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Malta: Company Taxation

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Proper tax planning and structuring is essential for any business, and especially essential for business such as fintech, blockchain, and crypto. The harmonized Maltese tax framework may be just the right option for you, as it provides a plethora of structuring opportunities, depending on your needs.

In a nutshell, tax benefits in Malta include, amongst other things, an onshore, EU-approved tax regime, the possibility to apply parent-subsidiary directive, an extensive double taxation treaty network with 70+ treaties signed that provides relief from double taxation, a full imputation system for taxation of dividends, a group relief regime available for trading losses, and a refundable tax credit scheme on dividends to shareholders, residents & non-residents.

Companies incorporated in Malta that are resident in Malta are taxed at a flat corporation rate of 35% on chargeable income. Nevertheless, upon receipt of dividends, the shareholders of such a company would be eligible to claim a refund of part of the tax paid in Malta at the level of the company. Such shareholder, in receipt of a dividend distributed by a company resident in Malta out of profits allocated to its Foreign Income Account (typically foreign source passive income) and/or its Maltese Taxed Account (typically trading income or domestic source passive income) would be entitled to claim a refund of a portion of the Malta tax suffered or paid on the profits out of which the dividends were distributed. These refunds would usually be:

  • 6/7ths of the Malta tax paid at the level of the Malta company on profits allocated to its Foreign Income Account or its Maltese Taxed Account and out of which the dividends were distributed (i.e., effective tax rate 5%); or
  • a reduction to 5/7ths of the Malta tax paid at the level of the Malta company on profits allocated to its Foreign Income Account out of which the dividends were distributed in the event that such profits consist of passive interest or royalties, or dividends derived from a participating holding when the anti-abuse provisions are not satisfied (effective tax rate 10%); or
  • a reduction to 2/3rds of the Malta tax paid by the Malta company on profits allocated to its Foreign Income Account and out of which the dividends were distributed in the event that the Malta company would have claimed relief for double taxation in respect of the said profits (effective tax rate of 23.3 %).

The processing of the refund by the Maltese CFR is efficient, as it usually takes up to 14 days. However, companies can now also opt to apply for the so-called ‘fiscal consolidated unit’ which allows one to surpass the refund mechanism.

Further, holding companies may benefit from the participation exemption regime which allows dividends received from qualifying holdings to flow through the business without attracting further tax, provided that certain requirements are met.

Companies and start-ups in certain industry sectors may also benefit from targeted tax regimes designed to enable sectoral growth. Malta Enterprise has launched a number of schemes regarding start-ups, including a start-up residence permit allowing non-EU nationals to base themselves in Malta under an advantageous regime. Other benefits provided by the Maltese islands include grants for the early stage of development up to €10,000, which includes development of business proposals and start-ups presenting viable business plans, may receive funding of up to €20,000. Further, start-ups can also opt for the Smart and Sustainable Investment Grant scheme with a maximum grant capped at €70,000 per project. Moreover, small, and medium sized enterprises (SMEs) can opt to apply under Malta Enterprise for guarantees against bank loans. These and many other incentives, coupled with funding, and a beneficial taxation system, are designed to support industry sectors earmarked for growth.

If you are looking for your next business and home destination, Malta is the next best place to be. Coupled with excellent business environment, highly qualified personnel, and great weather, it is a perfect place to develop your business.

The content of this article is valid as at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on a specific matter before acting on any information provided.

For further information, please contact us at MK Fintech Partners via email at infomalta@kyprianou.com or by telephone +356 2016 1010.