Malta offers several tax benefits for businesses who operate from the island. Malta has over 70 agreements with countries from across the world, preventing double taxation on taxed company profits. Moreover, corporate tax in Malta has a full imputation system that means company profits are taxed at the source, but dividends distributed to the hands of shareholders are not taxed again.
The Malta corporate tax rate is set at 35%, however, once a company distributes dividends, shareholders are entitled to claim a tax refund based on their business activities. If the income of the business is of a trading nature (offering a product or service to a client), shareholders can claim a 6/7th tax refund of tax paid. Therefore, this makes the effective rate of corporate tax in Malta 5%. However, if the income of the business consists of passive interest and royalties, the shareholders may claim a 5/7th refund of the tax charged to the Maltese company. Thirdly, if the passive income or royalties have been subject to a claim for double taxation relief, including the FRFTC (Flat Rate Foreign Tax Credit), a 2/3rd refund of the Malta tax charged may be applicable. Finally, if the revenue comprises of income and gains from participating holdings, and the participation exemption has not been applied, the shareholders may qualify for a full refund of Malta tax paid. Therefore, a Malta business can be exempt from tax.
If you’re looking tax advice or you want more information on the corporate tax in Malta, reach out to us and speak with our Malta tax advisory team directly. Contact us today using the form below to arrange a consultation, alternatively, you can call us on +356 2258 2000.