Malta Accounting & Tax

Company Income Tax

The standard company income tax rate on profits is 35%.

Dividends received by a Maltese company holding directly 10% or more of the shares in the distributing company located outside Malta are exempt from tax in Malta through the participation exemption rules. This also applies to profit distributions from partnerships and overseas branches of the Maltese company. Other criteria could allow the application of the participation exemption rules, but the 10% holding rule is the most significant.

Upon distribution of a dividend and under the Maltese imputation system of taxation, the shareholder of a Maltese company may claim a tax refund of a substantial part of the tax paid and withheld by the distributing company. Dividends paid from Maltese companies are not subject to any withholding tax when distributed.

A tax exemption has been introduced for income from certain copyrights similar to the current exemption available in respect of income from patents on inventions. The exemption applies to income arising from copyrights on books, film scripts, music and art.

A tax credit will be available to Maltese companies in respect of expenditure incurred on the development of educational and other digital games.

Taxation on Capital Gains

The tax refund system available in relation to income tax is also available in relation to capital gains tax on assets located outside Malta, including immovable property. These can be particularly advantageous since additional deductions for inflation and tax suffered abroad are available. The transfers of shares held by a Maltese company in foreign companies are often exempt in Malta, due to the participation exemption rules.

VAT

The standard rate of VAT is 18% (reduced rate 5%). The VAT registration thresholds under Article 10 is €7,000. The VAT registration threshold under Article 11 ranges form €12,000 to €28,000

Tax Residence

A company that is incorporated in Malta shall be regarded for the purposes of Income Tax as being resident in Malta. As a result all Maltese companies may avail themselves of the benefits under Malta’s double taxation treaty network.

Audit

Limited liability companies are required to file audited financial statements with their tax return.

Statutory Obligations

Every company in Malta must file an annual return and a set of audited statutory financial statements with the Maltese Registry of Companies. The annual return is filed annually on the anniversary of the company’s incorporation in Malta. The statutory financial statements are filed following their approval in the company’s annual general meeting. The time allowed for the laying and approval of financial statements before the general meeting is ten months from the end of the accounting reference period for a private company and seven months for a public company.

A Maltese company whose business is carried out more than ninety percent outside Malta may pay its income tax within up to eighteen months after the end of the accounting reference period. Such a company may also, upon notifying the Maltese Registry of Companies, submit the financial statements with the registry within eighteen months from the financial year end. This also applies to companies that have passive foreign income such as dividends, royalties, capital gains, interest, rents and any other income derived from investments situated outside Malta.

An advance tax payment is to however be paid within 60 days from the distribution of the relative profits to shareholders, if the income tax payment has not yet been paid by the company. This is referred to as Advance Company Income Tax ‘ACIT’. The ACIT will be considered as a provisional tax payment for the company. The tax return is to be filed within nine months from the end of the accounting period.