Corporate Tax in Malta
Corporate Tax in MaltaUpdated on Thursday 02nd April 2020
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The scope of Malta corporate tax
- business activities,
- incomes made from real estate rental or selling,
- other sources of income.
The corporate tax rates in Malta
Corporate tax refunds in Malta
The calculation of the corporate tax in Malta
- the foreign income account,
- the Maltese taxed account,
- the final tax account,
- the immovable property account,
- the untaxed account.
Tax planning opportunities for foreign investors in Malta
- the full imputation system of taxation that allows shareholder receiving dividends to apply for a credit for tax paid at source,
- the participation exemptions applied to dividends and capitals from holding companies qualifying for such exemptions,
- the tax refunds that reduce the tax applied to trading profits at 5% ,
- the extensive network of double taxation agreement Malta has with other countries.
Trusts and foundations as tax planning solutions in Malta
Investment funds as a tax planning vehicle in Malta
Fiscal domicile for determining the payment of the Maltese corporate tax
In order to establish the amount of money a company must pay as a corporate tax in Malta, the authorities will first determine if the company has a fiscal domicile in this country. According to the law, companies which have a management seat in Malta are considered tax residents and will be applied the corporate on their worldwide income. In the case of foreign companies operating through branch offices in Malta, the branches will be taxed on the income generated in Malta.
The rate of corporate tax in Malta is 35%. However, this rate is substantially reduced after the dividends are distributed among the shareholders, and thus the imputation system is imposed. From a taxation point of view, this makes Malta quite unique in Europe.
Our Malta tax advisors can offer more information on the imputation system as part of the corporate tax system.
The Maltese corporate tax imputation system
In order to establish the exact amount of money a business needs to pay the corporate tax on, the dividends must first be distributed among the shareholders, thus giving rise to a company to be taxed on its corporate income only.
Once the Maltese corporate tax is applied, the shareholders are entitled to apply for a partial or total tax refund of the tax paid at a company level. The following conditions must be respected when claiming the corporate tax refund:
- a full corporate tax refund is possible if the income derived from the investment qualifies as a participating holding, or if the dividend income satisfies the participating holding regime;
- a 5/7 refund is given to shareholders whose income is derived from passive interest or royalties, or for income qualifying as a participating holding outside the anti-abuse regulations;
- a 2/3 refund is given to shareholders applying for double tax relief if the income was obtained outside Malta by the Maltese company;
- a 6/7 refund is given to shareholders receiving dividends which are paid from incomes which have not been mentioned.
This way, a Maltese company can become subject to a reduced corporate tax of 5%.
Our accountants in Malta can offer more information on the corporate tax and how refunds can be obtained. All our accountants are CPA-accredited in Malta and thus we offer safe and reliable services.
The relief from double taxation in Malta
Another important aspect of the corporate tax in Malta is related to the reliefs which can be obtained under certain conditions. Maltese companies can benefit from unilateral, double tax treaty or foreign tax reliefs.
The unilateral corporate tax relief mechanism is based on a tax credit received by a Maltese company paying a foreign tax under Malta’s double taxation agreements. The company will need to submit evidence on the provenience of the income and the amount of money paid in another country.
Maltese companies can obtain corporate tax reliefs under the country’s double tax treaty network. Each agreement contains specific conditions which provide for such reliefs.
Other corporate tax reliefs are granted under EU directives, such as the Parent-Subsidiary and the Interest and Royalties Directives. The Participating Exemption Scheme is another way of holding companies to recover the corporate tax. However, these must first meet some requirements imposed by the Office of the Commissioner for Revenue in Malta.
You can rely on us for various accounting services, including for audit services in Malta.
Other facts about the corporate tax in Malta
Malta is one of the most appealing jurisdictions in Europe thanks to its corporate tax system and if you decide to set up a business here, you should know that:
- Malta has a wide network of double taxation agreements which currently contains 70 countries;
- companies generating profits abroad can obtain foreign tax credits at the rate of 25%;
- in order to be deemed a holding company, a Maltese business must own at least 5% of the shares in its subsidiary;
- the participating exemption regime can also apply to companies paying a foreign tax at a minimum rate of 15% and obtaining less than 50% of the income from interests or royalties.