- Investment basics
Foreign exchange control – No
Accounting principles/financial statements – These must be prepared annually.
Business entities – Are the public and privet limited liability company, partnership en nom collectif and the partnership en commandite (the capital of which may be divided into shares). Trusts and foundations are also available under the Maltese law.
- Corporate Taxation
Residence – A company incorporated in Malta is considered both domiciled and resident in Malta, whereas a company not incorporated in Malta is considered resident in Malta if the management and control of its business is locally exercised.
Basis – Companies resident and domiciled in Malta are subject to income tax on their worldwide income and chargeable gains. Companies which are resident but not domiciled are taxable in Malta on source and remittance bases. Companies that are neither incorporated non-resident in Malta are chargeable to tax in Malta only in respect of Malta-source income and chargeable gains, such as the income of a Malta permanent establishment.
Taxable Income – It includes, inter alia, gains or profits derived from a trade or business; dividends, premiums, interest or discounts, rents, royalties and other profits arising from property; any charge, annuity or annual payment; and certain chargeable capital gains.
Taxation of dividends – A company in receipt of dividend income is subject to tax on such income, with the possibility of relief for any underlying tax.
Capital gains – Gains on the transfer of capital assets are aggregated with a company’s other income and the total income and capital gains are charged to income tax. Capital gains arise, inter alia, upon a transfer of immovable property, securities, business, goodwill, business permits, copyrights, patents, trademarks, trade names and any other intellectual property. Also of interest in a partnership and beneficial interests in trusts that hold property referred to the above.
Losses – Trade losses may be set off against income of the relevant year and carried forward indefinitely for setoff against income of subsequent years. The carryback of losses is not permitted. Capital losses may be set off against capital gains of the current and subsequent years.
Rate – Companies are taxed at a flat rate of 35%. A shareholder has the right to claim a refund of all or a part of the Malta tax paid on the qualifying profits out of which the dividend was distributed and, as a result, may reduce the effective tax rate in Malta to 0% – 10%. Certain categories of investment income are taxed at 15% or 105; certain categories of rental income are taxed at 15%. Transfers of immovable property situated in Malta are chargeable to an 8% final tax on the transfer value; other rates, mainly 2%, 5%, 10% and 12%, may apply in specific cases. The transfer value is the higher of the consideration received or the market value of the property transferred.
Surtax – No
Alternative minimum tax – No
Foreign tax credit – An ordinary tax credit with per-country and per-source limitations may apply, or a (notional) flat rate foreign tax credit of 25% may apply to companies that receive, and are specifically empowered to receive, foreign-source income.
Participation exemption – Dividend income or capital gains derived from a participating holing or from the disposal of such a holding (usually a 10% equity shareholding), are exempt from tax in Malta (or alternatively may be taxed at 35%. In the case of dividends derived from a participating holding, the entity also must be incorporated or resident in the EU or must derive less than 50% of its income from passive interest and royalties or must be subject to tax at a rate of at least 15%. If none of these conditions are satisfied the entity is taxed at a rate of at least 5%.
The participation exemption regime also is applicable to profits and gains derived by a Maltese company. With effect from 1 January 2016, distributed profits received by a company resident in Malta from a participating holding in a company resident in another EU member state, to which the EU parent-subsidiary directive applies, shall only benefit from the participation exemption in Malta to the extent that such distributed profits are not deductible by the subsidiary situated in the other EU member state.
Holding company regime – No specific holding company regime is available; however, the participation exemption may be applicable, as outlined above.
Incentives – Tax and other incentives are granted to the following activities; manufacturing, information and communication technology, development, call centers, healthcare, pharmaceuticals, biotechnology, aviation and maritime services, education and training and logistics.
- Withholding tax
Dividends – Malta does not levy withholding tax on outbound dividends (except for certain untaxed dividends where a non-resident is owned and controlled by, or acts on behalf of, an individual ordinarily resident and domiciled in Malta).
Interest/Royalties– The rate is 0%, provided the recipient is not owned and controlled by, and does not act on behalf of, persons ordinarily resident and domiciled in Malta, and does not carry on a trade/business in Malta through a PE with which the interest income is effectively connected.
Technical service fees – The rate is 0%, provided that such fees are not sourced to Malta.
Branch remittance tax – No
Other – Non final withholding tax may be imposed on certain taxable income paid to non-resident companies.
- Other taxes on corporations
Capital duty – No
Payroll tax – No additional taxes are levied in relation to payroll. Income tax is withheld from salaries under the Final Settlement System.
Real property tax – There is no real property tax; however, stamp duty and income tax may apply to gains derived from the transfer of immovable property.
Social security – The employer must pay social security contributions for each employee, in an amount generally equal to 10% of the employee’s basic weekly wage. The employer also must deduct 10% from the basic weekly wages of the employee and pay the entire amount to the government on a monthly basis.
Stamp duty – Generally is levied on documents evidencing transfers of immovable property at a rate of 5% of the higher of the consideration or the real value. Certain transactions may be exempt from duty. Stamp duty is also levied on certain specified documents when no transfer of property takes place, such as policies of insurance.
- Anti-avoidance rules
Transfer pricing – No
Thin capitalization – No
Controlled foreign companies – No
Disclosure requirements – Malta has adopted country-by-country reporting. A Malta resident parent company of a multinational enterprise must file an annual CbC report with Commissioner for Revenue if the consolidated turnover of the group exceeds EUR 750 million.
