undertakes not to deduct tax as
required by these rules from any part or all of the emoluments paid
to a payee shall be null and void.
16 [ S.L.372.14 FINAL SETTLEMENT SYSTEM (FSS)
Form referred to in 
these rules.
37. A sufficient number of forms referred to in these rules shall
be made available free of charge by the Commissioner to every
payer on his request. No return, statement, certificate or other
information required to be submitted by these rules shall be deemed
to have been submitted unless it is made on a form supplied or
approved by the Commissioner.
Transitory 
provision relating 
to fringe benefits 
provided between 
January and 
October 2001.
Added by:
L.N. 297 of 2001.
38. For the purpose of any statement required to be furnished
to the payee and any form required to be forwarded to the
Commissioner, and for the purpose of calculating any tax that is
required to be deducted from emoluments, the emoluments payable
to a payee for the month of October, 2001 shall be deemed to
include the total value of fringe benefits provided to him during
2001 up to the end of that month to the extent that such value has
not been included in, and tax with respect thereto has not been
deducted from, emoluments paid in any previous month.
FINAL SETTLEMENT SYSTEM (FSS) [ S.L.372.14 17
SCHEDULE A Substituted by:L.N. 297 of 2001.
(Rule 3)
18 [ S.L.372.14 FINAL SETTLEMENT SYSTEM (FSS)
FSS MAIN TAX DEDUCTION METHOD
PART I
FSS MAIN CUMULATIVE TAX DEDUCTION FORMULA
(RULE 7(2)(a))
(The FSS Main Cumulative Tax Deduction Formula must be applied by all payers 
having ten or more full-time payees on their payroll.)
The appropriate tax deduction to be made under the FSS Main Cumulative Tax
Deduction Formula from emoluments paid to a payee at any pay period is
determined by computing, in respect of each payment, the following four steps:
STEP 1- Projected Annual Emoluments (A)
The amount of Total 'Main' Emoluments for the calendar year up to and including
the Current Pay Period (E) is divided by the Current Pay Period Number (C) and
multiplied by the Number of Pay Periods in the Year (N).
A = (E/C) N
STEP 2 - Projected Annual Tax Due (P)
The amount of the Projected Annual Tax Due (P) by the payee is computed on the
basis of the Projected Annual Emoluments arrived at in Step 1. The tax rates set out
in article 56(1)( a ) or ( b ) of the Income Tax Act are applied according to the tax
status of the payee indicated in the Payee Status Declaration Form.
STEP 3 - Total Tax Due up to and including the Current Pay Period (D)
The amount of projected Annual Tax Due (P) calculated in Step 2 is divided by the
Number of Pay Periods in the Year (N) and multiplied by the Current Pay Period
Number (C).
D = (P/N) C
STEP 4 - Tax Liability deductible for the Current Pay Period (L)
The amount of Total Tax Due up to and including the Current Pay Period (D)
calculated in Step 3 is reduced by the amount of Total Tax Deducted up to the end of
the previous Pay Period (X).
Amended by:
L.N. 297 of 2001. SCHEDULE B (Rule 6)
Projected Total 'Main' Emoluments up to
Annual
=
and including Current Pay Period
multiplied by
Number of Pay
Periods in the
YearEmoluments Current Pay Period Number
Total Tax
Due
up to and
=
Projected Annual Tax
Due multiplied by Current Pay Period Number
including the Number of Pay
Current Pay Periods in the Year
Period
FINAL SETTLEMENT SYSTEM (FSS) [ S.L.372.14 19
L = D - X
Note: If the amount of Tax Liability deductible for the Current Pay Period (L) in
the above calculation results in a negative figure no tax deduction should be made
for this period. In any other case, the amount of tax deduction shall not exceed fifty
per cent of that part of the emoluments for the period that are payable in cash.
PART II
FSS MAIN TAX DEDUCTION TABLES
(Rule 7 (2)( b ))
(The FSS Main Tax Deduction Tables may be applied only by payers having LESS
than ten full-time payees on their payroll and provided such payers do not
concurrently apply the FSS Main Cumulative Tax Deduction Formula in respect of
any pay period during the year.)
Tax deduction under the FSS Main Tax Deduction Tables works out as follows:
1. Periodical Calculation
The amount of tax to be deducted from 'Main' emoluments payable to a payee for
each pay period is arrived at by applying the appropriate tax table in the Main Tax
Deduction Tables.
The payer should match the amount of 'Main' emoluments payable for the pay
period with the corresponding tax deduction amount indicated in the relevant Tax
Deduction Table after having taken into account:
(i) the Tax Status of the payee (i.e. "Single" or "Married") as indicated in
the Payee Status Declaration form (FS4); and
(ii) the duration of the pay period (i.e "Weekly", "Fortnightly",
"Four-weekly" or "Monthly").
