Taxation Malta

Summary of benefits of registering a Company in Malta:

1. 6/7 refund to the non resident shareholder of a Malta company (Trading).
2. Full tax refund of a Malta company holding a participating interest in another non resident Company.
3. No withholding taxes, stamp duties or exchange control restrictions apply on distribution of profits from the Maltese Company to non resident shareholders.
4. Low Company Formation costs.

Example of a Trading Company registered in Malta
‘Malta Company Ltd (A Maltese Company) makes €1,000 profit on trading activities. Malta Company Ltd pays 35% Tax on that profit (€ 350). Malta Company Ltd then distributes its profit to a non resident Shareholder. The non-resident shareholder gets a refund of 6/7ths of the tax paid by Malta Company Ltd (€ 300). Net amount received by the non resident shareholder € 950.

Malta Company Tax (Detailed)
The payment of a dividend from a Maltese company to a non resident shareholder triggers the right to a refund of part or all of the tax paid by the Maltese Company on the profits. The tax paid by the Maltese company is refunded to the shareholder in one of the following forms depending on the source of the profits.

• Refund on 6/7th of the tax paid by the Malta company (except on profits on sale of immovable property in Malta, and profits that have been taxed at source on a final withholding regime)
• Refund of 5/7th of the tax paid by the Malta company on profits that consist of passive interest or royalties
• Refund of 2/3rd of tax paid by the Maltese company on profits that have already claimed relief for double taxation
• Full refund on profits that are generated from a ‘participating holding’

Effective Tax Payable for a Trading Company
The effective rate of tax payable for trading Companies in Malta is therefore 5% due to the 6/7ths refund available to non-resident shareholders of the company registered in Malta.

Participating Holding
A holding by a Maltese Company in a non resident company qualifies as a participating holding if any of the following is satisfied;

• The holding is 10% or more of equity share capital
• The Maltese company has an investment of minimum €1.16million held for at least 183 Days
• The Maltese company is entitled to appoint a director in the non-resident company

The Profits by the Maltese Company from a ‘Participating holding’ is exempt from tax if one of the following is satisfied:

• The non-resident Company is resident in an European Union State; or
• It is subject to foreign tax of 15% or more; or
• It does not have 50% or more of its income derived from passive interest and royalties

If none of the above conditions is satisfied, the both the below conditions need to be satisfied for the participation exemption to apply:

• The holding of the Maltese company is not a portfolio investment. If the non resident company derived more that 50% if its income from portfolio investments this will be deemed as a portfolio investment.
• The non resident company has paid foreign tax of more than 5%.

VAT

Standard rate18%, Reduced rate 5%
V.A.T is paid quarterly.