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.
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.
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%.
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.
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.