Malta Company Tax
Taxes Malta DOESN'T have
- Tax on Capital Gains realised on a disposal of shares in a Malta company.
- Withholding taxes on Dividends distributed by a Malta company.
- Withholding taxes on outbound payments of Interest or Royalties.
- Wealth or Capital Taxes.
- CFC legislation.
- Thin Capitalisation rules.
- Transfer Pricing rules.
- Exit/entry taxes are levied in Malta on a shift of fiscal residence and / or corporate domicile.
Fiscal Attractions of the Maltese Corporate Tax System
- Non-exempt income or gains derived by a Malta company may be taxed in Malta at a combined overall effective rate ranging between 0% and 6.25% by application of Malta’s full imputation and refundable tax credit system;
- An extensive and expanding Double Tax Treaty network.
- Access to the benefits of the EC Tax Directives.
Basis of Taxation, Corporate Tax Rate
A company registered in Malta is subject to tax on its worldwide profits at the flat rate of 35%.
Malta operates a full imputation system. Dividends distributed by a Maltese company carry a credit in favour of recipient shareholder/s equal to the amount of underlying tax paid by the Malta company on the profits out of which the dividend was distributed.
Income & Deductible Expenses
The taxable income of a Maltese company is based on the financial statements of the company (subject to applicable adjustments). Expenses wholly and exclusively incurred in the production of chargeable income are deductible.
Tax Exemption on Foreign Gains & Profits
Shareholders of Malta holding companies qualify for a full refund of the Maltese tax paid by the company on profits and gains arising from “participating holdings” when such profits are distributed. From 1st January 2008, Malta holding companies also qualify for an outright participation exemption subject to light anti-abuse provisions introduced from that date.
Therefore, capital gains realised by a Malta company pursuant to a disposal of its shares in a subsidiary would be exempt from Malta tax to the extent that the Malta company’s investment in the subsidiary would represent a 'participating holding'.
Participation Exemption
A Malta company would have a 'participating holding' in a subsidiary company if the following conditions are satisfied:
- The subsidiary does not own, directly or indirectly, immovable property situated in Malta (or rights over such property); and
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The shares held by the Malta company in the subsidiary carry at least two of the following rights:
- a right to votes; and/or
- a right to profits available for distribution; and/or
- a right to assets available for distribution in the event of a winding up; and
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At least one of the following 6 additional qualifying criteria are met:
- The Malta company holds more than 10% of the shares in the subsidiary; or
- The Malta company holds shares in the subsidiary having an acquisition value of at least €1,164,000 and for an uninterrupted period of at least 183 days; or
- The Malta company is entitled, at its option, call for and acquire the balance of shares in the subsidiary; or
- The Malta company is entitled to first refusal in the event of the proposed disposal, redemption or cancellation of the shares in the subsidiary; or
- The Malta company is entitled to sit on the board or to appoint a person to sit on the board of the subsidiary as a director; or
- The Malta company holds shares in the subsidiary for the furtherance of its own business and not as trading stock.
Dividend income accruing to a Malta company from a non-resident subsidiary would be exempt from Malta tax to the extent that the Malta company's investment in the distributing subsidiary would represent a participating holding (satisfying the above rules) and, additionally, provided that:
- the distributing subsidiary is resident or incorporated in an EU country or territory; or
- the distributing subsidiary is subject to foreign tax at a rate of at least 15%; or
- no more than 50% of the distributing subsidiary's income is derived from passive interest or royalties; or
- the Malta company's holding in the distributing subsidiary is not a portfolio investment and the said subsidiary is subject to any foreign tax at a rate which is not less than 5%.