The Malta tax system and income tax

Malta tax system and income tax | Papilio Services Limited

Malta tax system and income tax

The Malta tax system and the main provisions regulating income tax in Malta are included in the Maltese Income Tax Act and the Maltese Income Tax Management Act.

The total income from all sources, including capital gains, is aggregated into one amount for the purpose of the income tax, and charged to tax in the hands of the tax payer.

  • Persons (including companies, other bodies of persons and individuals) who are both ordinarily resident and domiciled in Malta are liable to tax in Malta on their worldwide income.
  • Persons who are either not ordinarily resident or not domiciled in Malta are liable to tax on any income and capital gains arising in Malta and on any foreign income, but excluding capital gains, received in Malta.
  • Persons who are not resident and not domiciled in Malta may be liable to tax on income and capital gains arising in Malta.

A company is considered resident in Malta if it is incorporated in Malta, or (in the case of a non-Maltese body of persons) if its control and management are exercised in Malta.

The Malta tax system described below is available to Maltese companies (including partnerships en commandite whose capital is divided into shares) and to non-resident companies carrying on activity in Malta through a branch.  It is also available to Maltese trusts and foundations that irrevocably elects to be taxed as companies.

Malta Corporate Tax Rate

The Maltese company tax rate is 35%. Malta is currently the only EU member that operates a full refund system of taxation, whereby the tax charged to the company is refunded in full to the shareholder in the event of a dividend distribution by the company.

This effectively means that a shareholder will not be charged to tax twice on any dividends received and could even receive a refund of tax if such income falls to be taxed at a lower rate of tax in the hands of the shareholder (ie lower than the rate of tax incurred by the company).

Tax in Malta

The Malta tax system has been approved by the EU Commission and the OECD.

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