Know Your Parent Tax Benefits: Part One – Parent Rates

As a parent, it always feels like your money just disappears without even trying, so it’s not often that having a child works in your favour financially. That’s why it’s so important to make use of the exclusive parent tax benefits that are available in Malta. There are numerous schemes that you may qualify for and you could make some substantial savings, so it’s worth looking into!

We know it’s not the most exciting subject, and it can seem complex and overwhelming, so we’ve teamed up with NM Group, a professional services firm specialising in finance, tax, and legal, to help us put together a concise, 3-part guide explaining exactly what’s available to you and how you can claim it.

In the first part of our guide, we look at the parent tax band, what it does for you, and how to make the switch when you become a new parent.

When it comes to paying taxes in Malta, being a parent can be a benefit due to the dedicated tax band that was introduced here in 2012. Depending on your situation, qualifying for the parental tax status may reduce your tax burden.

parent tax benefits maltaTo give you an example, an individual who earns a yearly income of €20,000 would be required to pay €2,275 in tax on the single tax rate, however, on the parent rate computation they would be due to pay a much lower €1,845. In this case, that’s a tidy €430 saving on your tax bill.

This is just a general example, and a case-by-case analysis should always be done to determine the most beneficial tax rates for your circumstances.  It’s advisable to seek professional advice to make sure you’re getting the most from your money.

Parent Rate Eligibility

Parent rates are applicable to parents who maintain a child under their custody, or who pay child maintenance in respect of their child. It’s important to note that a parent’s eligibility is not applicable indefinitely as the rates do not apply if the child is either over 18 years of age (or over 23 years if they are receiving full-time tertiary education and not gainfully occupied).  If the dependant is gainfully occupied, then he/she must not earn an income which exceeds €3,400.

parent tax benefits maltaDo I Need To Register For the Parent Rates?

If your child was born in Malta, the tax department would have the relevant information regarding the birth of your child and would register your eligibility for the parent tax rates. Having said that, it is important to note the following:

  • If you are in employment, you would need to advise your employer to deduct tax from your salary using the parent tax rates following the birth of your child.
  • If the father is Maltese and is not married to the mother of the child, he should complete a prescribed parent rates application form as issued by the tax department and enclose the form with his tax return.  Such form should also be filed by foreigners who are resident in Malta and who wish to avail themselves of the parent tax rates.
  • If your child was born outside Malta, in order to benefit from the parent tax rates, then you would also have to enclose a copy of your child’s birth certificate with the parent rates application form.

As new parents, we might not be able to take a break, but at least we can make sure we’re getting any tax breaks we’re entitled to. It’s important to note that finances should be examined on a case-by-case basis and this 3-part series functions as a general guide. If you’d like further advice on parent tax benefits, or any other financial guidance specific to your circumstances, NM Group can help.

For more expert advice and guidance, visit our Island Experts section.

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