Tax Resident in Malta
A company incorporated in Malta is considered both domiciled and resident in Malta. A company that is not incorporated in Malta is still viewed as a tax resident in Malta if the management and control of its business are taking place in Malta.
- Companies that are domiciled and resident in Malta are required to pay tax on their worldwide income and their taxable gains.
- Companies are a resident but not domiciled in Malta are only taxable on a remittance basis (income and gains arising outside of Malta that are received in Malta).
- Companies that are not resident nor domiciled in Malta are only charged on Malta sourced income and gains.
Malta Corporate Tax Rate
Companies pay a flat rate of tax of 35%.
a) Full Imputation System – The corporate tax system works off of 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.
b) Tax Refund System – The tax refund system enables shareholders, of a company registered in Malta, to claim tax refunds on tax paid.
- 6/7th Tax Refund (5% effective tax rate) – Malta Trading Companies
- 5/7th Tax Refund – (10% effective tax rate) – Malta Passive Income Companies
- 2/3rd Tax Refund – When Passive Income has been subject to a claim for double taxation relief
- 100% Tax Refund – Participation Exemption (explained below)
c) Malta Participation Exemption – Participation Exemption is the relief from taxation for a shareholder in a company on dividends and capital gains received from the sale of shares. However, this occurs when a Maltese company holds shares in another entity (qualifying as a Participating Holding).
d) EU 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:
Incentives and Support for Business
“Malta Enterprise provides incentives for enterprises demonstrating commitment towards growth, an increase in value-added and employment. Enterprises engaged in manufacturing, ICT development activities, call centres, healthcare, pharmaceuticals, biotechnology, aviation and maritime services, education and training, logistics and more may benefit from these incentives.” – Malta Enterprise
Visit Malta Enterprise for more information on the support available to businesses – https://www.maltaenterprise.com/support
- Dividends – 0%
- Interest – 0%
- Royalties – 0%
- Branch Remittance Tax – 0%
- Capital Duty – No
- Real Property Tax – No
- Transfer Tax – No
- Stamp Duty – Yes
- Transfer of immovable property – 5% tax rate
- Transfer of marketable securities – 2% tax rate
- Transfer of marketable securities where 75% of the companies assets consist of immovable property – 5% tax rate