As everyone is aware, the COVID-19 crisis has impacted all businesses in Malta. The Government has issued a number of schemes with different types of assistance, one of which is the COVID Wage Supplement scheme, being administered by Malta Enterprise (more details here).
The Government is providing different levels of COVID Wage Supplements dependent on the sector of the employer and various other parameters. These are published on the Malta Enterprise web site. Organisations that fall under the business sectors defined in Annex A of the Malta Enterprise list are subject to an € 800 monthly COVID Wage Supplements, while those sectors listed in Annex B are entitled to a € 160 COVID Wage Supplements. Other companies will not receive any COVID Wage Supplements .
The information contained in this website page is not and should not be interpreted as legal advice.
Below are some important points using Annex A organisations as an example, but they are equally applicable for organisations covered under Annex B:
- The Government will be providing the COVID Wage Supplement to the employer not to the employee and employers need to pass this onto the employees.
- Employers will deduct the normal Social Security Contribution (SSC) contributions from employees for the payroll period, based on their SSC category and the standard rules. There is no change to this process.
- However, the COVID Wage Supplement being paid by the Government includes the employee’s Social Security Contribution (SSC) which is being paid by the Government.
- The employer therefore will not need to remit the employees’ SSC contributions to Government as part of the monthly FS5 process, even if this is deferred. They will of course still remit the employers’ SSC and the tax deducted from the employees as usual or after the acceptance of a deferral of these payments.
- Since the employer will have already retained the employees’ SSC, the COVID Wage Supplement that the employer will receive from Government will have the employees’ SSC contribution subtracted. As a result, the €800 COVID Wage Supplement will be received by employers as a result of a €720 contribution directly from the Government and €80 (i.e. 10%) that they would have already deducted from the employee as per standard calculation process.
- As the COVID Wage Supplement is a replacement of the wage usually paid by the employer to the employee, the COVID Wage Supplement is not tax-exempt. It continues to be taxed as if the €800 had been paid as a part of the basic wage. Of course, there will be instances where the remuneration level of the employee as calculated under FSS rules makes this taxable at 0% (as distinct from non-taxable).
- Because the CWS is required to be identified on the payslip, and possibly also on the FS7, produced either at the end of-year or at the end of an employee’s employment, it will be necessary to separate out the COVID Wage Supplement with its own description from the basic salary. Using an Annex A example, to implement this, a pre-tax deduction of €800 would need to be made to applicable employees as well as a pre-tax addition of €800. It is important that both the deduction and the addition are affected pre-tax.
- The Pre-tax addition of COVID Wage Supplement is to be included to ensure that this description appears on the employees pay slip.
- Please note that the COVID Wage Supplement received by the employer is not to be treated as taxable revenue as part of the tax computation at the end of the financial year but nor is the COVID Wage Supplement to be treated as a taxable expense. They are tax neutral.
It is understood that in various instances, when the operations are completely closed down due to Covid measures taken by Government. employees might be asked not to attend to work. The employer is obliged to pass on, as a minimum, the €800 wage subsidy less the employee’s national insurance contribution and government taxes to the employee.
In certain instance if there is agreement with the Department Of Industrial And Employment Relations, employees may be required to work a four or three day week, in these instance the Covid Wage Supplement would still be allocated in accordance to the parameters established above.
For a full explanation of the tax treatment of the Covid Wage Supplement, please refer to the guidance issued by the Commissioner for Revenue in this link:
The COVID Wage Supplement may only cover a person’s main source of income. Those in receipt of a Government, retirement or services pension, and students receiving a stipend are not eligible.
FAQs that may be of help to self employed/companies during this period may be found here:
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