DEDUCTION OF TAX (P.A.Y.E) ġ S.L.123.02 1
SUBSIDIARY LEGISLATION 123.02
DEDUCTION OF TAX (P.A.Y.E) RULES
1st January, 1973
 LEGAL NOTICE 79 of 1972, as amended by Legal Notices 101 of 1975,
12 of 1976, 132 and 143 of 1977, 135 of 1981, 62 of 1984, 38 of 1987 and
25 of 1989.
Title.
Rules.
Interpretation.
Cap. 123.
"emoluments" means any income chargeable to tax under article
4(1)( b ) and ( e ) of the Income Tax Act;
"paid" means paid directly or indirectly whether in cash or in
kind, and includes crediting or depositing in a bank or other
account or elsewhere for the benefit, use or advantage of the payee;
"payee" means any person to whom emoluments are paid; 
"payer" means any person by whom emoluments are paid 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.
Determination and deduction of tax 
Determination of 
rate of tax at which 
deduction is to be 
made and its 
communication to 
payers and payees.
Cap. 123.
Cap. 372.
3. (1) The Commissioner shall determine and direct the rate
at which tax is to be deducted by a payer on any occasion when
emoluments are paid by him to a payee: provided that unless article
71 of the Income Tax Act is applicable or article 46 of the Income
Tax Management Act has been applied, the Commissioner shall
not, without the consent of the payee, direct the deduction of tax in
excess of fifty per cent of the emoluments.
(2) The rate of tax determined by the Commissioner shall be
communicated as soon as may be both to the payer and the payee.
(3) Directions for the deduction of tax may include directions
regarding the manner in which the tax shall be deducted, the period
over which the deduction shall be made and such other directions
as the Commissioner may think fit.
Deduction of tax 
from emoluments.
Amended by:
L.N. 101 of 1975;
L.N. 12 of 1976;
L.N. 143 of 1977;
L.N. 135 of 1981;
L.N. 62 of 1984;
L.N. 38 of 1987;
L.N. 25 of 1989.
Cap. 452.
S.L. 452. 62
4. (1) When emoluments are paid to a payee, the payer shall
deduct therefrom a tax at the rate determined and communicated to
him by the Commissioner:
Provided that no such deduction shall be made from any
payment to which article 23 of the Employment and Industrial
Relations Act and the Weekly Allowance National Standard Order,
refer unless the Commissioner otherwise directs.
(2) ( a ) In cases where the payer has not received directions
2 ġ S.L.123.02 DEDUCTION OF TAX (P.A.Y.E)
from the Commissioner regarding the rate at which tax
is to be deducted, he shall notify the Commissioner
accordingly on the form supplied for this purpose by
the Commissioner.
( b ) The notification required by this sub-rule shall be
made within three days of the coming into operation of
the contract under which emoluments are paid by the
payer.
(3) Where the payer has not received from the Commissioner
directions regarding the rate at which tax is to be deducted he shall,
until such time as directions are received, deduct tax at the rate of
ten per cent: provided that if the payee is not resident in Malta, the
payer shall deduct tax at the rate of twenty-five per cent.
(4) Notwithstanding the provisions of sub-rule (3), but saving
the provisions of sub-rule (6), no deductions shall be made from
emoluments paid to a resident payee where directions have not
been received by the payer in the following cases:
( a ) where the payee is unmarried or a widower and the
emoluments, if expressed to be due -
(i) on an annual basis, represent an income of less
than one thousand and thirty liri per annum;
(ii) on a monthly basis, represent an income of less
than eighty-five liri per month;
(iii) on a fortnightly basis, represent an income of
less than thirty-nine liri per fortnight;
(iv) on a weekly basis, represent an income of less
than nineteen liri and fifty cents per week;
(v) on a daily basis, represent an income of less than
three liri and ninety-six cents per day;
( b ) where the payee to the best of the payer’s knowledge
is living with and maintaining a wife and the
emoluments, if expressed to be due -
(i) on an annual basis, represent an income of less
than one thousand seven hundred and thirty liri
per annum;
(ii) on a monthly basis represent an income of less
than one hundred and forty-four liri per month;
(iii) on a fortnightly basis, represent an income of
less than sixty-six liri per fortnight;
(iv) on a weekly basis, represent an income of less
than thirty-three liri per week;
(v) on a daily basis, represent an income of less than
six liri and sixty-five cents per day.
(5) For the purposes of sub-rule (4), where emoluments are
expressed to be due on some basis other than one of the alternatives
therein contemplated, the test as to whether tax is to be deducted or
not shall be made by using the alternative which is most
appropriate.
