What is a Non-FSS Employee?
A Non-FSS Employee is a person who is employed by a local company while living and working in a different country to the company. Such employees are subject to different taxes than their company's tax jurisdiction, and as a result do not have tax deducted from their wages by their employer. Instead, they are responsible for calculating and paying any taxes they may have due in their own country.
Locally, this means that a non-FSS employee's Country of Residence is NOT saved as 'Malta' in their Indigo employee profile.
Previously, Indigo users had to create a separate company to keep employee data and run a different payroll for those employees who are not based in Malta, and of course running two of every report required.
"But there must be a better way! 😫" you said.
We heard you 👂🏻 and yes, there is. 😎
Here's how to handle these non-FSS employees or subcontractors living abroad while controlling all your employee data, payroll, and reports in one place. ⬇️
Setting the Tax Profile
Go to Payroll & Leave > Tax Profiles.
In the Tax Profiles grid, click Insert + to add a new entry and fill it in as follows:
Under 'Code' write 'NON-FSS'.
Under 'Tax profile description' write 'Excluded from FSS (Not Reported)'.
For 'FSS Status', click the dropdown and select 'Excluded from FSS'.
Leave 'Tax on annual proj. gross' unticked.
Click Save.
Now that the Tax Profile is sorted, let's move on to the employee profile settings.
Non-FSS Employee Profile Settings
⚠️ When existing employees move abroad, you will need to first terminate their existing profile and then create a new one with the required non-FSS settings. Set the employment date as the date the employee will start working from their new country of residence. ⚠️
Go to HR > Employees.
Click Add New to the Employees grid to create a new employee.
In the 'Employment Details' section, choose the following settings:
Set 'Employment Type' to something that has SSC Type No Social Security and Statutory Bonus % of 0, with Pro-Rata Statutory Bonus unticked. (Create or edit one if it doesn't already exist.)
Set 'Tax Profile' to 'Excluded from FSS (Not Reported)' which is the Tax Profile newly created.
Leave 'Short Term Benefits' empty.
Tick 'No maternity leave fund deduction'.
Disable 'SSC Disability exemption'.
Overtime and Overtime Concession Opt Out must both be ticked.
Click Save.
Regarding Pay Items
Since non-FSS employees are effectively untaxable in Malta, you cannot input any pay item in either their Pay Items tab or while preparing their Payroll that is subject to tax or social security contributions.
This means you cannot add any pay item that has any of the following selected: Subject to FSS tax, Subject to SSC, Reported as gross, Is Due to 3rd party, or Fringe benefit category. These must all be off for any pay item given to these employees during Payroll.
Regarding Non-FSS Employee Payslips
Thanks to being exempt from paying tax and social security contributions in Malta, the payslips of non-jurisdiction employees will be blank in the section that normally contains such details. Have a look at the test example below to see how these will appear.
Reporting
If you want to see Non-FSS employees included in any of the Payroll & Leave reports, simply leave the box for 'Exclude Non-FSS Employees' unticked in Options. On the other hand, if you want to exclude such employees then make sure to tick this box.
If you want to run a report including only non-FSS employees:
In the required report, go to the Employee tab.
Make sure the "Tax Profile" column is showing.
Filter the Tax Profile column for your non-FSS profile.
Finally, run the report.
On a final note, non-FSS employees will not be included in FS3s, FS5s, FS7s and Electronic Lodgements. Indigo has multiple validations and checks in place to ensure the tax profile settings, employee settings, and pay items are processed correctly and help you avoid mistakes.