Beneficial Loan Arrangements

As explained in the Guide, the provision of a loan to an employee constitutes a fringe benefit. For this purpose a “loan” is any form of credit, including any kind of advance and any amount shown in the employer’s books or records as owed by an employee. The value of the benefit is the excess, if any, of the interest that would have been payable if the beneficiary had been required to pay interest on the loan at the benchmark rate, over the amount of interest that he actually pays, if any, for the period in question. The current benchmark rate is 6.5%, but the Commissioner is empowered to determine any other rate as the benchmark rate and may determine different rates for different types of loans. 

A special valuation rule applies in the case of loans advanced by licensed banks or financial institutions to their employees. The benchmark interest rate in this case is the rate on the main refinancing operations as applied by the Central Bank of Malta. The value of the fringe benefit in this case qualifies for the in-house benefit reduction (This reduction amounts to the lower of €700 and the value of that benefit before the reduction).

On the 14 February , the Commissioner for Tax & Customs  has issued additional guidelines in relation to Beneficial Loan Arrangements which shall apply as from year of assessment 2025 (basis year 2024) to any loan granted by a bank set up or licensed under Maltese law or by a financial institution authorised to lend money to the general public in accordance with Maltese law to an employee of such bank or financial institution. In such cases, the benchmark rate of interest on loans to which this guideline applies shall be as follows:
 

• In the case of a loan for the purchase of a primary residence, as defined in Directive No. 16 (Regulation on Borrower-Based Measures) issued by the Central Bank of Malta in terms of the Central Bank of Malta Act (Cap. 204), the average interest rate on Overnight Deposits as published by the Central Bank of Malta in the Statistics database titled Interest Rates and other Key Financial Market Rates. This benchmark rate may be located through this link - under the Excel file titled: Monetary Financial Institutions' Interest Rates on Deposits and Loans to Residents of Malta under Outstanding Amounts Row 37 titled Overnight Deposits.
   
• In the case of any other home loan, the average interest rate on Lending for House Purchases, as published by the Central Bank of Malta in the Statistics database titled Interest Rates and other Key Financial Market Rates. This benchmark rate may be located through this link - under the Excel file titled: Monetary Financial Institutions' Interest Rates on Deposits and Loans to Residents of Malta under Outstanding Amounts Row 56 titled Lending for House Purchases.
   
• In any other case, the average interest rate on Consumer Credit and other Lending as published by the Central Bank of Malta in the Statistics database titled Interest Rates and other Key Financial Market Rates. This benchmark rate may be located through this link -  under the Excel file titled: Monetary Financial Institutions' Interest Rates on Deposits and Loans to Residents of Malta under Outstanding Amounts Row 57 titled Consumer Credit and other Lending.

The new guidelines explain that the average rates referred to above shall be calculated by reference to the interest rates prevailing at the end of each month during the twelve-month period ending on 30 September of the year immediately preceding the year during which the benefit is deemed to arise, as published by the Central Bank of Malta in the said database.  These guidelines override any other guidelines previously issued by the Commissioner as well the Fringe benefit Rules.

The current benchmark rate of 6.5% shall continue to apply to  loans other than the loans referred to above.