Other – Under a general anti-abuse provision, the Commissioner for Revenue is entitled to disregard, for tax purposes, any artificial or fictitious scheme that reduced the amount of Malta tax payable by a taxpayer, and to assess the taxpayer for tax to effectively nullify or modify the scheme and the consequent advantage.
- Compliance for incorporations
Tax payer – Companies are assessed to tax on income derived during the financial year. Company profits are assessable in the year on the basis of the financial year immediately preceding the year of assessment.
Consolidated returns – They are not permitted; each company must file a separate return. However, group loss relief is available in certain circumstances.
Filing requirements – Companies are required to make advance payment of tax during the accounting period, and typically mu stifle a tax return together with financial statements within nine months from the end of the accounting period. A final tax payment is due by the date the tax return is submitted.
Penalties – Penalties may be imposed, inter alia, for filing an incorrect return.
Rulings – An application to the Inland Revenue may be made for an advance ruling on the tax treatment of certain transactions. A ruling is binding for five years and may be subsequently renewed; however, if relevant changes are made to the law in questions subsequent to the ruling, the ruling will remain binding for two years from such time.
- Personal Taxation
Basis – Persons ordinarily resident and domiciled in Malta are subject to income tax in Malta on their worldwide income and chargeable gains. Persons who are resident and not domiciled in Malta are taxable in Malta on a source and remittance basis, that is, on income and chargeable gains arising in Malta. It should be noted that persons who are resident or domiciled in Malta and who are married to an individual who is ordinarily resident and domiciled in Malta, are subject to tax in Malta on a worldwide basis.
Residence – The extend of a person’s tax liability will depend on his/her domicile and his/her tax residence status in Malta, and a factual determination must be made to determine whether the person is ordinarily resident and domiciled in Malta or not.
A person is considered to be a Malta resident if he/she is present in the country for a period equal to six months in a given calendar year with the intention to establish his/her residence in Malta.
Filing status – Spouses are jointly responsible for filing tax returns, whereby one spouse is registered as the taxpayer, although that spouse may opt to have tax on the other spouse’s income computed separately. Any income of the non-responsible spouse is assessable in the hands of the responsible spouse, jointly. Where spouses are assessed separately, they are assessed at the rates for single or parent taxpayers.
Taxable income – It includes gains or profits derived, inter alia, from a trade or business; profession or vocation; employment or office; dividends, interest or discounts; pensions, annuities or annual payments; rents, royalties, premiums and any other profits arising from property; and certain chargeable capital gains.
Capital gains – Gains on the transfer of capital assets are aggregated with a person’s other income, and the total of income and capital gains is charged to income tax. Capital gains arise, inter alia, upon of transfer of immovable property, securities, business, goodwill, business permits, copyrights, patents, trademarks, trade names and any other intellectual property, interest in partnership and beneficial interests in trusts that hold property referred to the above. When a person transfers immovable property which is situated in Malta, final tax is payable at a rate of 8% on the transfer value and other rates mainly 2%, 5%, 10% and 12% may apply in specific cases. Non-residents are not subject to tax on gains or profits.
Deductions and allowances – Various deductions are allowed, e.g. certain fees in connection with schools, childcare, and sports for children and homes for the elderly. No personal allowances are granted under Maltese law.
Rates – Rates are progressive, ranging from 0% to 35%. A flat tax rate of 15% applies to emoluments derived by highly qualified persons employed in a qualifying industry such as financial services, gaming or aviation, under a qualifying contract of employment.
- Other taxes on individuals
Capital duty – No
Stamp duty – Certain transfer agreements concluded in Malta are subject to stamp duty. Stamp duty is generally levied on documents evidencing transfers of immovable property, at a rate of 5%. No duty is levied in the case of transfer causa mortis of a dwelling house to a surviving spouse. Stamp duty also applies to a transfer of marketable securities and/or an interest in a partnership at a rate of 2% chargeable on the higher of the consideration or the real value.
Capital acquisitions tax – No
Real property tax – There is no real property tax; however, stamp duty and income tax is levied on the transfer of immovable property.
Net wealth/net worth tax – No
Social security – It is compulsory for all persons gainfully occupied in Malta between the ages of 16 and 65 including no-residents working in Malta. Full time employees must contribute 10% of their weekly wages and the employer contributes an equal amount.
- Compliance for individuals
Tax year – Individuals are subject to tax on income arising in a calendar year, which is assessed to tax in the year following the year in which it arises.
Filing and payment – Individuals must make provisional tax payments, which must be effected before 30 April, 31 August and 21 December, respectively, of each basis year.
Penalties – They may be imposed, inter alia, for filing late or incorrect returns.
- Value added tax
Taxable transactions – VAT is levied on the supply of goods and service in Malta, the intra-Community acquisition of goods in Malta and the import of goods in Malta from outside the EU.
Rates – The standard rate is 18%; reduced rates of 7%, 5% and 0% apply in certain cases and some transactions are exempt.
Registration – For VAT purposes, every person who, in the course of a trade or profession, makes taxable and/or exempt-with-credit supplies of goods and services in Malta is required to register for VAT in Malta and to charge VAT that may be applicable and is entitled to recover input VAT incurred for the purpose of tis supplies. Additional registration requirement apply to businesses supplying and receiving services in a cross-border context.
Filing and payment – Input VAT is set off against output VAT, and the balance is accounted for every three months.
Malta has concluded 73 tax treaties.