The Tax Treatment of Rental Income

Rental income may be taxed in two ways:

  1. Final withholding tax of 15%

Taxpayers may opt to pay tax on all rental income at a final withholding tax of 15%. Deductions are not available against final withholding taxes. The 15% final withholding tax rate is calculated on the gross rental income received. Furthermore, the final withholding tax of 15% applies to both residents and non-residents. To benefit from a final withholding tax of 15%, taxpayers must complete the prescribed TA24 form either manually or online and submit it within the prescribed period (30 April).

2. Declared as part of taxable income (i.e. in the income tax return)

Taxpayers may opt to declare rental income in their tax returns. Rental income declared as part of taxable income for any year of assessment will be added to other income, will be subject to tax at the applicable rate based on the applicable tax rate, without special consideration. In the case of individuals, the applicable rate will depend on the individual’s tax bracket in which the gross income (including rental income) falls. No special rate of tax will apply.

UPDATE – Borg Galea & Associates would like to inform our clients that the Office of the Commissioner for Revenue issued a manual on the taxation of rental income to serve as guidance to taxpayers. The manual can be found here. For more information, kindly contact us at: +356 2703 7012 or send an email to tax@borggalea.com.

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