Malta

Last modified: 10/01/2025 16:54

Corporate taxation

	Rate
Corporate income tax rate (1)	35%
Branch tax rate (2)	35%
Capital gains tax rate (3)	35%

1. Flat rate of EUR 0.35 per EUR 1 of tax adjusted profit. Effective tax rate reduced to typically 5% through the tax refund credit system. Certain receipts of income are tax exempt (e.g. dividend income or capital gains on disposal of shares, held in a participating holding)
2. Branch profits are only taxable in Malta if deemed to arise in Malta (source base taxation) or on foreign source income that is received/remitted to Malta (remittance base taxation). Foreign source capital gains and foreign source income that is not received/remitted to Malta are not subject to tax in Malta.
3. Only gains/profits arising from the exhaustive list of transactions of a capital nature attract capital gains tax. In all other instances, capital gains fall outside the scope of tax and are therefore tax neutral. Certain capital gains arising from the transfer of specific assets attract final withholding tax at a rate lower than the normal company tax rate.

Residence: A company is resident for tax purposes in Malta if it is incorporated/registered in Malta (“Incorporation Test”) or if incorporated/registered outside of Malta, is managed and controlled in Malta (“Management and Control Test”).

Basis: A company that is incorporated/registered in Malta is considered both resident and domiciled in Malta for tax purposes and is taxed on a world-wide basis, i.e. full liability to tax. A company that is either resident or domiciled, but not both (e.g. a branch of a foreign undertaking), is subject to tax in Malta on a remittance basis, i.e. limited liability to tax. Under the remittance basis of taxation, a company will be subject to tax on income arising in Malta (source base taxation) and on foreign source income that is received/remitted to Malta. Foreign source capital gains are exempt from tax even if received/remitted to Malta by a company that is taxable on the remittance basis of taxation.

Taxable income: Taxable income includes gains or profits derived from, inter alia, a trade or business, profession, vocation, dividends, premiums, interest, or discounts, rents, royalties. Certain categories of income are, subject to certain conditions, exempt from tax (e.g. interest, royalties and gains on the transfer of shares derived by non-residents). The tax adjusted accounting profit before tax as prepared under generally accepted principles and practices (e.g. IFRS, Local GAAP) is the basis for determining the chargeable income of a company. The accounting profit is adjusted to remove items of income that are tax neutral (e.g. provision reversals, unrealised gains, impairment reversals, income taxed on a receipt basis etc.) and removes items of expenditure that are specifically disallowed for tax purposes (e.g. provision increases, unrealised losses, impairment charges etc.)

Significant local taxes on income: N/A – There is no specific local taxes on income apart from company tax on profits.

Alternative minimum tax: N/A – There is no alternative minimum tax.

Taxation of dividends: Malta operates a full imputation system to dividend taxation. The shareholders in receipt of dividends are granted a tax credit equal to the tax borne on the profits out of which the dividends are paid. As business profits of companies are taxed at the same rate, no additional tax is paid on dividends. With respect to dividends received from qualifying participating holdings, such dividends can be exempt from tax in Malta under the participation exemption. Such dividends will also be exempt from tax when ultimately paid out/distributed to shareholders. Subject to very limited circumstances, Malta does not levy any withholding tax on inbound and outbound dividend distributions.

Capital gains: Only gains/profits arising from the transfer of specific capital assets are subject to tax in Malta. There is an exhausted list of capital assets that attract capital gains tax and capital assets not specifically mentioned within Malta’s tax legislation would fall outside of scope of the Maltese tax system. Capital gains arising from the disposal of shares in a participating holding can be exempt from tax in Malta (refer to above).

Losses: A loss incurred in a trade by a company is allowed as a tax deduction. A loss is considered as such provided that, had such a loss been a profit such a profit would have been chargeable to tax in Malta. In other words, a negative figure is treated as a loss for tax purposes provided that, had it been a positive figure it would have been treated as taxable income. A trade loss can be carried forward to subsequent years and may be used to set off any income. Trade losses may also be used to set off any taxable capital gains. If the chargeable income of the company is insufficient to enable the whole of the loss to be absorbed, the unabsorbed balance may be carried forward from year to year until the whole of the loss has been set off. This carry forward possibility is not dependent on the continued existence of the trade, business, profession or vocation that generated the loss. Subject to specific considerations, losses may also be surrendered to members of the same group of companies whereby the loss incurred by a company may be surrendered and offset against the profits of another company that forms part of the same group of companies.