DEDUCTION OF TAX (P.A.Y.E) ġ S.L.123.02 3
Cap. 123.
(6) Where the emoluments are gains or profits chargeable
under article 4(1)( b ) of the Income Tax Act, the provisions of sub-
rules (4) and (5) shall not be applicable if the emoluments are paid
to an employee who -
( a ) to the best of the payer’s knowledge is a married
woman; or
( b ) is not expected to render full time services to the payer
by whom the emoluments are paid during the period or
periods in respect of which they are expressed to be
payable.
Deductions to be 
made after 
determination of 
contract.
5. The provisions contained in rule 4(1) shall also apply to
emoluments paid after the determination of the relative contract
under which the emoluments have been paid.
Changes of 
employment.
Cap. 123.
6. (1) Where the payer is an employer and the payee is a
newly engaged employee, and the emoluments paid to the payee are
gains or profits chargeable to tax under article 4(1)( b ) of the
Income Tax Act, the payer shall, until such time as he receives
directions from the Commissioner in terms of rule 3, deduct tax
from emoluments paid to the said payee on the basis of directions
regarding such deductions issued by the Commissioner to a
previous employer of the payee.
(2) Notwithstanding the provisions of sub-rule (1), the
provisions of rule 4(3) and (4) shall be applicable -
( a ) if conclusive proof regarding directions issued to the
previous employer is not made available to the payer
by the payee;
( b ) if the directions were issued by the Commissioner to a
previous employer on a date anteceding by more than
eighteen months that on which emoluments are first
paid by the payer to his new employee;
( c ) in respect of any emoluments paid three months or
more after a new employee has been engaged where
the directions referred to in paragraphs ( a ) and ( b )
notified a rate of ten per cent or less.
Deceased payees. 
other law, in the event of any emoluments accruing to any
individual being payable at any time after his death, the payer shall
deduct tax therefrom in accordance with the provisions of these
Rules as if the deceased individual were still alive and payment was
being made to him.
Power of the 
Commissioner to 
determine 
questions.
8. If any question shall arise as to -
( a ) the applicability or otherwise of these Rules in respect
of any class of income, and/or
( b ) the rate at which tax is to be deducted when any
emoluments are paid,
such question shall be determined by the Commissioner, but
subject to the provisions of these Rules.
4 ġ S.L.123.02 DEDUCTION OF TAX (P.A.Y.E)
Requests for 
reduction of rate of 
deduction of tax.
9.  (1) ( a ) Any payee who feels aggrieved by the rate of tax
determined by the Commissioner, or any payer on his
behalf, may request the Commissioner to direct a
reduction in the rate at which tax is deducted. The
request shall be made in writing and shall include
sufficient details so as to enable the Commissioner to
decide whether a reduction in the rate at which tax is to
be deducted is justified.
( b ) Any request made under the provisions of this rule
shall not be valid if made with regard to a rate or in
relation to any part of a rate certified by the
Commissioner to have been determined for the
collection of unpaid tax for a year or years of
assessment other than the year of assessment following
that during which the deduction is being made.
(2) Any request to the Commissioner made under the
provisions of this rule -
( a ) shall not require him to direct the payer to cease
making deductions of tax or to deduct tax at a lower
rate; and
( b ) shall not enable the payer to cease deducting tax or to
deduct tax at a lower rate before he is instructed to do
so by the Commissioner.
(3) The Commissioner as soon as may be following receipt of
a request made under the provisions of this rule may require the
payer to produce such further information as he may deem
necessary. If the Commissioner is satisfied that a reduction in the
rate is justified, he shall determine and direct in accordance with
rule 3(1) the new rate at which tax is to be deducted, and he shall
communicate it in accordance with rule 3(2).
(4) ( a ) Not more than one request under this rule shall be
made by or on behalf of a payee during any period of
twelve consecutive months.
Cap. 372.
( b ) Nothing in this rule contained shall impair the payee’s
right under Parts V and VI of the Income Tax
Management Act following service of the notice of
assessment upon him in terms of article 33(1).
Accounting of deductions
Payers to keep 
records.
10. (1) Every payer shall at all times maintain an up-to-date
record complete with monthly totals showing the following details
in respect of each payee - 
( a ) full name and address;
( b ) the date of payment and the gross emoluments paid; 
( c ) the tax, if any, deducted; and
( d ) other details or information which the Commissioner
may require.
DEDUCTION OF TAX (P.A.Y.E) ġ S.L.123.02 5
Cap. 372.
