The government yesterday warned landlords to declare their income from rented property or risk being charged over tax evasion.

Launching a new reduced tax scheme on property rents, Finance Minister Edward Scicluna admitted there was “widespread tax evasion” in this area and the government would no longer tolerate it.

According to the law, income from rent proceeds is taxable at 35 per cent. However, few landlords have in the past declared this income, with successive administrations turning a blind eye.

Mr Scicluna said it was easy for the government nowadays to verify that a property was being rented out.

The scheme, first announced in the 2014 budget, reduces the maximum tax on rental income from 35 to 15 per cent, and is eligible to both individuals and companies.

Once an individual or company declares the annual income from the rented property and provides the required details, the taxpayer will only need to pay the flat annual rate of tax.

The scheme is a voluntary one and the government allows rental income earners to opt for the existing tax regime.

Since the new scheme may also reveal non-declaration of past revenue, the government is also giving the opportunity to individuals and companies to regularise their past tax position and pay arrears according to a formula that applies to 2005-2012. No interest or penalties will be charged on such declarations.

Currently, the market for property leasing is experiencing rapid growth particularly because thousands of expatriates are coming to Malta for work purposes.

Sources in the industry told Times of Malta that in certain localities, particularly in the Sliema and St Julian’s area, demand is currently higher than supply.