Foreign tax relief: Four mechanisms which may be used to eliminate double taxation: 1) Double Tax Treaty Relief; Malta has signed double tax treaties with over 70 countries and jurisdictions. 2) Unilateral Relief; Foreign tax relief in a manner similar to Double Tax Treaty Relief though applies outside of a restricted tax treaty context. Unilateral Relief is granted unilaterally and can be availed subject to certain conditions being met. 3) Relief in respect of Commonwealth income tax; and Rarely applied in practice, it is a relief available in respect of Commonwealth Income Tax. Available if a company is tax resident of the commonwealth country and its functioning is similar to foreign tax relief granted under double tax treaties. 4) Flat-Rate Foreign Tax Credit (FRFTC) FRFTC is claimed in respect of foreign income or gains which are received by a company registered in Malta and which is empowered to receive such income or gains that falls to be allocated to the Foreign Income Account. FRFTC can be claimed irrespective of whether tax is actually paid in a foreign jurisdiction and there is no need to provide evidence of taxes paid overseas.

Participation exemption: Dividend income or capital gains derived from a participating holding (usually an equity shareholding of at least 5%, although a number of alternative tests may apply), are exempt from tax. Alternatively, a company may opt to be taxed at 35% and upon a distribution of dividend, the shareholder of the company may claim a full refund of the Malta tax paid by the company.

Holding-company regime: N/A – No specific holding company regime. However, the participation exemption may be applicable as outlined above.

Tax-based incentives: Tax based incentives include: 1) Investment aid for business development and continuity assistance; 2) Tax credits for start-up, qualifying capital investments; 3) Aid for research and innovation, incl. R&D tax credits / enhanced deductions for R&D expenditure; and 4) Notional Interest Deduction (NID) on qualifying capital capped at 90% of taxable income, with excess carried forward to be deducted against future taxable income.

Group relief/fiscal unity: Subject to specific considerations, a company forming part of a local group may transfer a tax loss to other members of the group by virtue of the group relief provisions. A loss which would otherwise have been carried forward may be surrendered to other companies within the group and the recipient of the tax loss may offset the tax loss surrendered against its own taxable profits. Subject to specific considerations, a parent company may make an election for itself and its qualifying subsidiaries to form a fiscal unit. Members of the fiscal unit, other than the principal taxable, will be transparent for income tax purposes. The fiscal unity regime is optional and if elected to be formed, the principal taxpayer will be required to prepare on an annual basis a consolidated balance sheet and consolidated profit and loss account covering all companies within the fiscal unit.

Small company/alternative tax regimes: N/A – No small company/alternative tax regimes.

Corporate taxation: compliance

Tax year: A company is assessed to tax on income derived during the financial year. The financial year is taken by reference to the company’s accounting reference end date (referred to as the “basis” year) and by default is 31 December. The profits derived by the company in the basis year are brought to tax in the following year (referred to as the “year of assessment”).

Consolidated returns: When a company elects to form a fiscal unit, the company would be required to file the tax return of the fiscal unit.

Filing and payment: Electronic filing of the annual income tax return is mandatory and due for electronic submission within 9 months of the company’s accounting reference end date or March of that year, whichever is later. Payment of tax (if any), would be need to be paid by the tax return submission date. Subject to certain conditions being met, a company can apply for a tax payment extension to up to 18 months after the tax return filing deadline.

Penalties: Late filing penalties apply and are based on the number of months that have elapsed since the income tax return submission deadline. A late filing penalty of EUR 50 applies when the tax return is filed within 6 months of the tax return filing deadline and gradually increases, capped at EUR 1,500 per income tax return. Interest of 0.60% (up to 31/05/2022: 0.33%, up to 31/12/2019: 0.54%) per month or part thereof is incurred on late payment of tax.

