Tax in Malta
The Malta tax system and its extensive double tax treaty network means that, with proper planning and structuring, investors can achieve considerable fiscal efficiency using Malta as a base.
FinanceMalta Sector Guide - Wealth Management
Malta is a preferred choice of domicile for companies for various reasons, including:
- Only EU member state with full imputation system;
- Extensive network of double taxation treaties, plus benefits even when no bilateral treaty in force;
- Refundable tax credit scheme – on revenues as dividends to shareholders, resident & non-resident;
- Ideal tax residency status for individuals.
- Compliant with EU non-discrimination system
- Gained approval from OECD
Malta Corporate Tax Rates
Malta has a corporate income tax rate of 35% but, as with all imputation systems, shareholders receive full credit for any tax paid by the company on distributed profits. This means that profits taxed at a corporate level are not subject to further tax in the shareholder's hands, and, depending upon the rate of tax applicable to the recipient of dividends, may trigger off the entitlement to a tax refund in the hands of the recipient. As a result, shareholders of a Maltese company should, upon a distribution of profits, be entitled to claim a tax refund of 6/7ths of the relevant tax paid in respect of trading income and 5/7ths of the relevant tax paid in the case of passive interest and royalties. The refund is reduced to 2/3rds where the distributing company claims double taxation relief. Income and gains from a participating holding (where a company holds directly at least 10% of the equity shares of a non-resident company, or meets certain other criteria) are exempt from tax. Alternatively, instead of claiming this exemption, a company can choose to pay tax at the normal tax rate and then receive a full refund of the tax paid upon a distribution of dividends.
Download resources and information on Malta Tax
Malta grants relief from double taxation under the credit method on source-by-source and country-by-country bases. The Maltese tax regime governing double taxation relief includes not only treaty relief but also unilateral relief, and thereby ensures that income arising from overseas is not subject to double taxation, even if there is no double taxation agreement in existence.
In terms of domestic legislation, no withholding taxes are imposed on dividends, interest and royalties paid to non-residents, as long as various conditions are complied with. In addition, no Maltese tax is imposed on gains realised from transfers of corporate securities by non-residents, again as long as the relevant conditions are complied with, particularly that the sole or main assets of the company whose securities are being transferred do not consist of Maltese immovable property.
Taxation of Key Vehicles in Malta
- Banks and Financial Institutions & Fund Managers/Fund Administrators: Taxed like all companies registered in Malta
- Insurance Companies: Special provisions apply to the determination of total income from the business of insurance
- Insurance Managers: Taxed like all companies registered in Malta. Each cell in a PCC or an ICC is treated as separate company for tax purposes
- Investment Funds: Malta-domiciled funds are, as a general rule, exempt from Maltese income and capital gains tax as long as they do not have over 85% of their assets situated in Malta
- Trusts: When all the beneficiaries of a trust are not domiciled/resident in Malta and where the trust assets are situated outside Malta, no Maltese income tax (or transfer duty) is payable
- Foundations: A foundation may be treated as a Maltese company and benefit from Malta's full imputation system. Foundations may also opt to be taxed in the same manner as a trust
- Retirement Schemes: Licensed retirement schemes are exempt from tax on income and capital gains but this does not apply to immovable property situated in Malta
- Individuals: Charged on their income at progressive tax rates up to a maximum rate of 35%
Tax Incentives for Highly Qualified Professionals in Malta
To attract highly qualified personnel to the financial services industry, Malta introduced an incentive scheme in 2011 targeting well-paid foreign executives. Individuals who have their domicile outside of Malta and are employed in senior positions with a company licensed or recognised by the MFSA to conduct financial business in or from Malta, can benefit from a flat personal income tax rate of 15% on income up to €5 million. Any income over €5 million will be tax-free. To qualify for this tax incentive the employee must earn a minimum of €81,205 (basis year 2014) per year
, among other criteria.