PERSONAL INCOME TAX
Malta taxes individuals who are both domiciled and ordinarily residents in Malta on their worldwide income.
Any person who is an ordinary resident in Malta but is not domiciled in Malta is taxable at the applicable personal income tax rates only on income and capital gain arising in Malta and on any foreign income remitted to Malta. Capital gains arising outside Malta fall outside the scope of Maltese tax whether remitted to Malta or not.
A non-resident individual is taxed only on income arising in Malta. Local interest and royalty income are exempt from tax, as well as capital gains on holdings in collective investment schemes or on securities, providing that the underlying asset is not Maltese immovable property.
Income is taxable at progressive rates, ranging from 0% to 35% depending on the amount of gained income, marital and parental status and several other conditions.
NO capital duty,
NO capital acquisition tax,
NO real property tax (however, the transfer of immovable property is subject to stamp duty and income tax),
NO inheritance / estate tax,
NO net wealth / net worth tax.
Stamp duty is levied on certain transfer agreements such as agreements on transfer of immovable property or marketable securities and/or an interest in a partnership.
CORPORATE INCOME TAX
Companies incorporated in Malta are considered both domicilied and resident in Malta and are subject to income tax on their worldwide income and chargeable gains.
If a Company is not incorporated in Malta, but the management and control of its business activity is exercised in Malta, it is considered an ordinary resident and is taxable in Malta on the income and chargeable gains arising in Malta and on income remitted to Malta. Nevertheless, such companies are not taxed on capital gains arising outside Malta, regardless of whether received in Malta.
Non-resident companies are not chargeable to tax on gains or proﬁts realized on a disposal of units in a collective investment scheme (CIS), units relating to long-term insurance policies, interests in a partnership and shares or securities in a company, unless the partnership’s or company’s assets consist wholly or principally of immovable property situated in Malta.
Malta’s corporate income tax rate for companies is 35%.
NO capital duty,
NO payroll tax,
NO real property tax (however, the transfer of immovable property is subject to stamp duty and income tax).
TAX REFUND SYSTEM
This system allows a shareholder, who’s received a proﬁt dividend from a company, the right to claim a refund of all or a part of the income tax paid on this proﬁt by a company, and as a result, reduce the effective tax rate even to 0%.
The tax refund can vary depending on the nature of distributed proﬁts:
– 6/7 of tax refund in the case of dividend payment from proﬁt on trading income;
– 5/7 of tax refund in the case of passive interest and royalties;
– 2/3 of tax refund in the case of passive income subject to double tax relief mechanism;
– 100% of tax refund in the case of dividends from participating holdings.
Capital gains derived from participating holdings or from a disposal of such holdings are subject to the exemption from tax in Malta. Dividend income is also exempt from tax if the entity in which the participating holding is held satisfies any one of the following conditions:
• It is resident or incorporated in a country or territory which forms part of the EU; or
• It is subject to any foreign tax of at least 15%; or
• It does not have more than 50% of its income derived from passive interest or royalties.
A wide range of structures can be classified as participating holdings and as such benefit from tax exemption, due to the fact that according to the Maltese Law, in particular Chapter 123 Income Tax Act, the participation holding means a holding which arises where:
a) a Maltese company holds directly at least 5% of the equity shares of another company whose capital is wholly or partly divided into shares, which holding confers an entitlement to at least 5% of any two of the following:
• right to vote;
• profits available for distribution; and
• assets available for distribution on a winding up;
b) a Maltese company is an equity shareholder in another company and it is entitled at its option to call for and acquire the entire balance of the equity shares not held by that Maltese company to the extent permitted by the law of the country in which the equity shares are held; or
c) a Maltese company is an equity shareholder in another company and it is entitled to first refusal in the event of the proposed disposal, redemption or cancellation of all of the equity shares of that company not held by the Maltese company; or
d) a Maltese company is an equity shareholder in another company and it is entitled to either sit on the Board or appoint a person to sit on the Board of that company as a director; or
e) a Maltese company is an equity shareholder which holds an investment representing a total value, as on the date or dates on which it was acquired, of a minimum of €1,164,000 (or the equivalent sum in a foreign currency) in a company and that holding in the company is held for an uninterrupted period of not less than 183 days; or
f) a Maltese company is an equity shareholder in another company and where the holding of such shares is for the furtherance of its own business and the holding is not held as trading stock for the purpose of a trade.
No withholding tax is levied on dividend paid to shareholders who are foreign residents.
There is zero withholding tax on interest and royalties paid to foreign residents.
VALUE ADDED TAX (VAT)
VAT is charged, levied and collected on every supply of goods or services that takes place in Malta, on every intra-community acquisition of goods made in Malta and import of goods into Malta from outside the EU.
The standart VAT rate, which applies to most trasactions is 18%. There are as well reduced rates of 7%, 5% and 0% and some transactions are exempt from taxation.
Registration for VAT is not obligatory and newly created companies are not automatically registered as VAT payers. However, if a Maltese entity undertakes operations subject to taxation, it must register for VAT purposes within 30 days from the date of the ﬁrst operation.
VAT returns are usually submitted on quarterly basis, together with the respective payments. In certain cases VAT returns might be ﬁled annually or monthly.
DOUBLE TAXATION TREATIES
Malta enjoys an array of tax treaties with at least 68 jurisdictions, including most European countries, Canada, Australia and the USA.