A new, lower, withholding tax on rent has been launched today, but the government is convinced that its revenue will increase since the measure is set to crack down on tax evasion on property rentals.

"The government has felt that tax evasion on rental income is widespread, with people assuming that they can get away with it because no one would ask about it," Finance Minister Edward Scicluna said at a press conference this afternoon.

He added that the government wanted to change this state of affairs, but also felt the need to encourage landlords to pay their taxes and to regularise their position.

The measure, which had been announced in the 2014 Budget - Finance Minister Edward Scicluna noted that it was being launched at this stage since tax returns for 2014 have to be filed shortly - would see landlords pay a flat rate of 15% on the total gross rental income received. At present, the maximum withholding tax on rental property is 35%.

The scheme is actually voluntary in nature - rental earners may still retain the existing tax regime for rental income should they so with - but Prof. Scicluna points out that in the case of those who apply to benefit from lower tax rates, it would be easy to find out whether they have evaded paying tax on rental income in previous years.

To address this, the government is also providing an opportunity to landlords to regularise their position with respect to previous years' undeclared rents. Applicants would have to declare income from rent for the period 2005-2012 and pay 15% on a two-year averaged rental revenue received for the mentioned period of time, with no interest or penalties being charged.

Those who do not avail themselves of this opportunity, Prof. Scicluna warned, will not find another, and would have to pay the full 35% tax rate as well as penalties and interest if caught. The minister also said that enforcement in this sector was set to increase significantly, making it harder for evaders to continue evading their tax.

To pay 15% tax on rental revenue received during 2014, individuals or companies are to file a form which can be downloaded from the Inland Revenue Department website, together with a cheque covering the amount due by 30 June. A separate form is available for those seeking to declare any undeclared rental revenue received up to 2012, which should also be submitted by the end of this month.

Rental income received in 2013 should have been declared in the tax return for that year, and subject to normal tax rates.