Rulings: A company may apply for an Advance Revenue Ruling on the tax treatment of certain transactions. The ruling will be binding for 5 years and can be subsequently renewed subject that changes to tax law impacting the tax treatment of transactions to which the ruling applies will remain binding for 2 years from such time such changes are made.

Taxation of individuals

 Single Rates:

Chargeable Income (EUR)	Rates
From EUR          0 to EUR 12,000	0%
From EUR 12,001 to EUR 16,000	15%
From EUR 16,001 to EUR 60,000	25%
From EUR 60,001 and over	35%

Married Rates:

Chargeable Income (EUR)	Rates
From EUR          0 to EUR 15,000	0%
From EUR 15,001 to EUR 23,000	15%
From EUR 23,001 to EUR 60,000	25%
From EUR 60,001 and over	35%

 Parent Rates:

Chargeable Income (EUR)	Rates
From EUR          0 to EUR 13,000	0%
From EUR 13,001 to EUR 17,500	15%
From EUR 17,501 to EUR 60,000	25%
From EUR 60,001 and over	35%

Tax Rates for Non-Residents:

Chargeable Income (EUR)	Rates
From EUR        0 to EUR    700	0%
From EUR    701 to EUR 3,100	20%
From EUR 3,101 to EUR 7,800	30%
From EUR 7,801 and over	35%

Residence: Tax residence implies habitual physical presence and is typically determined by a physical presence test – residing in Malta for a period of more than 183 days in a year. However, an individual may be an ordinarily resident of Malta if there is regular physical presence in Malta coupled with residence which forms part of a the individual’s everyday life. Whereby a physical presence test be held sufficient to determine residence, in so far as ordinarily residence is concerned, it is crucial to take account of the facts and circumstances that make up the individual’s ordinary mode of life.

Basis: Individuals who are ordinarily resident and domiciled in Malta are subject to income tax in Malta on their worldwide income and taxable gains (i.e. full liability to tax). Individuals who are ordinarily resident but not domiciled in Malta (or not ordinarily resident but domiciled in Malta) are taxable in Malta on a remittance basis, i.e. income and taxable gains arising in Malta and on income arising outside of Malta (foreign source income) that is received/remitted to Malta (i.e. limited liability to tax). Foreign source capital gains are not taxable in Malta when derived by an individual who is taxed on a remittance basis, even if such foreign source capital gains are received/remitted in Malta.

Taxable income: Taxable income includes any gains or profits derived, inter alia, from trade or business, profession, vocation, employment or office, dividends, interest or discounts, pensions, annuities, royalties, rents, premiums, and any other gains or profits from any other sources. Subject to specific conditions, there shall be exempt from tax any interest, discount, premium or royalties accruing to or derived by a person not resident in Malta.

Capital gains: Any gains arising from the transfer of a capital asset is aggregated with the individual’s other income and the total of the individual’s taxable income and taxable gains shall form the individual’s chargeable income and brought to tax. Gains arising from the transfer of, inter alia, immovable property, securities, business goodwill, business permits, copyrights, patents, trademarks, trade names, and any other intellectual property, interests in a partnership, and on beneficial interests in trusts, are taxable in Malta and the tax rate applied on the capital gains vary depending on the type of asset transferred. Subject to specific conditions being met, there shall be exempt from tax any gains accruing to a person not resident in Malta on a transfer of, or on a transfer of any rights over, any units in a Collective Investment Scheme (CIS), interest of a partnership (not being a property partnership) and on any shares or securities in a company (not being a property company).

Deductions and allowances: Specific deductions include (1) certain fees paid by an individual in connection with schools, childcare, sports for children, homes for the elderly; (2) alimony payments capped up to the amount of taxable income; and (3) interest paid on money borrowed from income generated by assets acquired through the applicable of loaned funds. There are no personal allowances granted under Maltese tax law.

