The Life Hack That Can Actually Save You Thousands In Income Tax

If you’re reading this article then you probably already realise that the world of working has changed dramatically in the last 24 months. The Great Resignation and other similar trends all stem from the principle that individuals want greater freedom and flexibility. One of the most efficient ways to achieve this is through remote working.

When the Internet first came into existence, few could have accurately predicted the impact it would have on work. Today, just as business is carried out globally, so too is employment. A company can be based in Malta whilst employing or engaging with remote workers in India, Australia, the US, and all other parts of the globe.

The possibility and acceptance of remote working in today’s economies have made work more efficient than ever before. The goal is no longer to fill up eight hours of work, but rather to complete a task effectively within as little time as possible. This change in mentality, coupled with increased automation and changing priorities, is the reason why an estimated 80% of jobs in 2030 did not exist as recently as 2017.

If you’re a freelancer or remote worker you need to think like a business

The global pandemic has given rise to an exceptional number of new self-employed persons. These can be described using a number of popular terms, including freelancers and digital nomads. Their roles include software development, data analysis, consultancy, influencing, and a whole host of other primarily online-based activities.

If you are one such individual, then it is vital that you realise that you are running a fully-fledged business. You might not have employees or an office, however, you do have rights and obligations that apply to all businesses. One of these obligations is, of course, paying taxes.

What’s the most efficient way to pay less tax?

Depending on where you reside, you may or may not have heard of Malta’s attractive tax rate for qualifying business entities. By fulfilling a number of criteria, your business will be able to take advantage of a flat, 5% tax rate on its annual profits. You will also have the opportunity to apply for the Malta Digital Nomad Visa.

NM Group has designed special packages that cater to individual and small businesses that are looking for advantageous tax structures. As a licensed corporate service provider (CSP), we can handle all the necessary administration necessary to register a suitable corporate structure in Malta, allowing you to benefit from one of the world’s lowest corporate tax rates.

Get in touch with one of our representatives to learn more about how Malta is welcoming digital nomads and freelancers from all corners of the world.

The 2022 Budget: How will it affect your business?

The newly announced measures for Malta’s 2022 budget introduce a number of new incentives, as well as grant extensions to existing schemes for businesses.

Here’s a breakdown of the most salient 2022 Budget incentives:

New Business Initiatives

Part-time workers’ tax rate will be reduced to 10% tax rate from 15%.
In terms of capital investment, a rental subsidy incentive will be extended to a larger number of businesses, while other incentives will be offered to attract enterprise investment through the Change to Grow and Smart & Sustainable Investment schemes.
Companies with unused capital allowances for 2020 or 2021 due to pandemic-induced losses will be eligible for a tax reduction benefit.
Malta Enterprise will be working with the Malta Residency Agency to offer the Start-Up Residence Permit to offer a visa package for Non-EU start-up entrepreneurs.

VAT interest

Interest on unpaid VAT is set at 7.2% rate, and on exception will only be waived in line with the law.

Stamp duty

Anyone passing on a family business to a relative will only pay 1.5% in stamp duty on the transfer, reduced from 5%.

Extension of business schemes

The SME Tailored Facility by the Malta Development Bank will be extended to include green and sustainable projects. SMEs will be provided aid when diversifying into more green practices.

Assistance for the arts industry

As of 2022, individuals working in the arts, culture and entertainment sectors shall benefit from a income tax rate of 7.5%, calculated on a 3-year average period.
A €1 million guarantee fund will be set up for artistic events so that producers and promoters can recover their costs when unexpected restrictions are introduced.

Tax rebate cheque

Following the success of the previous year’s handout, the Government will be once again gifting workers on the lowest incomes with a €140 cheque (previously €95), while those in the top category, earning up to €60,000 will get a refund of €60.

Cost of living allowance increase

A €1.75 weekly wage increase will be given as a cost of living adjustment. This also applies to pensioners in full and pro-rata to students.

Want to learn more about how a particular development will be affecting your business? Get in touch today to speak to one of our advisors!

budget economy malta

A Simple Guide To Filling Your TA-22 Form

Filing your taxes can be one of the most intimidating aspects of running your own business, whether you’re full-time or part-time self-employed.

For the 2020 tax year, the deadline of submission of the TA-22 form is 30th April 2021.

Not sure about where to start? No need to panic – we’re breaking down each section of the form to help you fill it out.

Part 1: The Basics

The form starts out easy enough! Here you can fill in your basic details.

When filling out this section, keep in mind that:

Your address should be the same as the one on your I.D.
Type of business refers to the service you offer, e.g. retail, legal services, business consultancy
The PE (Permission to Employ) number applies to individuals who employ others within their business. If you work alone, you can leave this field blank.
Part-time and full-time self-employed individuals cannot operate a business without being VAT registered. VAT registration is easy, get in touch with our advisors for more information.

Part 2: Profit and Loss

This is the section that often causes the most distress for individuals filling out the TA 22 form.

As a part-time self-employed individual you are due to pay 15% tax on the net profit brought in within that tax year.

This means that you have to take the total turnover of the relevant tax year (in this case it’s 2019), and deduct your 2019 expenses to find your net profit. There are three steps to finding out your net profit:

Step 1: Calculating your gross profit

This step can have two processes, depending on the type of business you run; it is a 1-step process for service businesses or a 2-step process for businesses dealing with stock (e.g. retail, manufacturing, construction).