2. Year-End Adjustment 
In addition to the periodical calculation set out under item 1 above, a Year-End
adjustment is normally required to be made in the final pay period of the year. This
adjustment can be performed only where the complete information for its
computation is available to the payer. This data is usually obtained from the payer's
own records relating to the payee but, where the payee has received "Main"
emoluments from previous payers during the same year, such information will be
complete only if the payee produces the relative Statements of Earnings (FS3’s).
The Year-End Adjustment (i.e. the amount of Tax Liability deductible for the
Current Pay Period (L)) is determined by computing the following two steps:
STEP 1- Projected Annual Tax Due (P)
The amount of Projected Annual Tax Due (P) by the payee is computed on the
basis of the Total 'Main' Emoluments for the calendar year up to and including the
Current Pay Period (E). The tax rates set out in article 56(1)( a ) or ( b ) of the Income
Tax Act are applied according to the tax status of the payee indicated in the Payee
Status Declaration Form.
STEP 2 - Tax Liability deductible for the Current Pay Period (L)
The amount of Projected Annual Tax Due (P) computed under Step 1 is reduced
by the amount of Total Tax Deducted up to the end of the Previous Pay Period (X).
Note: If the amount of Tax Liability deductible for the Current Pay Period (L) in
20 [ S.L.372.14 FINAL SETTLEMENT SYSTEM (FSS)
the above calculation (i.e. the tax deduction for the last pay period) results in a
negative figure no tax deduction should be made for the last pay period of the year.
In any other case, the amount of tax deduction shall not exceed fifty per cent of that
part of the emoluments for the period that are payable in cash.
FSS MAIN TAX DEDUCTION TABLES
The FSS Main Deduction Tables applicable in accordance with this Part of this
Schedule shall be such tables as the Commissioner may, for the purpose of these
rules, declare to be applicable to the respective year of assessment in a
communication to the payer or a circular to payers or an official publication or the
official website of the Maltese Government.
FSS ADDITIONAL TAX
Amended by:
L.N. 297 of 2001. SCHEDULE C (Rule 24)
DEFAULT IMPOSITION
FSS ADDITIONAL TAX
(Subject to a maximum of Lm200 
for each default as per article 23 of 
the Act)
FSS RULE 
REFERENCE
1. PAYEE STATUS DECLARATION
FORM
The payer fails to submit to the
Commissioner the prescribed Payee
Status Declaration form, relating to
each of his payees, in the manner and
within such period provided under
rule 3(3) and (4) of these rules.
Lm1 for every form not submitted
as required
OR
the amount of Lm10, whenever the
number of such defaults in any one
month does not exceed ten.
Rule 3
2. PAYER REGISTRATION
The payer fails to register as an FSS
payer as provided under rule 4 and,
where applicable, to re-register in
accordance with rule 5(6) of these
rules.
Lm50 for default in registering or
re-registering as a payer, as the
case may be.
Rule 4 and
Rule 5(6)
3. MONTHLY PAYMENT ADVICE
The payer fails to forward to the
Commissioner a monthly payment
advice (including a nil advice) as
required under rule 15(2) and in the
manner provided under rule 20 of
these rules.
Lm10 for every month, or part
thereof, during which the
appropriate form has not been
forwarded to the Commissioner as
required.
Rule 15(2)
and Rule 20
4. PAYER’S ANNUAL 
RECONCILIATION STATEMENT
The payer fails to submit to the
Commissioner a Payer’s Annual
Reconciliation Statement together
with the original of all Payee
Statements of Earnings as required
under rule 22 of these rules.
1% per month, or part thereof, for
the period during which the default
continues calculated on the total
amount of tax deductible for the
year
OR
Lm20, whichever is the greater.
Rule 22
FINAL SETTLEMENT SYSTEM (FSS) [ S.L.372.14 21
5. TAX DEDUCTION and TAX
REMITTANCE
The payer fails to remit to the
Comrnissioner, as provided under
rule 15 of these rules, the monthly
total amount of tax deducted in
accordance with rules 6 and 10 of
these rules, or which should have
been so deducted from payments of
emoluments made by him.
1% per month, or part thereof, for
the period the amount of tax is
paid late or remains unpaid,
calculated on the monthly total
amount remittable in accordance
with rule 15(1) of these rules or on
the amount determined by the
Commissioner in accordance with
sub-rule (3) of the said rule, as the
case may be,
OR
Lm5, whichever is the greater.
Rule 6, Rule
10 and Rule
15
FRINGE BENEFITS
The Payer fails to include or to
include correctly the value of a fringe
benefit in the Payee Statement of
Earnings as required by rule 21(1)( b ).
Lm200 or an amount equivalent to
the value of the relative fringe
benefit, whichever is the lower, for
each separate fringe benefit whose
value has not been included or
included conectly (and for this
purpose fringe benefits shall be
deemed to be separate if they are
provided to different beneficiaries
or if they fall within the scope of
different provisions of the Fringe
Benefits Rules).
Rule 21(1)( b )
DEFAULT IMPOSITION
FSS ADDITIONAL TAX
(Subject to a maximum of Lm200 
for each default as per article 23 of 
the Act)
FSS RULE 
REFERENCE
