The rental market in Malta : an analysis of the fiscal implications

Abstract

Purpose: The objectives of this study aim to understand the Maltese rental tax regime in view of the developments occurring in the economic and legal environment. The study reviews the potential improvement of the tax system, thereby eradicating the rampant issue of tax evasion, while establishing the optimum potential of the rental market. Concurrently, this study compares the economic and fiscal system of three other EU countries, in the light of developing Malta as a prime investor location. Design: To address the objectives of the study, a qualitative approach was adopted. Semi-structured interviews were carried out with both governmental and non-governmental stakeholders, including the Housing Authority, Malta Developers’ Association, and the Federation of Estate Agents, and selected local and foreign tax practitioners. Findings: This study identified that the growth in the rental market has slowed down as a result of an increase in the supply of properties. Nevertheless, from a demand perspective, rental prices remain exorbitant, with employers facing extreme wage pressures, thus negatively impacting Malta’s attractiveness. Furthermore, the perceptions of the 15% final withholding tax on rental income and the Private Residential Leases Act of 2019, were recorded, with the purpose of determining the efficiency of such changes, on the rental market. Additionally, this research has shown that state has a great deal of tax income to benefit from, as a result of an optimum tax rate. Interviewees believe that by providing improved tax incentives for longer-leases, it would result in enhanced stability and affordability for both the landlord and the tenant. Conclusions: This research highlights the paramount importance of efficient and effective legal and fiscal frameworks within the rental market, which can eventually strengthen Malta’s reputation. The researcher concludes that investment in the rental market will ultimately correlate in the well-functioning of the island’s economy. Value: The strength of this study lies in the fact that it gives feedback from highranking individuals regarding one of the colossal components of Malta’s reputation. Given the prominence of the subject under study, this research suggests possible legal and fiscal amendments, which the legislator can exploit in establishing a well-functioning rental market.