1) Company Tax Rate

2) Imputation system

3) 6/7ths refund for active income

4) 100% refund for participating holdings / participating exemption

5) 5/7ths refund for passive interest and royalties

6) Procedure for Refund

7) Other tax benefits

8) EU Compliance

Company Tax Rate

Maltese Companies are subject to the normal corporate tax rate applicable to all companies registered in Malta, at 35% on their worldwide income.

Imputation system

Malta operates the full imputation system of taxation whereby the tax paid by the company is available as a credit to the shareholders when distributions are made to them.  Company tax of 35% is available as a credit to the shareholders upon receiving dividends from the company.

30% refund for active income

When dividends are paid by trading companies to the shareholders, these shareholders become entitled to claim refunds of 6/7ths of the Malta tax paid by the company. Taking into account such refunds, this results in an effective rate of Malta tax of 5%.

Shareholding may be held by individuals or through a Maltese parent.

The definition of a company has been widened to include an oversea branches (PEs) set up in Malta, companies which although not resident in Malta carry out activities in Malta and also companies which are neither incorporated nor resident in Malta provided that such companies are registered with the local tax authorities.

100% refund for participating holdings / participating exemption

Under the Maltese tax system, the income and capital gains derived by a Maltese registered company from a ‘participating holding’, qualifies for a full refund of the Maltese tax paid by the company when distributions are made to company shareholders.

The latest amendments to Maltese tax laws have enhanced this tax treatment through the introduction of the notion of the ‘participation exemption’ whereby such income may be exempted from Maltese tax provided certain conditions are satisfied.

Dividends derived from a participating holding acquired after 1 January 2007 by a Maltese company may qualify as a ‘participation exemption’ provided certain anti-abuse provisions are satisfied.

In those instances where the participating holding qualifies as a ‘participation exemption’, the Maltese company has the option not to declare the income in its tax return resulting in no tax being payable in Malta.

If the company, however, elects to include the income from its participating holding in its tax return, it will then still qualify for a full refund of the tax paid by the Maltese company. The refund is payable by the fourteenth day following the end of the month in which the claim is made.

For companies having income derived from non participating holdings or from passive interest and royalties, the Maltese tax system still provides for refunds of the tax paid by the Maltese company when distributions are made to shareholders.

5/7ths refund for passive interest and royalties

When distributions are made out of profits earned from passive interest and royalties, the shareholders of a Maltese company may claim a refund of five-sevenths of the tax paid by the company when distributions are made to them.

The six-sevenths and five-sevenths refunds only apply when the distributions are made by the company which did not claim any form of double tax relief. When dividends are paid out of profits allocated to the foreign income account and in respect of which profits the company has claimed double tax relief, the shareholders may apply for a refund of two-thirds of the tax paid by the Maltese company.

Procedure for Refund