Maltese fiscal legislation offers a vast range of tax refunds, incentives and other tax benefits which may be applied for by companies both registered in Malta as well as in some cases by companies registered elsewhere but which effectively trade in Malta.

Tax Rates

One of the advantages of setting up your company in Malta is that it has one of the lowest tax rates for companies, moreover various benefits and refunds are applicable. Maltese fiscal legislation sets a 35% tax rate on corporate profits for companies taxed in Malta.

Maltese legislation offers shareholders of Maltese registered companies the possibility to apply for various tax refunds, ranging from a 2/3rds refund to a 6/7ths refund, granting a beneficial rate.

Another benefit offer by Maltese fiscal legislation is the full imputation system if taxation, meaning that the tax paid by the company would be a credit to the shareholders where the distributions are made.

Tax Exemptions

According to Maltese law a Maltese Registered Company would be exempt from paying tax on any income or gain which is derived from a participating holding or from the disposal of such holding where such income or gain is not part of his chargeable income.

In case of a dividend derived from a participating holding acquired on or after 1 January 2007 the exemption contemplated by this paragraph shall only apply when the conditions set out in either paragraph (i) or paragraph (ii) are satisfied:

(i) Where the body of persons in which the participating holding is held satisfies any one of the following conditions, that is to say:

• It is resident or incorporated in a country or territory which forms part of the European Union;

• It is subject to any foreign tax of at least fifteen per cent (15%);

• it does not have more than fifty per cent (50%) of its income derived from passive interest or royalties;

(ii) where none of the conditions set out in paragraph (i) are satisfied then both of the following two conditions must be satisfied:

• the equity holding by the company registered in Malta in the body of persons not resident in Malta is not a portfolio investment and for this purpose the holding of shares by a company registered in Malta in a body of persons not resident in Malta which derives more than fifty per cent of its income from portfolio investments shall be deemed to be a portfolio investment; and

• the body of persons not resident in Malta or its passive interest or royalties have been subject to any foreign tax at a rate which is not less than five per cent (5%):

Please contact Gonzi & Associates Advocates for further information on these refunds and exemptions.