Eurostat has published the 2012 Edition of the report ‘Taxation Trends in the European Union’ (the ‘Report’) which is prepared by the European Commission Directorate-General for Taxation and Customs Union in conjunction with Eurostat. The Report presents findings on the distribution of taxes in each EU member state on the tax bases common in the Union.
Tax on labour income
The EU’s member states collectively levy most tax (representing almost half of the total tax revenue of the EU member states) on income derived from employment. The Report found that Malta charges one of the lowest implicit tax rates (ITR) on labour income. The exact ITR charged is of 21.7%, which is significantly lower than the EU average of 33.4% and markedly lower than the ITR charged in certain member states such as Italy and Belgium (and others) which charge an ITR on labour of 42.6 % and 42.5 % respectively.
Corporate income tax
Conversely, Malta charges a corporate income tax (CIT) rate of 35% which is higher than the EU average CIT rate of 23.5%. Malta has not change the rate of CIT charged since 1995. Notwithstanding the relatively high rate of tax, significant refunds are permitted when a company distributes a dividend to its shareholders, making Malta a much sought after jurisdiction for incorporations.
VAT
The rates of VAT had remain constant throughout the EU 27 since 2002. However, from 2009 onwards a marked increase was identified. The Report found that the EU-wide average VAT rate has arisen by 1.5 points since 2009. The average standard VAT rate currently stands at 21%. The standard VAT rate varies throughout the EU, from 15% in Luxembourg to 27% in Hungary. Malta charges a lower than average VAT rate at 18%.
