A limited liability company incorporated under the Laws of Malta is deemed to be resident and domiciled in Malta. Companies which are resident and domiciled in Malta are subject to tax in Malta on their worldwide basis. All active and passive flows of income derived by a Maltese company are subject to tax unless specifically excluded by the Income Tax Act. Taxable income includes any income from trade or business¸ rental income¸ dividends¸ interests¸ annuities and annual payments¸ royalties and premium.

The corporate tax rate is 35% but subjects to refunds available to the shareholders upon distribution of dividends by the company. Through the application of  Malta tax refunds it would be possible to achieve a combined overall Malta effective tax rate in a range of between 0% – 10%. A claim for a Malta tax refunds by a registered shareholder of a Malta company is paid by the Malta fiscal authorities within fourteen days of a valid application being submitted.

All Malta tax refunds contemplated in this report and the tax exemption available for the participation holdings are indirectly available only to non-resident persons. Provided that the beneficial owner of the income and gain¸ as the case may be¸ is a person not resident in Malta and such person is not owned and controlled by¸ directly or indirectly¸ nor acts on behalf of an individual or individuals who are ordinarily resident and domiciled in Malta.

Also another rule with respect to Malta tax refunds and participation holding is that such companies do not own and use immovable property situated in Malta¸ because in such case such income would be deemed to be allocated in the Immovable Property Account and no refunds can be claimed from such account.

Upon dividend distribution by the Malta Co to the shareholder (whether an individual or a company) may opt to apply Malta tax refunds depending on the type of income and from which tax accounts the dividend is distributed.

Available Malta Tax Refunds:

–         6/7th refunds of the tax paid on trading profits earned by the company¸ whereby the ultimate effective tax paid in Malta will be that of a mere 5%. Malta applies the full imputation system¸ and does not charge further tax in the hands of the shareholders.
–         5/7th refunds of the tax paid on passive interest and royalties earned by the company¸ whereby the ultimate effective tax paid in Malta will be that of a mere 10%. Malta applies the full imputation system¸ and does not charge further tax in the hands of the shareholders.
–         2/3rd refund of the Malta tax up to the Malta tax paid when claiming double taxation relief;
–         Full refund or 0% on dividend income or capital gain from the disposal of participation Holding.

For more information contact Donna Greaves Bonello | ACCA MIA CPA B.Com & Registered Auditor & Audit Partner