Tax Planning

Tax Planning

Current tax measures provide excellent opportunities to Malta based companies engaging in international trade as well as investment and holding activities. One of the main advantages is that Malta is the only EU member state that operates the full imputation system of taxation, whereby the entire tax paid on the profits distributed as dividends by the Maltese company is available as a credit to the shareholders against the tax due on the said dividend income. Furthermore, Malta also adopts a Tax Refund System, whereby dividend distributions by a Malta company attract a refund of normally 6/7ths of the tax paid at company level.. Maltese law also provides for a participation exemption regime on certain profits derived from a qualifying participating holding.

There are several other advantages under Malta’s unique international tax provisions:

  • No withholding taxes are applied when dividends are paid by Maltese companies;
  • Tax exemptions apply whenever interest and royalties are paid to non-residents;
  • No tax is levied on the transfer of shares held by non-residents (provided shares are held in a Company which does not own property in Malta);
  • Malta has an extensive network of double taxation treaties with over 60 jurisdictions;
  • The double taxation relief provisions are supplemented by other forms of double taxation relief in the absence of a double taxation treaty;
  • There are no ‘exit taxes’ on repatriation of funds outside Malta.

So far, Malta does not have any thin capitalisation or transfer pricing legislation.

The tax refunds currently available are:

  • 6/7ths refund:  due on those profits earned from trading activities. Taking into account such refund, the effective rate of tax can be as low as 5%;
  • 5/7ths refunds: due in respect of income derived from passive interest or royalties and from participating holdings not qualifying for the participation exemption; The effective rate of tax in these cases can be as low as 10%;
  • 2/3rds refund: available in those instances where the Company has claimed double taxation relief;
  • 100% refund:  applies to profits derived from a participating holding which qualifies for the participation exemption.