The basis of taxation in Malta requires companies ordinarily resident and domiciled in Malta to be subject to income tax on their worldwide income and on some chargeable capital gains. Companies that are either resident or domiciled in Malta but not ordinarily resident and domiciled in Malta are chargeable to tax in Malta on (a) income and chargeable gains arising in Malta, (b) income arising outside Malta that is remitted to Malta.

Main characteristics of the Malta tax regime:

• Operates a full imputation system of taxation;
• The refund system in Malta presents the shareholders of a company with the option to claim back a refund of all or part of the tax paid by the Malta company on qualifying profits distributed as dividends;
• Participation Exemption: Income deriving from a participating holding (generally a 10% equity holding or partnership interest or alternative tests) in a non-resident entity or from the disposal thereof are exempt from tax (alternatively they may be taxed at 35% and the shareholder may, following distribution, claim a full refund of the Malta tax paid by the company thereon) – subject to certain anti-abuse provisions being satisfied;
• Withholding Taxes (WHT): There is
  • no WHT on outbound dividends,
  • no WHT taxes on interest payable to non-residents (subject to certain conditions being satisfied),
  • no WHT taxes on royalties (subject to certain conditions being satisfied),
  • no branch remittance tax;
• Trading losses may be carried forward indefinitely and be set off against future income – any source of income. Similarly, capital losses may be carried forward indefinitely but may only be offset against capital gains;
• No transfer pricing rules nor thin capitalisation rules apply;
• 73 double tax treaties are in force most of which are based on the OECD model;
• VAT is charged on the supply of goods and services in Malta, on the import of goods from outside the EU into Malta and on intra-community acquisition of goods in Malta.

Tax payments are an important obligation for any company. With increasing regulatory requirements, tax compliance can be time consuming in today’s world where businesses and individuals need to do more than the mere preparation of tax returns. Proper planning is essential, and tax laws should be constantly monitored since laws and circumstances are apt to change. Our tax experts will help you meet your requirements and manage your tax affairs – be it tax representation or compliance.

Tax compliance has never been so important. Compliance failure represents not only a financial risk, financial penalties and a possible increase in the tax charge, but also a serious business risk, as it can damage a group’s reputation with the authorities and the general public. On the other hand, increased efficiency and effectiveness in tax processing can add value to an organisation’s bottom line and keep businesses running smoothly.

Our personal and corporate taxation services include:

• Tax accounting,
• Preparation and timely submission of income tax and VAT returns for you and your company,
• Provision of expert representation of clients with Inland Revenue, Value Added Tax and Social Security Departments.
• Application for Tax refunds where applicable.

William Cassar