So, if your business involves buying stock, this is where you take your total turnover and deduct costs related to stock purchasing; this will leave you with your gross profit.

This section can be confusing for service-based businesses that do not incur any expenses related to stock. If you run a service-based business and do not incur expenses related to stock, then all you need to do is put down your annual turnover in box 1, cross out boxes 2-6, and put down your annual turnover as your gross profits in box 7.

Pro tip: When entering your turnover, ensure that the amount is the same as the turnover reported to the VAT department in your VAT return.

Step 2: Calculating your expenses

The expenses are self-explanatory, but do keep in mind that expenses related to trading activity may include:

Stationery and office supplies
Depreciation of your car
Work travel
Advertising and promotion
and much more!

This part may seem straightforward, however there are probably a number of incurred expenses that you may not be aware of. Our advisors are available to help you identify tax-deductible expenses and ensure that you are paying the least tax possible while remaining completely compliant.

You’ve probably heard about people saving receipts for tax purposes, and this process is exactly why! It’s at this point that you have to gather all your receipts and sort them according to the above categories to help you calculate your expenses.

Part 3: Signing Off

Once you’ve confirmed that your calculations are correct and accurate, this last section requires your signature and an indication of how you will be submitting your tax payment.

Payment can be done by:

Cash
Cheque
Online

Do you require further assistance with your TA 22 form? Get in touch today and our advisors will ensure you get your payment in time by 30th April 2021!

Start-ups: here’s why your accountant is your new best friend

When you’re an entrepreneur burning the midnight oil to turn your dream into a business reality, you’ve got a lot on your mind. You’re busy sorting the legal side of things, filling out that TA-22 form and getting all your paperwork in order, finding the talent you need to get things up and running, getting your marketing plan together to get the word out – the list goes on. Hiring an accountant can wait until you reach the SME stage, right?

Well, not quite. In my 15 years working in Malta’s accounting sector, I can’t begin to tell you how many promising start-ups I’ve seen take quite a costly tumble because they’ve tried to handle all their own accounting without the know-how. While most recover, there is a very real risk of not only stunting your company’s growth but stopping it completely. Outsourcing your accounting early on can save you money and stress in the short term, while helping you carve out fresh opportunities that’ll carry you forward long term. Let’s take a closer look at why your accountant is actually far more than that.

Find funding opportunities

Your accountant will have their fingers firmly on the pulse of any local and EU funding opportunities that you can take advantage of, and that kind of cash injection early on can be what propels your start-up into success. They won’t just know about all the latest funding initiatives out there – they’ll have the industry knowledge you need to expertly navigate all the bureaucracy and sail through to approval. Minimal stress for you, maximum results for your business.

Take the Business Consultancy Services Grant Scheme, for instance. While it’s not difficult to understand what it’s all about, you need someone in the know to guide you through the specifics. Are you eligible? Do you have everything you need to apply for it? When’s the next submission deadline? And so on and so forth. Having a trusted accountant by your side to guide you through the jargon jungle can be a lifesaver.

Solid business strategy

I think I can speak for all the certified professionals at NM Group when I say that when it comes to the business world, we’ve seen and done it all, and that’s an experience we can share that goes beyond facts and figures. It’s a real boon to have someone on hand to offer insights on your overall strategy, especially when you’re still laying the foundations for your business. You can’t plan for the future without knowing your finances inside and out, and you can’t do that properly without an accountant by your side to tell you what’s worked and what hasn’t in the past.

When your weekly calendar is bursting with meetings, to-dos, high-priority asks and ten Zoom calls on top of that, it can be hard to find time to sit down and think about your long-term vision and what steps you need to take to get there. The last thing anyone wants to do at the end of a long day is go through an ocean of facts and figures – but then, that’s what your accountant is there for! They’ll take all that daunting data and give you a top-level view of it all that you can use to inform your business decisions going forward. You can even go to your accountant for advice on what you need to do financially to get where you need to be, and how long it’ll take to get there.

Make sure you’re compliant

Rule number one of a successful start-up: make sure you’re compliant from day one. This is perhaps the most crucial part of the process that a qualified accountant can help you with because it can have long-lasting repercussions on your finances – and your reputation. You need to know what kind of company you should register as, do the mountains of due diligence required, sort out your VAT registration, carry out audits, and all this while you’re sorting out payroll and monthly expenses.

The bottom line is this: failing to comply with compliance can lead to a crippling fine – and in some cases, jail time. Don’t skimp on it!

So here’s my advice to the get-up-and-go entrepreneurs out there: buddy up with an accountant and work together hand in glove to plan for the future of your start-up. Simply put, your business is your baby, and it’s worth considering your money-minded friend as the Mary Poppins of the nanny world. Outsourcing your accounting needs is cost-effective and can give you the inside track on what’s happening in the world of funding and finance.

To find out more about how a qualified accountant can help your start-up really take off, get in touch on [email protected] – let’s chat!

The 2021 Budget: How will it affect your business?

The newly announced measures for Malta’s 2021 budget introduce a number of new incentives, as well as grant extensions to existing schemes for businesses.

Here’s a breakdown of the most salient 2021 Budget incentives:

Covid-19 Business Support Measures

⁃ The wage supplement has been extended until March 2021 (same form maintained until the end of the year), will then be revised in 2021.

⁃ Another round of €100 vouchers will be available from Jan 2021, in denominations of €10 and €15. Share to be used in retail shops has been increased to €40.