Taxation of companies in Malta
Maltese companies are subject to tax at the rate of 35% on their worldwide income and capital gains. The Maltese Government has created various fiscal incentives to both companies and their shareholders upon distribution of a dividend.
Double taxation network
Malta also has a comprehensive double taxation treaty network and has to date concluded more than 65 double taxation agreements for the avoidance of double taxation. Malta’s treaties are largely based on the OECD Model Convention and grants relief from double taxation using the credit method.
Full Imputation System
Malta operates the full imputation system whereby the tax paid by the company is imputed towards the shareholders’ tax liability upon receipt of a dividend, meaning that no further tax is due by the shareholder upon receipt of a dividend.
Holding Companies in Malta
Holding companies registered in Malta that are in receipt of dividend income or capital gains from a ‘participating holding’ or from income arising from the disposal of that same holding, may apply for a participating exemption and consequently the dividend income will not be subject to income tax in Malta.
Distribution of interest and loyalties
No tax is withheld upon the distribution of interest and royalties to non-resident beneficial owners of such income. No tax is withheld upon the distribution of dividends irrespective of the residence and nationality of the shareholders.
Since Malta is a member of the European Union, it has access to EU directives such as:
- the EU Parent Subsidiary Directive: the aim of this directive is to set a common system of taxation applicable in the case of parent companies and subsidiaries of different Member States;
- the Merger Directive: the objective of the Merger Directive is to remove fiscal obstacles to cross-border reorganisations involving companies situated in two or more Member States;
- the Savings Directive: aims at implementing the European Union withholding tax, requiring member states to provide other member states with information on interest paid to achieve effective taxation of the payments in the member state where the taxpayer is resident for tax purposes; and
- the Interest and Royalties Directive: the purpose of this directive is to set a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States.