Taxation of companies in Malta

Corporate taxation in Malta is a key issue when setting up a company in the country.

Thanks to its strategic location in the Mediterranean, Malta is a destination that offers a number of advantages for companies seeking a stable business and tax environment in the European Union.

With a robust economy, political stability, and favorable tax policies, Malta is an attractive option for the setting up and relocation of international companies.

In this article, we provide a comprehensive overview of corporate taxation in Malta, exploring key aspects such as Income Tax, VAT, and Stamp Duty.

Income tax in Malta

One of the main reasons why Malta is so attractive to companies is its competitive income tax. The standard rate of corporate income tax in Malta is 35%.

Malta offers an extremely competitive tax regime, based on a full imputation system, created to avoid double taxation of the same income (at the company level and, thereafter, at the shareholder level).

Income Tax is governed by the Income Tax Act (ITA) and the Income Tax Management Act and by subsidiary legislation.

What kind of companies are subject to income tax in Malta?

This tax is levied on the income and some specific types of capital gains of companies in Malta. It also applies to individuals (natural persons).

There are special rules for the taxation of general partnerships and other types of partnerships.

What is the income tax base?

Special tax regime for company groups

The commercial losses of a company in Malta can be transferred to another company or companies within the same group. Two companies are considered to be part of the same group when one of them is a subsidiary of the other, or when both are subsidiaries of a third company.

This regime is only applicable to companies domiciled in Malta and not in any other country.

How is income tax calculated in Malta?

A Maltese company’s taxable profit is calculated from the net profit for the year using accounting standards with the adjustments (exemptions, deductions, and accruals) set out in the Income Tax Act.

This taxable profit is subject to a 35% tax.

Malta's income tax refund system

Malta offers an extremely competitive tax regime, based on a full imputation system, in which part of the tax on profits paid by the company distributing dividends is made available to the shareholder as a tax credit, to avoid double taxation on the same income (for the company and subsequently for the shareholder).

As the 35% tax rate applied to the company is equal to the maximum tax rate applicable to individuals, paying out dividends does not lead to further taxation for shareholders.

In fact, a shareholder of a company in Malta who receives profit dividends allocated to the Malta Tax Account (MTA) and Foreign Income Account (FIA) can ask for the tax paid on those profits by the company in Malta to be refunded. The amount of the refund depends on the nature of the distributed profits and if these have benefited, or not, from any double taxation relief mechanisms.

This makes Malta an attractive location for holding companies and companies with international activities.

Find out more about the tax refund system in Malta.

VAT – Value Added Tax in Malta

As a member state of the European Union (EU), Malta has its own Value Added Tax (VAT) legislation which complies with EU VAT Directives.

However, unlike in other EU Member States, companies in Malta are not automatically assigned a VAT identification number once they have been set up.

On the contrary, an identification number for VAT purposes is only issued when there is an obligation to be registered (i.e. in the case of compulsory registration), or if the person concerned wishes to register (i.e. in the case of voluntary registration), provided certain conditions are met.

Types of VAT registration in Malta

Companies in Malta can choose between three types of registration for VAT purposes: Article 10, Article 11, and Article 12 of the VAT Law.

These different types of registration depend on various factors, including the company's main activity, permanent establishment, and others:

Stamp Duty in Malta

The legislation that applies to Stamp Duty (SD) in Malta is the “Duty on Documents and Transfers Act” (DDTA).

However, there are several exemptions from stamp duty provided for by law.

VAT rates applicable in Malta

In Malta, the standard VAT rate is 18%.

There is also a reduced tax rate of 5% which applies to certain types of supplies of goods and services (supply of electricity, medical equipment, confectionery and similar items, printed material, and others).

A VAT rate of 7% applies to Licensed Rentals, the provision of an accommodation service and the use of sports facilities.

VAT returns in Malta

Companies in Malta are required to submit their VAT returns and make their tax payments on a quarterly basis. Under certain circumstances, VAT returns can be submitted annually (Article 11) or monthly (Articles 10 and 12).

Companies that fail to comply with the applicable deadlines can be fined. You should always ensure your company keeps detailed accounts for VAT purposes.

Stamp Duty in Malta

The legislation that applies to Stamp Duty (SD) in Malta is the “Duty on Documents and Transfers Act” (DDTA).

However, there are several exemptions from stamp duty provided for by law.

Stamp Duty Applications in Malta

Stamp duty in Malta applies, among other things, to:

• Documents issued in Malta, or which are used in Malta even if they were issued outside the country. A document is considered to have been used in Malta if it is presented as evidence to a court or arbitrator or if it is presented to any person or authority in Malta for the purposes of registration or execution;
• Sales and transfers of property and other real rights;
• Sales and transfers of securities;
• Life insurance policies;
• Partnership capital;
• The transfer to or by any person resident in Maltese territory of foreign securities, including shareholdings in foreign companies holding property in Malta;
• The transfer of a local security to or by any person residing in Malta.

Exemptions from Stamp Duty in Malta

There are various exemptions from stamp duty in Malta, which are laid down in legislation.

For example, companies in Malta that conduct more than 90% of their business activities outside Malta are exempt from stamp duty, as are companies in which more than 50% of the share capital is held by individuals not resident in Malta, among other conditions.

You can check all the Stamp Duty exemptions in Malta here.