Malta Tax Focus – An Overview of the Malta Tax System

December 2, 2019

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.

Tax Basis

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%.

Tax Incentives

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:

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

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

Withholding Tax

Dividends – 0%
Interest – 0%
Royalties – 0%
Branch Remittance Tax – 0%

Other Taxes

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

Tax Resident in Malta

An individuals tax liability depends entirely on the individual’s domicile and tax residence in Malta. If you intend on staying in Malta for longer than three months, you’re required to apply for residency. Therefore you will be taxed at the standard rate of tax unless you apply for a tax residency program through an authorised agent and accredited agent.

Tax Basis

Individual’s who is an ordinary resident and domiciled in Malta is subject to income tax in Malta on their worldwide income and taxable gains.
Individual’s who is an ordinary resident but not domiciled in Malta is subject to tax in Malta on income generated in and remitted to Malta.

Income Tax Rates

Malta operates off of the progressive rate of tax. Furthermore, this ranges from 0% up to a maximum income tax rate of 35%. For a detailed overview, visit our page on Malta income tax rates.

However, there are several tax residency programmes for non-domiciled individuals.

Malta Residence Programme – individual’s tax rate on income remitted to Malta at 15% for EU/EEA/Swiss nationals.
Malta Global Residence Programme – individual’s tax rate on income remitted to Malta at 15% for non-EU/EEA/Swiss nationals.
Highly Qualified Persons Rules – seeks to attract highly qualified persons in the financial, gaming and aviation sectors by offering a 15% flat rate of tax on income generated in Malta.
Malta Retirement Programme – sets tax rate on pension income remitted to Malta at 15% for EU/EEA/Swiss nationals.

Other Individual Tax Benefits

Capital duty – No
Inheritance / Estate tax – No
Wealth / Net Worth Tax – No
Capital / 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 assets consist of immovable property – 5% tax rate

Value Added Tax in Malta (VAT)

Malta VAT Rate

The standard rate of VAT is 18%. However, VAT reductions are applied in certain cases on certain products. For example; Yacht VAT, Aviation VAT, banking and insurance services, sale of immovable property. Malta boasts one of the lowest rates of VAT in the EU.

VAT Transactions

VAT is applied on the supply of goods and services in Malta, the intra-community acquisition of goods in Malta and the import of goods into Malta from outside the EU.

If you’re tax planning and looking at becoming more tax effective in Malta, enquire with our team directly by filling out our short enquiry form below. We will reach out to you for an initial consultation within 24 hours.

We deal in effective tax planning strategies such as establishing a Malta holding company, tax residency programmes and much more.

Contact us by either emailing enquiries@papilioservices.com or filling out our short contact form below and we will reach out to you.

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