Malta has a full imputation tax system meaning taxes are levied at company level only. The corporate tax in Malta is 35% and the shareholders benefit from tax credits that can be translated into a 5% tax rate under certain circumstances. This is the main reason for foreign investors to open companies or bring their businesses in Malta by opening branches, representative offices or agencies.
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.
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:
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.
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