A company incorporated in Malta is deemed to be both domiciled and resident in Malta from the date of incorporation. A company not incorporated in Malta is considered resident in Malta if themanagement and control of its business is exercised in Malta.
Companies which are resident and domiciled in Malta are subject to income tax on their world wide income at a flat rate of 35%. In certain circumstances, depending upon the business activity from which the profit has been generated, recipients of dividend income may become entitled to refunds of company tax paid. In certain circumstances, these refunds reduce the effective tax burden on distributed profits to between 0% and 10%.
Companies that are either resident or domiciled are taxable in Malta on the remittance basis. Therefore, income and taxable chargeable gains arising in Malta and on foreign income received in Malta. Foreign capital gains are not taxable, regardless of whether received in Malta. Companies that are neither not resident nor domiciled (i.e. incorporated) in Malta are only chargeable to tax in Malta in respect of income and gains arising in Malta.
The refundable tax system applies both to profits allocated to Maltese Taxed Account as well as to profits allocated to its foreign income account. Refunds are available both to residents and non-residents. A registered shareholder in receipt of dividend from a company that is registered in Malta may claim a refund six-sevenths of the tax paid by the company on that income. The rate of refund is reduced to a refund of five-sevenths when profits on which the dividend is distributed consists of passive interest and royalties. When double taxation relief has been claimed, the registered shareholder is entitled to a two thirds refund of Maltese tax paid.