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Taxation in Malta - Legal Advice for Foreign Investors

Taxation in Malta

Updated on Saturday 05th June 2021

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taxation_in_malta.jpg.jpgThe Maltese taxation system is one of the main reasons foreign investors open companies here. Malta offers competitive rates compared to other EU countries due to a full imputation tax system which favors both companies and individuals. The Maltese tax system is made up of: the income tax, withholding taxes, other indirect taxes. For tax minimization solutions you can request the services of our Maltese lawyers.
 
We invite you to read below about the taxes to be paid by individuals and companies in Malta. At the same time, Malta tax legislation can be explained by our attorneys in Malta.
 

How is the tax base established in Malta?

 
In order to pay taxes in Malta, a tax base must be determined for each taxpayer. There are two main taxpayers in Malta: individuals and companies. Both types are taxed in accordance with their fiscal domicile. In order to be considered a tax resident in Malta, an individual must comply with one of the following conditions:
 
  1. he or she must have a place to stay in Malta or must be a citizen of the country and will be taxed on the income generated in Malta and abroad;
  2. he or she must qualify for the resident status which implies living in Malta under a residence permit and be taxed as a Maltese citizen;
  3. foreign citizens living in Malta for at least 183 days in a calendar year are taxed on the income generated in Malta and abroad;
  4. foreign citizens working in Malta for less than 183 days in a calendar year are considered non-residents and will be taxed on the income earned in Malta.
At our law firm in Malta you can obtain the necessary representation in matters of taxation in this country. If you are a foreign investor seeking to set up a business in Malta, our lawyers can handle the entire incorporation procedure, including the tax registration step.
 

The income tax in Malta

 
Unlike other EU states where the taxation of individuals and companies is separate, Malta imposes the income tax on both natural and legal persons. Malta taxes individuals and companies based on their residency. While Maltese residents are taxed on their worldwide income, non-residents will be taxed on their income received in the country. Individuals are taxed on the incomes arising from employment or other sources of income and are also subject to social contribution payments. Maltese companies, on the other hand will be taxed on their business profits and other sources of income, among which dividend, interest and royalties payments. Maltese residents and non-residents are taxed progressively at rates varying from 0% to 35% depending on their income.
 

Taxation of individuals in Malta

 
Malta has a unique taxation system, including when it comes to the personal income tax which must be paid by individuals. Personal taxation in Malta can apply at individual or couple level. In the case of married couples with children, special rates apply. Maltese citizens and residents are taxed at rates ranging between 0% and 35% with the mention that in the case of married people, the individuals have the option to report their income separately or jointly. Where the couple decides to report a joint income, one of the spouses must be appointed as the representative partner.
 
The following rates apply to individuals paying taxes in Malta:
 
  • 0% rate applies for incomes of 9,100 euros for singles and the tax base can go up to 10,500 euros for parents;
  • 15% rate applies for incomes ranging between 9,101 euros and 21,200 euros;
  • 25% rate will be levied for those with incomes of at least 14,01 euros and a maximum of 28,700 euros;
  • 25% rate is also applicable to individuals earning up to 60,000 euros per year;
  • the maximum rate of 35% is applicable to all individuals, no matter their marital status with incomes above 60,001 euros.
 
The rates above are calculated for the tax year of 2019 and express the income earned by an individual during a calendar year, however we invite you to talk to our Maltese lawyers who can guide to our accountants in Malta for detailed information. More about Malta tax can be discussed with us.
 
Another aspect to be considered by Maltese residents and non-residents is that they will need to file their annual returns by June 30th of the current year for income earned in the past year. Self-employed individuals are subject to different criteria which implies advance payments for the taxable income made in the past year.
 

The taxation of companies in Malta

 
The Maltese corporate tax is encompassed in the Income Tax Act. Maltese companies are taxed on their profits at a fixed rate of 35%. However, due to all double taxation treaties Malta has in place and to the other EU regulations, among which the Parent-Subsidiary Directive, the effective corporate tax rate is significantly reduced. Malta’s double tax agreements also provide for tax exemptions on withholding taxes applied to dividends, interests and royalties.
 
Maltese companies must also comply with the reporting regulations imposed by the tax authorities. The same reporting period of 30th of June applies to companies, however, if any difference is registered in the accounting of a company, it must be reported by the 30th of September.
 
