COVID-19: Wage Supplement Notice to Employers
The Commissioner for Revenue has issued a notice to employers clarifying certain payroll implications emanating from the Covid Wage Supplement.
- Payroll Implications
The wage supplement received by the employer facing difficulties is intended to be passed onto the employees. Thus, the income of €800 or less, depending on eligibility, replaces the normal wage and is taxable in the hands of the employee.
For payroll purpose; tax and social security contributions are to be calculated in the standard method by taking into account the supplement received, as well as, any other income received by the employee during the pay period. Payroll requires no changes as the employer will record receiving the wage supplement, and forwarding same to the employee.
By way of clarification, CFR highlighted that for income tax purposes, the wage supplement will not be treated as income or grant to the employer and therefore will not be taxable nor tax deductible.
- Social Security Contributions
Upon the transfer of the supplement, the government will retain 10% thereof for each employee as a prepayment of the employee’s share of social security contribution (SSC).
Subsequently, the employer will calculate the total sum due to the CFR i.e. the employer’s and employee’s share, Maternity Contribution and taxes and deduct therefrom the amount of SSC prepaid to CFR. The total due to CFR less the SSC retained when the wage supplement was paid, will be shown in box D5 on the Form FS5.
- FS3 and FS7 Reporting
Since Malta Enterprise is responsible for providing full details of the applicants to CFR, the employers will merely report the wage supplement paid to employees in the regular FS3 Forms.
In relation to FS7 forms, the CFR stated that it shall be modified to illustrate the amounts paid to employers and the SSC withheld from the wage supplement.
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