Malta Corporate Taxation

The combination of Malta‘s unique tax system and its extensive and growing double tax treaty network means that, with proper guidance, planning and structuring, investors can achieve considerable fiscal efficiency using a Malta company to carry out its operations.

• Malta is the only EU member state with full imputation system;
• Malta has an extensive network of double taxation treaties, plus benefits even when no bilateral treaty in force;
• Malta applies a refundable tax credit scheme – on revenues as dividends paid by a Malta company to its shareholders, resident &non-resident;

One of the key advantages of Malta‘s tax system is that it is a full imputation system, and has been so since 1948, when income tax legislation was first enacted. Malta is, in fact, the only EU member state with a full imputation system of taxation in force. Another key advantage is Malta‘s extensive network of double tax treaties with almost all the important OECD countries.

The Maltese full imputation system which has been in force since 1948 and is compliant with the EU directives and ECJ case law, ensures that both resident and non-resident shareholders of a Maltese company are entitled to a refund of any tax paid by the company which is in excess of the shareholder‘s income tax liability.

Malta‘s EU membership has made the country a competitive jurisdiction for tax planning and corporate structures. Income Tax in Malta is charged on income from all sources and capital gains on the transfer of immovable property, securities and certain intangible assets. Maltese companies are taxed at a flat rate of 35% which is also the maximum rate for individuals. Other taxes include VAT, stamp duty and customs and excise duty. Malta is the only EU member state with a full imputation system of taxation in force.

Under Malta‘s full imputation system the shareholder of a company incorporated in Malta will, upon distribution of dividends, be entitled to a refund of in part or in full of any advance tax levied on the distributing company. A resident shareholder of a Malta company will be taxable in Malta on the dividend income, including the refund, at personal rates.

• The amount of the tax refund attributed to a Malta company is set at 6/7ths of the advance corporation tax paid by the Malta company and 5/7ths in the case of passive interest and royalties received by a Maltese company.
• The refund is reduced to 2/3rds where the distributing company claims double taxation relief.
• With respect to Maltese participating holdings a full 100% refund applies. A Maltese participating holding “arises where a Malta company holds at least 10% of the equity shares of a non-resident company”, or meets certain other criteria set out in the law.

In addition to the considerable benefits of the full imputation system and the extensive network of double taxation treaties, Malta offers businesses other key benefits under its tax legislation, including the following:

1. As an EU member state, entities have access to the Parent-Subsidiary, Interest &Royalties, and Mergers Directives;
2. An exemption from tax on income derived by collective investment schemes;
3. Participation exemptions;
4. The possibility of migrating companies to and from Malta;
5. Advance rulings issued by the Maltese Commissioner of Inland Revenue on international transactions that guarantee the tax provision for a minimum of five years and may be renewed for a further five year period;
6. The possibility for companies to denominate their share capital and their accounts in any convertible currency with the chosen currency then being used for payments of tax and tax refunds (where applicable) thus minimising exchange risks;
7. An absence of “thin capitalisation” rules and no anti-controlled foreign corporation legislation;
8. No capital duty on share issues and exemption from duty on transfer of shares in, by or to companies having the majority of their business interests outside Malta;
9. Low registration and maintenance costs;
10. Relative ease of incorporation for non-regulated entities;
11. A taxation scheme for groups of companies allowing offset of losses between group companies.

Contact us for more information and guidance on the taxation of a Maltese company. We reply to queries within 24 hours.