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Let the team of experts at Fides help you navigate Malta's corporate tax framework. With our knowledgeable tax solutions, we can help you maximize refunds and leverage exemptions for your business success.

Malta Taxation Framework

The framework for corporate income tax in Malta is established by the Income Tax Act (ITA) and the Income Tax Management Act (ITMA), along with their relevant subsidiary legislation.

Tax liability is determined based on the principles of residence and domicile. Malta-incorporated companies, being both resident and domiciled in Malta, are subject to Maltese tax on their worldwide income at the standard rate of 35%. If a company is domiciled outside Malta but is a tax resident in Malta, it is taxed on income arising in Malta and on income remitted to Malta.

Taxable Income

Article 4(1) of the ITA outlines the types of income subject to tax, including:

  • Profits or gains from commercial activities, professions, or vocations
  • Remuneration from employment or self-employment, including fringe benefits
  • Dividends, bonuses, interest, or discounts
  • Pensions, compensation, annuities
  • Rental income, royalties, bonuses, and other property-related income
  • Other miscellaneous income

Capital gains are also taxed, covering the sale of specific assets such as property, securities, shares, transfers, goodwill, licenses, authorizations, and certain intellectual property.

Tax Accounting

A Malta registered company must allocate its distributable profits to various accounts, including the Final Tax Account (FTA), Immovable Property Account (IPA), Foreign Income Account (FIA), Maltese Taxed Account (MTA), and Untaxed Account (UA).

Tax Refunds

Shareholders of a Malta company can reclaim a tax refund, with the most common refund being 6/7th of the Malta tax suffered, resulting in a net effective Malta tax charge of 5%. Refund rates may vary in specific cases, such as for passive interest or royalties and FIA profits subject to double taxation relief.

Participation Exemption

The Participation Exemption applies to qualifying participating holdings, where a Malta resident company holds at least 5% equity shares in another entity. The exemption covers various scenarios, including voting rights, rights to profits, rights to assets on winding up, equity shareholding, and holding for business purposes.

Duty on Documents Exemption

Recent changes in the Duty on Documents and Transfers (DDT) Act require companies to renew the Duty on Documents Exemption (DDT10) to avoid duty on share transfers. The DDT10 exemption, applicable to collective investment schemes, entities with an investment services license, international trading companies, and others, must be determined and renewed by the Commissioner for Revenue (CfR).

Companies need to be mindful of the applicability of the DDT10 exemption to maintain the duty exemption on share transfers.

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