Malta country profile

Malta country profile

Key tax factors for efficient cross-border business and investment involving Malta.

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EU Member State

Yes. 

 

Double Tax Treaties

Albania Estonia 
Italy  Moldova Singapore
Australia  Finland   Jersey   Montenegro Slovakia 
Austria   France  Jordan Morocco  Slovenia 
Bahrain    Georgia       Rep. of
Korea  
Netherlands   South
Africa   
Barbados  Germany   Kuwait   Norway  Spain 
Belgium     Greece   Latvia  Pakistan  Sweden 
Bulgaria  Guernsey  Lebanon    Poland   Switzerland 
Canada   Hong
Kong 
Libya   Portugal    Syria 
China   Hungary    Liechtenstein    Qatar      Tunisia 
Croatia   Iceland   Lithuania  Romania  Turkey 
Cyprus  India  Luxembourg  Russia  UAE   
Czech Rep.  Rep. of
Ireland 
Malaysia  San
Marino 
Uruguay 
Denmark  Isle of
Man  
Mauritius  Saudi
Arabia 
UK       
Egypt   Israel       Mexico     Serbia   US    
Albania Denmark Kuwait Poland Turkmenistan 
Algeria Egypt Kyrgyzstan Portugal UAE
Armenia Estonia   Latvia Qatar UK
Australia Faroe Islands Liechtenstein  Romania Ukraine
Azerbaijan Finland Lithuania Russia US
Bahrain France Luxembourg San Marino Uzbekistan
Barbados Georgia Macedonia Saudi Arabia Venezuela
Belarus Germany Malaysia Serbia  Vietnam
Belgium Greece  Malta Singapore  
Belize Hong Kong  Mexico Slovakia  
Bosnia & Herzegovina Hungary Montenegro  Slovenia  
Brazil India Moldova South Africa  
Bulgaria Indonesia Mongolia Spain   
Canada Iran Morocco  Sweden  
Chile  Ireland Nepal Switzerland
 
China Israel Netherlands  Taiwan  
Croatia Italy New Zealand Tajikistan  
Cuba Japan Norway  Thailand   
Cyprus Kazakhstan Pakistan Tunisia  
Czech Rep. Rep. of Korea  Philippines  Turkey  

Most important forms of doing business

Limited Liability company, partnership en commandite and partnership en nom collectif that elect to be treated as a company.

Legal entity capital requirements

A minimum of EUR 1,165 for a private company and EUR 46,587.47 for a
public company.

Residence and tax system

A company is resident if it has been incorporated in Malta or if its management and control is exercised in Malta. A company is domiciled in Malta if it has been incorporated in Malta (i.e. Maltese company law applies to it).

Companies both resident and domiciled in Malta are taxed on their worldwide income.

Companies resident but not domiciled in Malta are taxed on their Maltese source income and foreign source income received in Malta; however, they are not taxed on capital gains arising outside Malta, even if they are received in Malta.

Non-resident companies are taxed on their Maltese source income only.
 

Compliance requirements for CIT purposes

The fiscal year generally follows financial year, ending on 31 December, but may be changed upon request.

Company tax returns must, in principle, be submitted within 9 months from the financial year-end or March 31 of the following year, whichever date is later. Companies carrying on a business must retain proper and sufficient records of their income and expenditure and are required to submit, together with their tax return, a balance sheet and income statement accompanied by a report made out by a certified public auditor.

Corporate income tax rate

The standard corporate income tax rate is 35 percent. The application of double taxation relief and tax refunds can reduce the standard rate for investment income to 0 – 6.25 percent.

The standard rate is reduced to 5 percent for trading companies by the application of a tax refund of 6/7 of Maltese tax paid, with the exception of income derived from immovable property situated in Malta.

Both resident and non-resident shareholders are entitled to the same tax refunds in respect of underlying tax on distributed company profits. The only exception to this universal tax refund rule applies to income subject to a final tax and to the tax chargeable on profits derived, directly or indirectly, from immovable property situated in Malta.

