Malta’s corporate tax regime has been one of it's primary magnets for international business over the last decade. Starting with the introduction of an onshore company subject to a low-tax regime in the mid-1990’s providing an attractive effective tax rate for international businesses and further developments in line with an agreement reached with the European Union in 2006, the taxation of Maltese companies has gone through dramatic changes implemented with effect from 2007.

In terms of Maltese law, a company registered in Malta is domiciled and resident in Malta and therefore taxable on all of its profits. However should the board of directors meet regularly outside of Malta, a foreign jurisdiction may attempt to tax the profits of the Maltese company on the basis that its management and control is exercised outside of Malta. For this reason it is recommended that approximately four board meetings are held in Malta and/or a Maltese resident Director is appointed.

Profits of Maltese companies are taxed according to the nature of their source. In order to differentiate the different sources of income for tax purposes, Maltese law provides for the distribution of a company’s profits into five different tax accounts. These accounts are the Immovable Property Account, the Final Tax Account, the Foreign Income Account, the Maltese Taxed Account, and the Untaxed Account. The standard corporate tax rate in Malta is 35% however due to the full imputation system the tax paid by the company is attributed to that due by the shareholder on the company’s profits therefore the shareholder will pay no further tax in Malta on receipt of dividends. Malta is the only EU state that has maintained the full imputation system.

Furthermore, Malta’s corporate tax system provides a number of refunds of the tax paid by the company on the distribution of dividends. These refunds vary according to which tax account the dividends had been distributed from. The amount of refund is set at 6/7ths of the tax paid by the company on income distributed from the Foreign Income Account and the Maltese Taxed Account – thereby the effective rate of tax in Malta paid on the company’s profits would be reduced to 5%. The refund is reduced to 5/7ths if the income from which the dividend has been distributed was derived from passive interest and royalties (with an effective rate of 10%). In the event that the company had claimed double taxation relief, a refund of 2/3rds of the tax paid by the company would be available.

Further to the 2007 amendments, Maltese companies also provide additional  benefits to holding companies - for more information and details on the spefic conditions applicable, we recommend you view the holding companies information from the menu on the left.

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