Our lawyers in Malta can provide you with more information about the tax benefits companies can take advantage of. Make sure you ask about Malta tax system and requirements
 

Other taxes in Malta

 
The Malta tax system is made up of direct and indirect taxes. The most important indirect tax levied in Malta is the value added tax (VAT). The standard rate of the VAT is 18%. Other reduced rates apply as it follows:
 
  • 7% on tourism services,
  • 5% on electricity services, medical equipment and confectionery,
  • 0% on imports and exports, different transactions.
 
Other indirect taxes levied in Malta are the stamp duty which applies to property transfers, environmental taxes and customs and excise duties. For any information on the taxation of companies, you can discuss with our lawyers in Malta.  EORI registration in also possible with the help of our law firm. The video below shows the main taxes applicable in Malta:
 
 

Taxation of various business vehicles in Malta

 
Malta is a very appealing country for those seeking to establish financial companies. However, it should be noted that the taxation of these companies can be different from that of commercial companies. The following types of entities are subject to different tax conditions in Malta:
 
  • investment funds are exempt from taxation in Malta if they are domiciled here if less than 85% of their assets are located in Malta;
  • trusts are also exempt from taxation in Malta if their beneficiaries are not residents of this country and if the assets of the trust are located outside the country;
  • foundations can be taxed as trusts (if they fulfill the same conditions) or can be taxed as Maltese companies;
  • retirement schemes are exempt from the income and capital gains tax, however, will be taxed on any immovable property held in Malta.

The tax base for foreign companies in Malta

 
Companies that have no registered offices in Malta are considered foreign companies only carrying business activities in this country and they will be taxed on their chargeable income and capital gains made in Malta. Companies registered in other countries, but controlled in Malta, will be held liable for taxation on the incomes they earn in this country and for the income made outside and remitted in the country as well. The chargeable income will be subject to the 35% tax rate and it includes capital gains.
 

Taxable income of foreign companies in Malta

 
The taxable income made by a foreign company in Malta can be defined as a company’s profit as it is shown in the audited statements. The profits are subject to certain adjustment in order to become taxable profits. The adjustments can refer to tax deductions or exemptions, for example, if double tax treaties are enforced between Malta and the country of origin of the foreign company undertaking commercial activities in Malta. According to the Income Tax Act in Malta, chargeable income can take the form of:
 
  • trading profits,
  • dividends,
  • business profits,
  • interests,
  • rentals,
  • royalties,
  • gains made from disposed taxable assets.

 

Capital gains taxation of foreign companies in Malta

 
According to the Maltese Income Tax Act, capital gains are levied as a tax on earnings made from the transfer of intellectual property rights, securities, business, interests in a trust, immovable properties. The capital gains made by a foreign company in Malta will be added to the company’s income made throughout the year and the tax will be levied on the total amount of money.
 
A provisional tax of 7% is also levied at the moment of the transfer. Immovable properties are subject to a transfer tax of 12%. An exemption from the capital gains tax is provided to nonresident persons who do not act on behalf of Maltese residents. More about this topic and also Malta tax can be discussed with our advisors.
 

Tax minimization in Malta

 
Tax minimization is a process that can help companies in Malta avoid paying more taxes than needed. However, the process is complex and it is recommended that business owners in Malta seek the help of a professional who can help them invest carefully and establish a good financial plan.  Our lawyers in Malta can help you with useful information about the taxes in Malta and offer you legal and business advice in a number of key fields.
 
The Republic of Malta has much to offer to foreign investors. The beautiful southern European country is a popular touristic destination which gives business owners many investment opportunities. 
 
Company owners who want to make the most out of their investments in Malta need to consider ways to maximize their income. Financial planning is an important part of any business strategy and tax minimization is more than just avoiding to pay more taxes than needed. Business owners need to commit to a comprehensive financial planning strategy. Our Maltese lawyers can provide financial planning services, suited to the specific needs of your company type.
 

Strategies for minimizing taxes in Malta

 
Business owners in Malta need to carefully plan their investments. The first step towards avoiding unnecessary taxes is to choose tax-efficient investments. Another strategy to reduce taxes is to bring forward the tax deductions, with the aim to reduce the taxable income. This can be done for a number of purchases, like gifts for employees in Malta or business partners, investments made for property repairs in Malta, office supplies or business travel expenses. Another method is to pay in advance any interests on investment loans.
 
