Malta’s tax system has been designed to encourage investments from foreign countries, its efficiency and simplicity are the strength that every year attracts many new investors and entrepreneurs from all over Europe.
The strengths of the Maltese tax system:
- – Progressive tax rate for individuals (up to a maximum of 35%)
- – Tax rate for companies of 35%
- – Simple and practical administrative procedures
- – No tax withholding
- – No capital charge
- – No property tax
- – Value added tax (VAT, corresponding to our VAT) equal to 18%
- – A fair social security system
Company taxation in Malta
A company incorporated in Malta is considered to be resident and domiciled in Malta for tax purposes and is therefore subject to Maltese taxation on income from any country in the world with a standard rate of 35%.
The “Full Imputation” system
It allows shareholders of a company to combine dividends from their share of the company with their tax base, receiving a total or partial tax credit for the part of the tax paid by the company on the dividends distributed by the company itself. Given that the highest rate for individuals is equal to the corporate tax rate (ie 35%), the “full imputation” system ensures that the shareholder is not subject to any additional tax.
The Tax Refund System was officially approved by the European Commission towards the end of 2006. The members of a company registered in Malta have the right to request certain types of tax refunds for taxes paid on all taxable profits that come beyond outside Malta and on all taxable profits from the Maltese territory provided that they do not derive from real estate or that they are not subject to final tax. Such reimbursements can be requested by both resident and non-resident members.
What kind of companies can ask for these refunds?
- – Companies incorporated in Malta under Maltese law.
- – Companies not incorporated in Malta, but which are managed and controlled in Malta.
- – Companies that do not operate in Malta and that are not managed in Malta, but that operate through a Maltese branch.
What amount about tax refunds?
- – 6/7 tax refund: this type of refund is generally applied to income from commercial activities.
- – 5/7 tax refund: this type of refund is reserved instead for non-commercial income produced therefore by interest expense or copyright.
- – 2/3 tax refund: applicable only on foreign revenues if the company has already requested exemption from double taxation on that profit.