(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 19 of the Income Tax Management Act. Such
record shall be kept on the forms supplied by the Commissioner for
this purpose.
Statement to be 
given to payees.
Amended by:
L.N. 132 of 1977.
11. (1) ( a ) On every occasion that emoluments are paid by a
payer, he shall furnish the payee in receipt of such
emoluments with a statement showing the gross
amount of those emoluments and the amount of tax, if
any, deducted therefrom in accordance with these
Rules. The statement shall be given on a form
approved by the Commissioner. 
Cap. 372.
( b ) The payer shall also furnish the payee, within twenty
days from the 31st day of December of any year, with a
statement in duplicate (one copy to be retained by the
payee and the other copy to be forwarded by him to the
Commissioner together with the return required to be
filed under the provisions of article 10 of the Income
Tax Management Act) showing the gross amount of the
emoluments paid to hum during that year and the
amount of tax, if any, deducted therefrom:
Provided that, where the contract under which
the emoluments are paid is determined prior to the 31st
day of December of any year, unless the provisions of
rule 19 or of rule 26 apply, the said statement in
duplicate shall be furnished to the payee or, in the
event of his decease, to his heirs or legal
representative, within twelve days of such
determination.
S.L. 372.18
(2) Subject to the provisions of rule 10(2), a payee shall for the
purposes of these rules or of the Payment of Provisional Tax (PT)
Rules, be entitled to require any person who has at any time paid to
him emoluments to furnish him with a statement within twelve days
of demand showing the total gross emoluments paid to him and the
amount of tax, if any, deducted therefrom during any specific year
or part thereof. This statement shall be given on the form approved
by the Commissioner and it shall be furnished to the payee in
duplicate.
Monthly return 
remittance to the 
Commissioner.
12. (1) ( a ) Every payer shall submit a return to the Commissioner
(including a nil return) on the form approved by him by
the tenth day of each month containing the following
details in respect of each payee to whom he has paid
emoluments at one or more times during the preceding
month -
(i) the full name and address;
(ii) the gross emoluments paid during that preceding
month;
(iii) the rate at which tax is deductible;
(iv) the tax if any, deducted during that preceding
month; and
6 ġ S.L.123.02 DEDUCTION OF TAX (P.A.Y.E)
(v) any other details or information which the
Commissioner may consider necessary.
The total tax which should have been deducted
during the said preceding month as shown on the said
return, less any amount recouped under paragraph ( b ),
shall be remitted to the Commissioner together with
the return. Such return shall be delivered on the form
to be supplied or approved by the Commissioner.
( b ) Where the payer has deducted tax at a rate higher than
that applicable under these Rules and in consequence
excess 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:
Provided that where the circumstances of the
case warrant an adjustment to the satisfaction of the
Commissioner and that repayment to the payee has
been made, 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 the
amount so repaid to the payee.
(2) ( a ) 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
deductions of tax which should have been made by the
payer during the preceding month, and he shall serve a
notice upon the payer requiring him to pay the full
amount, or the difference, as the case may be, within
the time to be limited in such notice. Such full amount
or difference, as the case may be, shall thereupon
become a debt due to the Government and recoverable
from the payer as set out in rule 17(2).
( b ) Where, following service of a notice issued under
paragraph ( a ), the Commissioner, having regard to the
relevant return submitted by the payer under sub-rule
(1) is satisfied that the total amount received by him
exceeds the deduction of tax which should have been
made, such excess shall be refunded or set off wholly
or in part against the next or any other such remittance
still due.
Recovery of 
deductions paid to 
the Commissioner 
from payees.
13. 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.
DEDUCTION OF TAX (P.A.Y.E) ġ S.L.123.02 7
Annual return to be 
submitted by 
payers.
14. (1) Not later than the 30th day of January of each year,
every payer shall furnish the Commissioner with the following
documents -
( a ) a separate return for each payee on the form supplied
or approved by the Commissioner providing the
following details in respect of each payee to whom he
has paid emoluments at one or more times during the
year ending on the preceding 31st day of December:
(i) the full name and address;
(ii) the gross emoluments paid during that year;
(iii) the tax, if any, deducted during that year; and 
(iv) any other details or information which the
Commissioner may consider necessary; and
( b ) a statement on the form supplied or approved by the
Commissioner which shall include the following:
(i) a list showing the names and addresses of all
payees in respect of whom a return was
submitted under paragraph ( a ), the total gross
emoluments paid during that year, and the total
tax deducted therefrom; and
(ii) a reconciliation of the sum of the total tax
deducted from each payee listed in the statement
at sub-paragraph (i) with the sum of the monthly
remittances made by the payer for the said year.
