Doing Business

Taxation

CORPORATE TAX 

Malta offers a highly efficient fiscal regime which avoids double taxation on taxed company profits distributed as dividends. Companies are taxed at a rate of 35 per cent. However, a full imputation system applies to the taxation of dividends, whereby the tax paid by the company is imputed as a credit to the shareholder receiving the dividend. Following the distribution of a dividend, shareholders are also entitled to claim a tax refund of six-seventh of the relevant tax paid in respect of trading income and five-sevenths of the relevant tax paid in the case of passive interest and royalties. The refund is reduced to two-thirds where the distributing company claims double-taxation relief. Malta’s tax system has been deemed by the European Commission to be compliant with EU non-discrimination principles and has also gained approval from the OECD.

PERSONAL INCOME TAX RATE

Individuals are charged on their income at progressive tax rates up to a maximum of 35 per cent. From 2015 onwards, Malta reduced the top rate of income tax for those who earn less than €60,001 to 25 per cent from 29 per cent. Tax liability in Malta is based on the following conditions: 

Rate

Single Computation (€)

Joint Computation (€)

Parental Computation (€)

0%

0 - 8,500

0 - 11,900

0 - 9,800

15%

8,501 - 14,500

11,901 - 21,200

9,801 - 15,800

25%

14,501 - 19,500

21,201 - 28,700

15,801 - 21,200

25%*

19,501 - 60,000

28,701 - 60,000

21,201 - 60,000

35%

60,001+

60,001+

60,001+

*Not applicable to dividend income which remains taxable at 35%

EXPAT TAXATION

To attract highly qualified personnel from abroad, Malta has introduced an incentive scheme targeting foreign executives. Professionals in the financial services, gaming and aviation sectors can benefit from a flat personal income-tax rate of 15 per cent on income up to €5 million. Any income over that figure is tax-free. To qualify for this tax incentive, the employee must earn a minimum of €80,100 per year (basis year 2013), among other criteria. EU nationals can benefit from the reduced tax rate for an unlimited period, EEA and Swiss nationals for a period of five consecutive years and third-country nationals for four consecutive years. Malta is also an attractive place for high-net-worth individuals and their families to relocate. In addition, two separate residency programmes, the Residence Programme for EU nationals and the Global Residence Programme for non-EU nationals, offer a flat tax rate of 15 per cent to people who purchase or rent property on the Maltese Islands. 

DOUBLE TAXATION TREATIES

Malta has signed agreements for the avoidance of double taxation with some 70 countries. The tax system also includes Commonwealth relief, unilateral relief and the flat-rate foreign tax credit, thereby ensuring that income arising from overseas is not subject to double taxation, even if there is no double-taxation agreement in force. 

CUSTOMS & DUTIES 

As an EU member state, Malta falls under the EU’s customs union, which enshrines free trade and the absence of customs duties and quotas on trade among members. Consequently, trade with Malta is totally free from customs duties, provided that the country of origin of the goods is one of the other EU member states. When goods are imported from a non-EU country, customs duties are calculated in accordance with the Common Customs Tariff (CCT). 

VAT 

Value-added tax (VAT) applies to supplies of goods and services within Malta, intra-community acquisitions and imports. The standard rate is 18 per cent, and a 5 per cent rate applies to the supply of electricity, printed matter and confectionery. The VAT rate on holiday accommodation is 7 per cent. Zero-rating applies to exports and intra-community supplies, international transport, domestic passenger transport, food, pharmaceuticals, and the supply and repair of ships and aircraft. Exemptions from VAT include the sale and leasing of immovable property, banking and insurance services, health, education and broadcasting. 

SOCIAL SECURITY 

Employers are obliged to pay a social security contribution at a rate of 10 per cent of the basic wage paid to their employees. Employees pay another 10 per cent of their basic wages. 

ACCOUNTING & AUDITING 

Companies in Malta are required to maintain accounting records in accordance with the Companies Act. Accountancy principles conform to International Financial Reporting Standards (IFRS). Companies are also required to submit accounts, which are audited, and every company incorporated in Malta is required to appoint an independent auditor registered with the local Accountancy Board and holding a certificate to practice. Auditors must follow the International Standards of Auditing (ISA) issued by the International Federation of Accountants (IFAC).

TAX RETURNS

The fiscal year is the calendar year. Malta operates a self-assessment tax system. Taxpayers are required to declare their income and calculate their tax, taking into account payments in advance and any other tax credits. The tax payable must be settled at the time that the self-assessment is filed. For individuals, the deadline is 30 June each year. For companies, the tax return date is nine months after the financial year-end, but not earlier than 31 March of each year. Companies’ tax returns must be accompanied by an auditor’s certificate. Revenue assessments may be raised when a return is not filed or where the Commissioner of Inland Revenue disagrees with the self-assessment. 

upcoming
events

SIGN UP TO AND RECEIVE OUR NEWSLETTER

Brands who work with us