Malta’s Benefitial Corporate Tax System

Setting up a Company in Malta has several benefits. If you want to see more information, read the 8 Benefits of Setting Up a Business in Malta. However, one of the standout features of starting a business in Malta is the tax benefits.

Here are our top three reasons why Malta’s corporate tax system is the best for businesses:

1. Full Imputation System

Firstly, Malta’s corporate tax system works off of a Full Imputation System. In simple terms, this means that the Revenue Department will tax company profits at the source, but dividends distributed to shareholders are not be taxed again. In contrast, most countries operate off of the classical system. In other words, the company profits are subject to tax and shareholders are taxed on dividends.

2. Tax Refund System

Secondly, Malta has a tax refund system. Shareholders of Maltese companies can claim refunds of tax paid when such income gets issued as a dividend. Organisations are only eligible for this if profits have been subject to tax at the standard rate of 35%.

Trading companies in Malta can be entitled to a 6/7th refund, making the effective tax rate of 5% as opposed to 35%. If the companies income is more passive (such as passive interest and royalties), you could be entitled to a 5/7th refund, making the effective tax rate of 10%.

3. EU Parent-Subsidiary Directive

Finally, as Malta has been a member of the EU since 2004, it does benefit from some Intra-EU tax benefits — one of these perks being the EU Parent-Subsidiary Directive. The directives aim is to eliminate double taxation on profit distributions between associated companies in the different EU Member States.

For example, if a company gets liquidated in Malta and profits of the sale are received by the parent company in the EU, the gains get taxed in Malta, not the other EU country. However, there is a second benefit! There are no withholding taxes or stamp duty on the distribution of dividends or profits to the shareholders. Therefore, you can liquidate a company in Malta and distribute the profits to the shareholders in another EU country, tax-free.

You can see why Malta is the fastest growing economy in the EU!

Malta Corporate Tax System

Useful Links

Company Formation and Registration
EU Parent Subsidiary Directive
Malta’s Double Taxation Agreements
Overview of Malta’s Tax System

Contact Us

If you’re looking at setting up a business in Malta or you want to speak with our tax advisory team directly, contact us today using the form below to arrange a consultation.

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