(2) The documents required under sub-rule (1)( a ) and ( b ) shall
be furnished in addition to any other return required under rule
12(1)( a ).
(3) The Commissioner may at any time require further returns
or statements in relation to any specific period or periods.
(4) The Commissioner may exempt any person or class of
persons from complying with any of the provisions of this rule.
Any exemption may, at any time, be revoked by the Commissioner.
Where a payer 
ceases to carry out 
his functions.
15. Where a payer, before the end of a year, ceases for any
reason to exercise the functions of a payer, and the provisions of
rule 26 are not applicable, the returns required in terms of rule 14
shall be furnished within one month of such cessation.
Deductions of tax 
to be set off against 
payees’ liabilities.
16. Any deduction made under these Rules shall, where the
relative amount has been paid to the Commissioner, 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 payments 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.
8 ġ S.L.123.02 DEDUCTION OF TAX (P.A.Y.E)
Collection and refunds 
Recovery of tax 
deducted by 
payers.
17. (1) Any tax deducted or which should have been deducted
by payers under these Rules during any month shall be a debt due
to Government by the tenth day of the succeeding month and shall
be recoverable as such.
(2) Without prejudice to any other powers vested in him, the
Commissioner may sue any payer in a court of competent
jurisdiction 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.
Refund of tax over 
deducted.
18. (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.
Cap. 372.
(2) Subject to rule 16 claims for refunds under this rule shall
be governed by article 48 of the Income Tax Management Act.
Miscellaneous
Deceased payers. 19. If any payer dies, anything which he would have been
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.
20. 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.
Inspection of 
records.
21. Every payer, when called upon to do so by the
Commissioner, shall produce for inspection, at the payer’s
premises or, when the Commissioner shall so require, at the Office
of Inland Revenue, all wage sheets, lists and other documents and
records whatsoever relating to the calculation or payment of
emoluments paid by him, or the deduction of tax therefrom, or the
accounting of any tax so deducted.
Payment on behalf 
of another person.
Cap. 123.
Cap. 372.
22. Where the 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 Income Tax Act, the Income Tax Management
Act and of these Rules.
Tax free 
emoluments.
23. (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 emoluments shall be deemed to be increased by a sum
equivalent to the amount so paid.
(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.
DEDUCTION OF TAX (P.A.Y.E) ġ S.L.123.02 9
Terminal 
payments.
24. (1) Where any payment of emoluments to a resident payee
represents or includes amounts payable on the determination of a
contract giving rise to the payment of emoluments, the rate of
deduction of tax therefrom, notwithstanding the provisions of rule
3(1) and rule 4(3) shall be as set out hereunder - 
( a ) where the terminal payment is less than five hundred 
liri  ..................................................................... 15%;
( b ) where it is five hundred liri or over, but less than one
thousand liri ....................................................... 20%; 
( c ) where it is one thousand liri or over but less than two
thousand liri ....................................................... 30%; 
( d ) where it is two thousand liri or over but less than five
thousand liri ......................................................  45%;
( e ) where it is five thousand liri or over but less than
seven thousand five hundred liri  ........................ 50%;
( f ) whereitisseventhousandfivehundredlirior 
over  .................................................................... 55%.
(2)  The rates of deduction of tax under sub-rule (1) shall in
such instance be increased by ten per cent where payment is made
to a non-resident payee or to a resident person on behalf of a non-
resident payee.
Indemnification of 
payers.
25. Every payer is hereby indemnified against any person
whatsoever for all deductions and payments made by him in
pursuance of and by virtue of these Rules.
Where the payer, 
but not the relative 
contract, is 
changed.
26. Where there has been a change in the payer from whom a
payee receives emoluments without there having been an effective
change in the contract under which the emoluments are paid, the
payer after the change shall be liable to do anything which the
payer before the change would have been liable to do under these
Rules.
Certain 
arrangements to be 
null and void.
27. Saving arrangements such as are provided for in rule 23,
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.
Managers or other 
principal officers 
of bodies of 
persons.
28. The manager or other principal officer 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. 
Payers to give 
notice to the 
Commissioner.
29. Every payer who is obliged to give notice to the
Commissioner within three days of the coming into operation of the
contract under which emoluments are first payable by him to any
payee. This notice shall be given by every payer on the form
supplied by the Commissioner.
Forms referred to 
in these Rules.
30. 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.
