Corporate Tax

The Malta corporate tax system aims to attract businesses to the island by offering excellent tax incentives and schemes for businesses. Malta, based within the EU, is an ideal jurisdiction to set up a company either as a holding company or as a trading operation as it offers many tax planning opportunities.

As a company service provider, we offer tax solutions to our clients to help streamline their business as well as minimise any tax leakage. Contact our Malta corporate tax team and we will arrange a consultation to understand your requirements and offer our solution.

Malta Corporate Tax System

The Malta corporate tax system outlines that companies, incorporated or managed and controlled in Malta, are subject to Malta corporate tax rate of 35% on a worldwide basis. However, through Malta tax laws, you can reduce the rate of corporate tax to an effective rate of 5%. Moreover, there are many tax benefits that Malta offers that make the Malta tax system attractive to business.

Malta Tax Benefits for Companies
  • Tax Refund System
  • Full Imputation System
  • Participation Exemption
  • EU-Malta Tax Benefits
  • Other Corporate Tax Benefits

    Malta Tax Refund System

    The Malta tax refund system enables foreign shareholders of a company registered in Malta to claim up to a 6/7th tax refund of tax paid in Malta. This 6/7th refund is paid to the shareholder in the form of a dividend, therefore making the effective tax rate 5%.

    Where the income of the business is made up of passive interest and royalties, the shareholders may claim a 5/7th refund of the tax charged to the Maltese company. Therefore, the effective tax rate is 10%.

    However, through income tax consolidation, a Malta holding company, who has a subsidiary trading company situated in Malta, is entitled up to a 30% tax refund upon distribution of a dividend from its subsidiaries to consolidate. The result means that the whole fiscal unit is eligible to the lower effective tax rate subject to satisfying some anti-abuse mechanisms.

    Malta Full Imputation System

    Malta corporate tax system works off a Full Imputation System. In simple terms, this means that company profits are taxed at the source, but dividends distributed to shareholders are not taxed again.

    This system is different from the classical system, whereby company profits are subject to tax and shareholders are taxed on dividends.

    Malta Participation Exemption

    Participation Exemption is an exemption from taxation for the shareholder in a company on dividends received, and potential capital gains arising on the sale of shares. However, this occurs when a Maltese company holds shares in another entity (qualifying as a Participating Holding).

    Typically, this is found when the holding company holds at least 5% of the equity shares of another entity such as a company/body of persons/CIS. The 5% must give the right to at least two out of the following three equity rights:

  • the voting rights,
  • the dividend rights, or,
  • the rights to assets on a winding-up of the equity shares.

    EU-Malta Tax Benefits

    Malta has come into line with the various EU directives and tax laws. However, this does open up various international tax planning opportunities for businesses. For example:

  • EU Parent-Subsidiary Directive – eliminates tax obstacles in profit distributions between groups of companies in the EU.
  • Interest and Royalties Directive – eliminates withholding tax obstacles in cross-border interest and royalty payments within a group of companies.

    Other Malta Corporate Tax Benefits
  • No Outbound Withholding Taxes
  • Group Taxation Provisions
  • Payment of Tax and Refunds
  • Taxation Delays for International Businesses
  • Advance Revenue Rulings

  • Contact Us

    If you need a more in-depth discussion around the Malta corporate tax system, contact us and we will arrange a consultation to discuss your businesses situation and how the Maltese system can make your business more tax effective.

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