Malta Corporate Taxation

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. 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.

One of the key advantages of the Maltese income tax system is the full imputation system that applies to the taxation of dividends. Shareholders are entitled to a credit for the company tax paid on distributed profits and will qualify for a refund when the tax credit exceeds their tax liability.

Under Malta’s full imputation system the shareholder 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 will be taxable in Malta on the dividend income, including the refund, at personal rates.

• The amount of the tax refund is set at 6/7ths of the advance corporation tax paid by the company and 5/7ths in the case of passive interest and royalties.
• The refund is reduced to 2/3rds where the distributing company claims double taxation relief.
• With respect to participating holdings a full 100% refund applies. A participating holding “arises where a 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:

• As an EU member state, entities have access to the Parent-Subsidiary, Interest & Royalties, and Mergers Directives;
• Participation exemptions;
• An exemption from tax on income derived by collective investment schemes;
• 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;
• An absence of “thin capitalisation” rules and no anti-controlled foreign corporation legislation;
• 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;
• 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;
• The possibility of migrating companies to and from Malta;
• Relative ease of incorporation for non-regulated entities;
• Low registration and maintenance costs;
• A taxation scheme for groups of companies allowing offset of losses between group companies;

For Corporate Services, including Malta Company Formation, Back Office Management and Accounting & Payroll Services; kindly forward your query to corporate@csbgroup.com