Car cash allowances can be given to employees in Malta if they use their vehicle while on official business.
When this type of perk is given to an employee, it is considered in terms of taxation law to be a fringe benefit.
However, the component of fringe benefit is calculated at 50 percent of what is paid to the employee, as long as the total allowance amount of €1,170 is not exceeded. The total amount which can be deducted is capped at €1,170.
The tax contribution also includes any type of reimbursement for fuel, including signup schemes, vouchers and repaid receipts.
It is to be noted that the fuel reimbursement will count towards the above-mentioned threshold of €1,170.
The car cash allowance in Malta can be given provided that the employee uses their own vehicle, and not a company owned vehicle.
The said allowance criteria must be laid out in the terms of any collective agreement that the employee signs up to, or, in the case of niche` and non-union affiliated employees, in their written contract.
In order to benefit from the car cash allowance in Malta, employees must not make use of another car owned by the employer.
If the employee is in breach of the laid out conditions, the Tax Department will tax the benefit amount in full.
Multiple car cash allowances
When a beneficiary of a car cash allowance receives more than one car cash allowance– whether from the same employer or a different one, the 50 percent deduction can only be used once.
For example, when an employee exhausts the €1,170 threshold, the remaining of the other allowance becomes 100 percent taxable. Put simply, the 50 percent on the €1,170 threshold can only be claimed once.
It is up to the employee to declare any additional car cash allowances to their employers to apply the allowance correctly.
Rate per kilometre basis
Some reimbursements are made on a rate per kilometre basis.
This form of reimbursement is not treated as a fringe benefit, provided that the rate agreed on is 35 cents per kilometre or less, covering only business travel in the employee’s own personal car.
All business travel must be recorded in a logbook which can be verified by the tax authorities and is held securely by the employer for a six year period.
If the above criteria are not adhered to, the full value will be treated as a fringe benefit and taxed under the same criteria as a car cash allowance.