Another method to reduce taxes in Malta is to make charitable donations. The most popular form of donation is the donation in cash, but other tangible or intangible assets can also be donated.
 

Taxation under varied Maltese programmes

 
Third-world nationals and high net worth individuals can apply for different programmes through which they can gain residency, citizenship and also benefit from special tax rates. Below are a few examples of advantageous programmes implemented in Malta that might attract your interest:
 
  1. The Global Residence Programme – foreign-source incomes remitted in Malta are levied at a 15% tax rate. Among the requirements, candidates must own Maltese property worth at least EUR 250,000 or rent one for at least EUR 9,600/year.
  2. Malta Retirement Programme – Individuals with periodic pension income remitted in Malta are subject to the same tax rate of 15% and an additional EUR 500/year for each applicant.
  3. The UN Pensions Programme – This aims at foreign pensioners who want to retire from the United Nations to Malta. The eligibility criteria involve the possession of a Maltese property worth around EUR 275,000 or rent one for at least EUR 9,600/year. The same flat rate of 15% applies to foreign-source incomes paid in Malta.
  4. The Qualifying Employment in Innovation and Creativity Programme – A minimum salary of EUR 52,000 without benefits is required to join this programme. The taxation is set at a 15% rate.
 
The tax system is quite beneficial for foreigners who want to relocate to Malta. If you need more details on this topic, we suggest you address one of our Maltese lawyers. We remind that we can help foreigners from a tax point of view, whether as company owners or natural persons.
 

FAQ about taxation in Malta

 
1. What types of incomes are levied for companies in Malta?
Incomes registered by companies in Malta are subject to taxation. Business profits, dividends, royalties, rental incomes, and gains made from disposed taxable assets are among the incomes levied in Malta.
 
2. What is the income tax in Malta?
The income tax in Malta is subject to a 35% rate for companies in this country. Even the ones controlled in Malta but incorporated in other countries are subject to this kind of tax.
 
3. How is an investment fund levied in Malta?
If less than 85% of the assets of the investment funds are established in Malta, there is no taxation. This is quite a benefit for financial company owners in Malta. More on this topic can be discussed with our Maltese lawyers.
 
4. What is the tax rate for tourism services in Malta?
Tourism services in Malta are levied with a 7% tax rate. This is one of the reduced VAT rates for services in this country.
 
5. What is the VAT rate in Malta?
The standard VAT rate in Malta is set at 18%. One should note that different types of imports and exports are not subject to VAT in Malta. This is another important aspect related to taxation in Malta that can be discussed with our specialists.
 
6. What is the taxation of incomes of individuals in Malta?
The taxation of incomes registered by individuals living in Malta ranges from 0% to 35%. As such, there is no tax applicable to incomes of a minimum of EUR 9,100. Persons with incomes of more than EUR 60,000 are subject to a 35% tax rate in Malta.
 
7. Who is considered a tax resident in Malta?
Foreigners who live in Malta for at least 183 days must register for taxation in this country. The taxes apply to incomes generated in Malta or foreign countries. Detailed information about the residence and tax status of foreigners in Malta can be discussed with our advisors.
 
8. Are there any tax exemptions in Malta?
Yes, there is no withholding tax imposed on interest, royalties, and dividends in Malta. Moreover, Malta signed several double taxation treaties to protect against fiscal evasion and double payment of taxes.
 
9. Can companies in Malta benefit from tax minimization methods?
Yes, company owners can implement different tax minimization tools to reduce the amount of taxes to pay in the firm. A complete and concrete financial plan can be created by our Maltese lawyers with experience in the tax field.
 
10. Can I ask for support for Malta tax registration?
Yes, it is extremely recommended to solicit the legal assistance of an experienced tax advisor in Malta. He/she knows the applicable laws ad requirements and can provide the exact support for different registration formalities.
 

Working with our Maltese lawyers

 
Both natural persons and company owners can solicit the support and legal advice of a tax lawyer in Malta. The legislation might seem complex for foreigners found for the first time on the business market in Malta, so legal assistance is needed. Our clients who decide on our legal services can benefit from a professional team with experience who looks for optimal business solutions.
 
 
If you want to open a company in Malta and need more information about the corporate tax, please contact our law firm.