Key tax factors for efficient cross-border business and investment involving Malta.
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Limited Liability company, partnership en commandite and partnership en nom collectif that elect to be treated as a company.
A minimum of EUR 1,165 for a private company and EUR 46,587.47 for a public company.
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.
The fiscal year generally follows the 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 drawn up by a certified public auditor.
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.
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.
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.
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:
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.
100 percent participation exemption applies with respect to capital gains derived from a participating holding (see above).
Trading losses may be carried forward indefinitely. No carry-back is allowed.
Group relief regime available for trading losses.
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.
As per above.
No (however, anti-avoidance rules to be considered)
No. Will be affected by EU developments on country-by-country reporting requirements.
A general anti-avoidance rule is provided under Maltese tax legislation.
Some SAARs are applicable, usually in relation to companies owning real estate in Malta.
Yes (rulings bind local tax authorities for a maximum period of 5 years, but are renewable).
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. Tax credit for employment of a person holding or reading a doctoral degree in one of the areas as specified in the Incentive Guidelines.
Investment tax credits in line with EU State Aid rules.
The standard rate is 18 percent, which may be reduced to 5 percent or 7 percent, depending on the nature of goods or services.
Malta has recently introduced a Notional Interest Deduction on risk capital (any form of free capital which does not bear interest such as equity share capital, share premium less any risk capital that is invested and generates exempt income). Subject to the fulfilment of conditions prescribed under the relevant rules, the notional deduction of interest could reach a maximum of 90% of the chargeable income of an entity.
KPMG in Malta
T: +356 2563 10 04
KPMG in Malta
T: +356 2563 10 29