By virtue of Act No. VII of 2022 enacted on 8th February 2022 and through the introduction of article 56(26A) of the Income Tax Act (chapter 123 of the laws of Malta – the "ITA") a reduced rate of tax on income from artistic activities has been introduced into the legislative framework.
In terms of article 56(26A), ITA, a self-employed individual who derives income from a full-time or part-time artistic activity shall be subject to a reduced rate of tax of 7.5% on gross turnover, effective basis year 2022, year of assessment 2023, subject to approval of the activities by the Malta Arts Council.
Guidance on the application of article 56(26A), ITA, (the "Guidelines") has been made available on Arts Council Malta site, which Guidelines provide clarity on a number of points, including an individual's eligibility to avail himself of the reduced rate of tax and the application process to be followed, amongst other matters.
Eligibility
The Guidelines confirm that the reduced rate of tax is only applicable to self-employed individuals who generate income from "artistic activities", for an "artistic purpose" (as defined) i.e. by individuals who are:
- actors;
- artistic directors;
- choreographers;
- curators;
- dancers;
- literary writers;
- musicians;
- painters; and
- sculptors.
Furthermore, in terms of the Guidelines, in order for the income generated by said individuals to fall within scope of article 56(26A), ITA, the artistic activities undertaken must be for any of the following "artistic purposes":
- theatrical, stage, motion picture and TV productions;
- exhibitions;
- paintings, sculptures, literary and musical works; and
- intellectual property and royalties.
Applicability and Application Process
The 7.5% reduced rate of tax is only applicable on the first €30,000 turnover (i.e. revenue) generated from artistic activities. Any income generated over and above €30,000 shall be added to the individual's other income, if any, and subject to tax at the progressive rates of tax, reaching a maximum of 35%.
The tax paid in terms of article 56(26A), ITA, is a final tax and no set-off or refund may be granted in respect of same.
Individuals wishing to benefit from article 56(26A), ITA, must submit an online application via the Arts Council Malta. Applications for tax basis year 2022, year of assessment 2023 are currently open and must be submitted prior to Tuesday 7th November 2023 at noon.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
