Corporate Taxation

1. I would like to set up a company in Malta, what is the standard corporate tax rate?
The standard corporate tax rate in Malta is 35%, which is applied on the income of the company after allowing for any deductible expenses and non-taxable income.

For more information about taxation of companies in Malta, do not hesitate to contact Elaine Camilleri, the firm’s tax partner, on ecamilleri@act.com.mt.

2. Is there a possibility for this corporate tax rate to be reduced?
Yes, by means of the refundable tax credit system which Malta has to offer, whereby non-resident shareholders are allowed to claim a refund of 6/7ths (in certain circumstances 5/7ths or 2/3rds) of the tax paid by the company upon the distribution of a dividend. This reduces the effective tax rate to 5%.

For more information about the refundable tax credit system, kindly visit our factsheet on Taxation of Malta Companies by clicking here.

3. If I set up a company in Malta, is it automatically deemed to be tax resident in Malta?
Yes, a company is deemed to be resident in Malta for tax purposes if it is incorporated in Malta.  Companies which are incorporated outside Malta but are effectively managed and controlled from Malta are also considered to be tax resident in Malta.

For more information about how a company’s management and control can be effectively exercised in Malta, do not hesitate to contact Elaine Camilleri, the firm’s tax partner, on ecamilleri@act.com.mt.

4. I have heard that Malta operates a Full Imputation System. What does it mean and how may I benefit from this if I set up a company in Malta?
Yes, it is a system whereby the shareholders of a Malta company will be entitled to a tax credit equivalent to the tax paid by the company, upon a distribution of profits. The highest rate of tax applicable to individual shareholders is 35% (equivalent to the corporate rate of tax), meaning that no further tax will be paid by the shareholders on distribution of profits by the company.

For more information on this system, do not hesitate to contact Elaine Camilleri, the firm’s tax partner, on ecamilleri@act.com.mt.

5. If my Maltese company receives foreign income that is subject to tax outside Malta, will it be entitled to claim relief for foreign tax?
Yes, Malta offers various forms of double taxation relief. The most common being the treaty relief which emanates from the extensive treaty network which Malta has with over 70 countries. The relief is given in the form of a credit whereas the foreign tax suffered is set-off against the Maltese tax liability.

For more information on the various forms of double taxation relief, kindly visit our factsheet on Taxation of Malta Companies by clicking here.

6. Is my Maltese company required to withhold any tax upon the payment of dividends to me as shareholder?
Under Maltese tax law, a Maltese company is not required to withhold any tax on the payment of dividends to you as the shareholder, irrespective of your residence, domicile and nationality.

For more information about the taxation of dividend income, do not hesitate to contact Elaine Camilleri, the firm’s tax partner, on ecamilleri@act.com.mt.

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