The 2017 budget has seen the implementation of the `Voluntary Occupational Pension Scheme Rules` through LN 228 of 2017. This Legal Notice includes tax incentives for both the employer and employees making contributions to a private pension fund. The aim of this initiative is to encourage employers to decrease the burden on the state`s public pensions scheme in place, by providing peace of mind to their employees. Discussions and lobbying have been long going on this matter due to the increase of pensioners depending on state pensions when compared to the current rate of individuals paying their Social Security Contributions.
The `Occupational Retirement Scheme` is an investment on a voluntary basis in a private scheme for qualifying employees. Contributions in this fund can be made both by the employer and by the employees. A qualifying employer shall be a registered payer with IRD on behalf of employees carrying out economic activity.
A qualifying scheme is a retirement scheme or a long term contract of insurance approved by the Commissioner and compliant with the Retirement Pensions Act (Chapter 514 of the Laws of Malta). A long-term insurance contract or fund shall be issued and administered by a licensed holder by the MFSA. Commencement of retirement payments back to the employee shall commence after the age of 50 years while not later than the age of 70. An exemption to these age rules applies in the case of long-term contract of insurance in relation to permanent disability or death of the beneficiary. The qualifying contributions shall be disclosed in the FS3 prepared by the employer in terms of the FSS rules. The qualifying contributions made by the employer to the employees shall not qualify under the Fringe Benefit Rules.
- A qualifying employer making contributions to a qualifying scheme on behalf of his employees, will benefit from the lowest of a tax credit up to 15% of the qualifying contribution during the year OR EUR 150 OR any amount as may be prescribed by the Minister of Finance. The benefit in question shall be applicable per employee to whom the employer had made contributions during that year. The tax credit shall be a deduction from the chargeable income of the employer during the year. In the absence of a chargeable income, the tax credit shall be carried forward throughout the years until the deduction can be utilised.
- Tax deductibility for the qualifying employer on approved schemes by the Commissioner shall be the lower of the qualifying contribution paid and EUR 2,000 per employee for whom qualifying contributions were made during the year.
- A qualifying employee who also makes personal contributions to the qualifying scheme shall be eligible to a tax credit amounting to the lower of 15% on the aggregate qualifying contributions made during the year or the maximum of EUR 150 from the tax liability of the employee. In case of married employees taxed under the married rates, the tax credit can be netted against the aggregate tax liability of the couple.
This new scheme gives the opportunity for employers to set up their Company Occupational Pension Scheme. This may be done through the setting up of a trust which is authorized by the MFSA and registered with the IRD.
If you are interested in setting up an `Occupational Retirement Scheme` tailor-made for your company and its employees, RBG Fiduciary Services Limited can act as the licence holder of the qualifying scheme and administer the fund.
Should you require further information on the above, contact Ms.Shanice Finch directly on firstname.lastname@example.org to set a meeting in order to discuss this opportunity.