Withholding tax rates

on dividends paid to non-resident companies

No

on interest paid to non-resident companies

No. 0 percent rate applies provided a non-resident person is not engaged in trade or business in Malta through a PE situated there and where the debt claim in respect of which the interest, discount or premium is paid is effectively connected with such a PE; AND the non-resident is not owned and controlled, directly or indirectly, nor does the non-resident act on behalf of an individual/individuals who is/are ordinarily resident and domiciled in Malta.

on patent royalties and certain copyright royalties paid to non-resident companies

No. 0 percent rate applies provided a non-resident person is not engaged in trade or business in Malta through a PE situated there and where the intellectual property in respect of which the royalties are paid is effectively connected with such a PE; AND the non-resident is not owned and controlled, directly or indirectly, nor does the non-resident act on behalf of an individual(s) who is ordinarily resident and domiciled in Malta.

on fees for technical services

No

on other payments

No

branch withholding taxes

No

Holding rules

Dividend received from resident/non-resident subsidiaries

Dividends received from a resident subsidiary benefit from the imputation system while dividends received from a non-resident subsidiary benefit from a 100 percent participation exemption when derived from a participating holding. A participating holding exists where the shareholder holds at least 10 percent, has made an investment of at least EUR 1,164,000, is entitled to purchase the balance of the equity shares of the company, or has the right of first refusal to purchase such shares, or is entitled to sit as, or appoint a Director on the board of that company, or holds the shares in the company for the furtherance of its own business and the holding is not held as trading stock for the purpose of a trade. Certain other conditions apply. In terms of the amended Parent-Subsidiary Directive, participation exemption will not apply where the dividends were deductible for the subsidiary.

capital gains obtained from resident/non-resident subsidiaries

100 percent participation exemption applies with respect to capital gains derived from a participating holding (see above).  

Tax losses

Trading losses may be carried forward indefinitely. No carry-back is allowed.

Tax consolidation rules/Group relief rules

Group relief regime available for trading losses. 

Registration duties

2 percent, but there are exemptions for transfers of shares in Maltese companies in international situations.

Transfer duties

On the transfer of shares

2 percent unless the company in which the shares are transferred derives 75 percent or more of its value from immovable property in Malta, in which case, the stamp duty is 5 percent.

On the transfer of land and buildings

5 percent

Stamp duties

As per above.

Real estate taxes

No

Controlled Foreign Company rules

No 

Transfer pricing rules

No (however, anti-avoidance rules to be considered)

Documentation requirement

Will be affected by EU developments on country-by-country reporting requirements.

Thin capitalization rules

No

General Anti-Avoidance rules (GAAR)

A general anti-avoidance rule is provided under Maltese tax legislation. An advance revenue ruling can be requested on the application of the rule to any transaction.

Specific Anti-Avoidance rules/Anti Treaty Shopping Provisions

The abuse of the flat-rate tax credit can be counteracted.

Advance Ruling system

Yes (rulings bind local tax authorities for a maximum period of 5 years, but are renewable).

IP / R&D incentives

IP / R&D incentives R&D tax amortization at 150 percent on meeting specific conditions. SMEs may be eligible to R&D tax credits. Exemption on royalties & similar income derived from a patent and copyrights. Incentives are applicable only where applied for before June 30, 2016. Existing investments may benefit from exemptions until June 30, 2021.

Other incentives

Freeport activities, manufacturing industry, Research and Development
companies may claim tax credits. 

VAT

The standard rate is 18 percent, which may be reduced to 5 percent or 7 percent, depending on the nature of goods or services.

Other relevant points of attention

No

Contact us

André Zarb

KPMG in Malta

T: +356 2563 11 34

E: andrezarb@kpmg.com.mt

 

Juanita Brockdorff

KPMG in Malta

T: +356 2563 10 29

E: juanitabrockdorff@kpmg.com.mt

EU Tax Centre

KPMG’s EU Tax Centre, working together with our network of EU tax law specialists throughout the European Union.

 
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