By means of Legal Notice 188 of 2025, The Final Income Tax Without Imputation Regulations, 2025 have been published. Such rules provide companies (including other entities that opt to be treated as a company) as well as trusts with the option to elect for a final tax rate in lieu of the imputation system.
Entities may choose to be subject to tax either under the existing provisions of the Income Tax Act, or at a final income tax rate of 15% on chargeable income. Entities which opt to be subject to the final tax rate of 15% must formally notify the Commissioner for Tax and Customs. Such election may be applied to income derived in the fiscal year preceding the year of assessment 2025 and subsequent years.
Once an entity elects for the 15% final tax, it must remain under this system for a minimum of five consecutive years. If it later opts out, it must then remain under the existing rules for the next five years.
The option to pay a 15% final tax does not extend to all forms of income. Dividends derived from profits that have not been allocated to the Final Tax Account of another Maltese company, as well as any income that has already been subject to a final tax under other provisions of the Income Tax Act and duly allocated to the Final Tax Account are specifically excluded.
Under the said rules, the tax payable may not result in a lower tax liability than what would arise under the existing system after accounting for shareholder refunds under Article 48(4) or (4A) of the Income Tax Management Act. Furthermore, the 15% tax is deemed to be a final tax, meaning that that it cannot be credited or offset against the tax liability of any other person, nor can it generate refunds. Profits taxed in this manner must be allocated to the entity’s Final Tax Account.
Disclaimer
The above does not constitute tax or legal advice and is up to date on the date it was published. Please ensure that you take appropriate advice from tax or legal professionals before making any decisions based on the above.
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