• Malta Tax System

  • TAX RESIDENCY

    Tax Residency

    A company incorporated in Malta is considered to be tax resident in Malta by virtue of its incorporation.

    A company registered outside Malta is considered to be tax resident in Malta if its management and control is exercised in Malta.

    Taxable Basis

    Malta tax resident companies are taxed as follows:

    1. Companies incorporated in Malta: taxed on their worldwide income.
    2. Companies incorporated outside Malta but which are controlled and managed in Malta:
      • taxed on income arising in Malta; and
      • income arising outside Malta to the extent that such income is remitted to Malta; and
      • gains realized in Malta (gains realized outside Malta would not be taxable in Malta even if remitted to Malta).

    Non-Malta tax resident companies are taxed only on income generated in Malta.

  • TAX ADMIN

    Taxable Period

    The taxable period for a company in Malta is the calendar year i.e. from 01/01 to 31/12.

    Tax Returns

    Every company needs to submit an annual tax return within 9 months from the year-end i.e. by 30/09 of the following year.

    Consolidated tax returns are not allowed. However, group relief is available for companies belonging in the same tax group - see below.

    Tax Assessments

    The Tax Authorities may issue a tax assessment within 6 years from the end of the year in which the tax return is submitted.

  • CORPORATION TAX

    Corporation Tax

    Corporation tax is levied at a flat rate of 35%.

    However, under the Maltese full imputation system the dividend paid by a Maltese company does not attract any further tax since a tax credit equivalent to the tax paid by the company is available upon the distribution of the dividend.

    As a result, the shareholder is entitled to a refund on tax paid by the company and therefore the effective tax rate is reduced significantly to 0% - 10%. (Illustration of Malta's tax refund system →).

  • DIVIDENDS

    Dividends from Foreign Investments

    Dividend income of a Maltese company from foreign investments is generally taxable in Malta.

    However, under the participation exemption rules, dividend income derived from a foreign participating holding may be either exempt from taxation in Malta or the shareholder may claim a credit for the tax paid by the company on the distributed profit.

    A shareholding in a foreign company qualifies as a foreign participating holding if the Maltese shareholder company:

    • holds at least 10% of the share capital; or
    • is entitled at its option to purchase the shares of the foreign company not already owned; or
    • is entitled to first refusal; or
    • is entitled to participate in the Board of Directors of the foreign company; or
    • has invested at least €1,164,000 and such investment is held for at least 183 days; or
    • the investment is held for its own business and not held as trading stock for the purpose of trade.

    In addition, the foreign company in which the participating holding is held must satisfy any one of the following three conditions:

    • be a resident or incorporated in the EU;
    • be subject to foreign tax of at least 15%;
    • not derive more than 50% of its income from passive interest or royalties.

    Dividends from Local Investments

    Under the Maltese full imputation system of taxation the tax suffered by a Maltese company on the profits, which it distributes as a dividend, is credited in full against the Maltese tax liability of its shareholder.

    Withholding Tax on Dividends

    In general, there is no withholding tax on dividend distributions by a Maltese company to foreign shareholders.

    There is no withholding tax on dividend payments by one Maltese company to another Maltese company.

  • INTEREST

    Interest Income

    Interest income is generally taxable in Malta.

    Interest Expense Deductibility

    Interest expense is tax-deductible if the capital borrowed has been used for the production of taxable income.

    Withholding Tax on Interest

    In general, there is no withholding tax on interest payments to foreign recipients.

    There is no withholding tax on the payment of interest by one Maltese company to another Maltese company.

  • ROYALTIES

    Royalty Income

    Passive royalties (i.e. royalties which are not derived, directly or indirectly, from a trade or business and have not suffered any foreign tax less than 5%) may be exempt from taxation in Malta.

    Royalty Expense Deductibility

    Royalty expense is tax-deductible if it is incurred for the use and benefit of the trade or business.

    Withholding Tax on Royalties

    In general, there is no withholding tax on royalty payments to foreign recipients.

    There is no withholding tax on the payment of royalties by one Maltese company to another Maltese company.

  • TAX LOSSES

    Ordinary Tax Losses

    Ordinary tax losses can be carried forward indefinitely and be set-off against capital gains or other taxable income of future years.

    There is no carry back of ordinary tax losses.

    Group Relief

    The Maltese tax system allows for Maltese resident companies to form a group for tax purposes whereby tax losses may be transferred between members of the tax group.

    A tax group is created when:

    • One company is the 50% subsidiary of another company.
    • Two companies are 50% subsidiary of another company.
  • CAPITAL GAINS

    Disposal of Shares by Foreign Shareholder

    The disposal of shares of a Maltese company by its foreign shareholder is exempt from taxation in Malta.

    The only exemption is when the Maltese company's assets consist of Maltese real estate or when the foreign shareholder is a company directly or indirectly owned and controlled by individual(s) who are ordinary resident and domiciled in Malta.

    Capital Gains

    The disposal of participating holdings (as explained above) is exempt from tax in Malta.

    The disposals of holdings, which do not qualify as participating holdings, are taxable in Malta. However the application of the Maltese tax payment and refund system would typically result in a combined overall effective tax rate of 5% or less.

    The gain on the transfer of other capital assets is added to the company's other income and taxed under income tax.

    Capital Losses

    Capital losses of a given year cannot be set-off against taxable profit from other sources.

    However, they may be carried forward indefinitely and be set-off against capital gains in future years.

  • PARTNERSHIPS

    Partnership Profits

    General and Limited partnerships are treated as transparent entities for tax purposes which means that their profits are taxed directly in the hands of each partner.

    Limited partnerships, the capital of which is divided into shares, are treated as limited liability companies and taxed under income tax.

  • BRANCHES

    Branch Profits

    The profit of a Maltese Branch generated in Malta is taxed under Maltese income tax at the rate of 35%.

    There is no tax in Malta on the remittance of the profit of a Maltese Branch to its foreign head office.

  • STAMP DUTY

    Stamp Duty

    Stamp duty is imposed on the transfers of immovable property and marketable securities.

    The stamp duty on transfers of immovable property is 5% whereas the stamp duty on transfers of marketable securities is 2% (but for marketable securities in a company the 5% rate applies if at least 75% of the company's assets are made up of immovable property).

  • CAPITAL DUTY

    Capital Duty

    There is no capital duty in Malta.

  • VAT

    VAT Taxable Transactions

    VAT is levied on the supply of goods and services in Malta.

    VAT Standard Rate

    The standard rate of VAT is 18%.

    VAT Reduced Rate(s)

    The reduced rates of VAT are 7% (accommodation and licensed premises) and 5% (electricity, medical accessories, printed materials, works of art and collector's items and antiques).

    VAT Exempt Transactions

    Banking and insurance services as well as the sale and leasing of immovable property are exempt from VAT in Malta.

    VAT Registration Threshold

    The VAT registration threshold in Malta is €7,000.

    VAT Filing & Payment

    Filing of VAT returns and the payment of VAT liability is made every 3 months.