Fabian Demicoli

Host Families Taxation Problem Close to Solution

Host Families Taxation Problem Close to Solution

The Marquis Scicluna Hall at the Trade Fair Centre Naxxar was full to the maximum capacity as over 500 host families convened by GRTU – Malta Chamber of Small and Medium Enterprises – to hear details of the proposals made by GRTU to the Ministry of Finance to resolve the taxation of host families income. This is an issue that was raised over these last three months as the Income Tax Authorities requested host families to include the income received from hosting students in addition to any other income returned for Income Tax purposes.

Host Families Taxation Problem Close to Solution

The Marquis Scicluna Hall at the Trade Fair Centre Naxxar was full to the maximum capacity as over 500 host families convened by GRTU – Malta Chamber of Small and Medium Enterprises – to hear details of the proposals made by GRTU to the Ministry of Finance to resolve the taxation of host families income. This is an issue that was raised over these last three months as the Income Tax Authorities requested host families to include the income received from hosting students in addition to any other income returned for Income Tax purposes.

GRTU President, Paul Abela and GRTU Director General, Vince Farrugia explained that following preliminary meetings with the Hon. Tonio Fenech and representatives from the Tax Authorities, GRTU conducted a survey among host families to establish exactly the dimension of the problem and to plan proposals based on the realities of the local scene. Mr Farrugia explained that GRTU was keen to see this sector grow, as it believes the experience of households, hosting language students can be extended to develop a lodger’s sector that can help extend Malta’s total tourism accommodation sector without the necessity of additional accommodation infrastructure and investment.

From the survey conducted by GRTU it resulted that 46% of host families have a gross intake of less than Lm1, 000 per annum, another 31% have a gross intake of less than Lm1, 500 but more than Lm1, 000, while another 10% receive between Lm1, 500 and Lm2, 000. These incomes cover all the expenses and time consumption and care of the host families for the whole period of hosting. Only 36% host students for more than 12 weeks. 66% of host families host four students while 34% host between 1 and 3 students.

On the basis of these findings, GRTU proposed a system of taxation, which reflects in principle the system adopted by the UK Tax Authorities, but simplified to meet particular local needs.

The scheme proposed by GRTU gives host families a non- taxable threshold that covers re-imbursement of residential expenses. Host Families who do not receive more than this threshold will not have any tax liability as the income received will be deemed as home sharing re-imbursement and not earned income. Any income above this threshold will be presented on a simple form with agreed deductions for expenses such as water, electricity and food on figures as agreed with GRTU. The remaining resultant income will become taxable for income tax purposes. The amount of the resultant taxable income will be added to any other income received by host families. Depending on whether a family declares on a separate single tax return or on returns as couples, the applicable taxation rate will be established.

GRTU also met the President and Committee members of the Federation of English Language Teaching Organisation Malta (FELTOM) so that an agreement can be achieved as a joint approach to this issue. GRTU is satisfied that FELTOM is supporting GRTU’s proposals. FELTOM members will be guided to deduct from the income receivable by host families any amount of taxation due according to the rate applicable to individual households and as indicated by the individual tax payers.

GRTU is confident that its proposals will not burden the vast majority of host families and will therefore be beneficial to the continued expansion of this line of tourism. GRTU is also confident that its proposals will not negatively affect host families who are in receipt of state pensions or any state welfare assistance.

GRTU discussed these proposals with the Hon Tonio Fenech, Parliamentary Secretary, Ministry of Finance and with the Hon Dolores Cristina, Minister for the Family and Social Solidarity, and GRTU is confident that these proposals are in line with Government thinking on this issue and that therefore a practical solution is possible.

The Naxxar Meeting of Host families also discussed a number of other problems faced by Host families. These issues will be the subject of a memo that GRTU is presenting to FELTOM as the national association representing all Language Schools so that a Memorandum of Understanding can be signed between the two national organizations. The Memorandum will guide Schools and Host Families in the exercise of hosting students to the highest professional and ethical standards and will govern the whole exercise of hosting of language students by private households.

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