Foreign tax relief: Resident individuals may avail themselves of two mechanisms to relieve foreign tax paid: 1) Double Tax Treaty Relief; Malta has signed double tax treaties with over 70 countries and jurisdictions. 2) Unilateral Relief; Foreign tax relief in a manner similar to Double Tax Treaty Relief though applies outside of a restricted tax treaty context. Unilateral Relief is granted unilaterally and can be availed subject to certain conditions being met.

Taxation of individuals: compliance

Tax year: Taxable income and taxable gains arising in a calendar year (“basis” year) are chargeable to tax the following year in which such taxable income and taxable gains arise (“year of assessment”).

Filing and payment: Individuals are required to prepare and file their income tax return by 30 June of each year. The tax payable must be paid by the tax filing deadline, i.e. 30 June. Depending on the source and nature of the taxable income, an individual may be required to make provisional tax payments. Provisional tax payments are made in three installments and are payable by 29 April, 31 August and 21 December of each year. The residual balance of tax payable on the income tax return would need to be settled in full by the tax return filing deadline, i.e. 30 June. Spouses are jointly responsible for the filing of the income tax return whereby one spouse would be registered as the taxpayer for filing and correspondence purposes. Individuals whose tax is deducted at source (e.g. employment income subject to the Final Settlement System) would be classified as non-filers and would not need to file an income tax return if such individuals have no other sources of income.

Penalties: Late filing penalties apply and are based on the number of months that have elapsed since the income tax return submission deadline. A late filing penalty of EUR 50 applies when the tax return is filed within 6 months of the tax return filing deadline and gradually increases, capped at EUR 1,500 per income tax return. Interest of 0.33% (up to 31/12/2019: 0.54%) per month or part thereof is incurred on late payment of tax.

Rulings: N/A – No Advance Tax Ruling can be requested.

Withholding taxes

Type of Payment	Resident recipients		Non-residents recipients
	Company	Individual	Company	Individual
	Rate (%)	Rate (%)	Rate (%)	Rate (%)
Dividends	0%	0%*1	0%	0%
Interest	0%*2	0%*2	0%	0%
Royalties	0%	0%	0%	0%

*¹ 15% withholding tax may apply where profits are distributed out of the untaxed account

*² 15% withholding tax may apply where interest qualify under the investment income provisions.

Dividends – Malta does not levy any withholding tax on outbound dividend. The only exception pertains to certain untaxed dividends relating to dividend distributed and paid out of a company’s Untaxed Account and where the shareholder who benefits from the dividend is an individual that qualifies under the definition of a recipient.

Interest – 0% applied to interest payments made to non resident individuals, provided that the non resident individuals are not owned and controlled by, and does not act on behalf of, persons ordinarily resident and domiciled in Malta and does not carry on a trade or business in Malta through a permanent established with which the interest income is effectively connected.

Royalties – 0% applied to royalty payments made to non resident individuals, provided that the non resident individuals are not owned and controlled by, and does not act on behalf of, persons ordinarily resident and domiciled in Malta and does not carry on a trade or business in Malta through a permanent established with which the interest income is effectively connected.

Branch remittance tax: N/A – There is no branch remittance tax.

Anti-avoidance legislation

Transfer pricing: Malta has implemented the Transfer Pricing Rules (S.L.123.207) which shall apply for basis years commencing on or after 1 January 2024.

Interest restriction: Subject to certain exclusions and derogations, exceeding borrowing costs shall be deductible in a tax period in which they are incurred limited to 30% of a taxpayer’s earnings before interest, tax, depreciation and amortisation (EBITDA). The EBITDA is calculated after all actual and deemed deductions provided in the Malta’s Income Tax Act. Any borrowing costs in excess of the interest restriction may be carried forward. Unused interest capacity may be carried forward for a maximum of 5 years.

Controlled foreign companies: CFC Rules apply when the following conditions are met: (1) Control Test (in the case of an entity): The taxpayer by itself, or together with its associated enterprises, holds a direct or indirect participation of more than 50% of the voting rights of any entity, or owns directly or indirectly more than 50% of the capital or is entitled to receive more than 50% of the profits of that entity; and (2) Low-taxation Test (in the case of an entity or a PE): The actual corporate tax paid by the entity/PE is lower than the difference between the tax that would have been charged on the entity/PE under Malta’s Income Tax Act. If an entity or PE is treated as a CFC, certain undistributed income of the entity or PE arising from “non-genuine arrangements” (those that have been put in place for the essential purpose of obtaining a tax advantage) will be included in the tax base of the taxpayer that meets the control test. There are certain exclusions to the application of the CFC Rules, principally linked to an entity/PE that do not exceed certain financial thresholds.

Hybrid mismatches: Anti-hybrid rules are based on the EU Anti-Tax Avoidance Directive 2 that have entered into force as from 1 January 2020. However, rules regarding reverse hybrid mismatches will apply with effect from 1 January 2022. These rules apply to Malta taxpayers, including PEs of non-resident companies, and to all entitles treated as transparent for tax purposes in Malta. The aim of the rules is to correct mismatch outcomes that result from the implementation of hybrid mismatch arrangements. For the corrective mechanisms to apply, the rules require two factors to subsists at the same time: 1) A mismatch outcome; and 2) A hybrid mismatch. Furthermore, the “mismatch outcome” must be a direct result of the “hybrid mismatch”. Corrective mechanisms where a hybrid mismatch results in a mismatch outcome comprise a primary rule and a secondary rule. The secondary rule is triggered only to the extent the primary rule is not applied. Furthermore, special corrective mechanisms apply where mismatch outcomes occur as a result of reverse hybrid mismatches and tax residency mismatches.

Disclosure requirements: Country-by-Country (CbC) Reporting A Malta resident parent company of a multinational enterprise must file an annual CbCR with the tax authorities if the consolidated turnover of the group exceeds EUR 750 million. The report covers each jurisdiction in which the multinational group conducts business activities and must include, inter alia, information on revenue, profits (or losses), income tax paid, income tax accrued, the number of employees, stated capital, accumulated earnings AND tangible assets. Cross-Boarder Arrangements reportable under DAC 6 Tax intermediaries are required to file information that is within their knowledge, possession, or control on reportable cross-border arrangements to the tax authorities. In the absence of a tax intermediary, the reporting obligations falls upon the taxpayer themselves. A cross-border arrangement would be considered reportable in terms of DAC 6 if such an arrangement contains at least one of the hallmarks listed in annex IV of the rules. Hallmarks are certain characteristics or features that present an indication of a potential risk of tax avoidance.

Exit taxes: Exit Tax Rules are applicable as from 1 January 2020. A taxpayer shall be subject to an exit tax if Malta loses its taxing rights on capital assets that are transferred under any of the following circumstances: 1) A taxpayer transfers assets from its head office in Malta to its permanent establishment in another EU member state or third country; 2) A taxpayer transfers assets from its permanent establishment in Malta to its head office or another permanent establishment in another EU member state or third country; 3) A taxpayer transfers its tax residence from Malta to another EU member state or third country; or 4) A taxpayer transfers the business carried on by its permanent establishment from Malta to another EU member state or third country. The term “transfer of assets” is defined as “an operation whereby Malta loses the right to tax the transferred assets, while the assets remain under the legal and economic ownership of the same taxpayer. Note – Where Malta has the right to tax in terms of international tax principles but chooses not to tax, then it follows that there is no effective loss of right to tax for Malta. By way of example, a taxpayer which is not taxed on foreign capital gains will not be subject to exit taxation on foreign unrealised capital gains if its place of effective management is shifted away from Malta. Tax on capital gains on assets transferred under the above mentioned circumstances shall be calculated at an amount equal to the market value of the transferred assets, at the time of exit of the assets, less their value for tax purposes.

General anti-avoidance rule: Under the General Anti-Abuse Provision, the tax authorities shall ignore an arrangement or a series of arrangements which have been put into place for the main purpose or one of the main purposes of obtaining a tax advantage that defeats the object or purpose of an applicable tax law, and for which are not genuine having regard to all relevant facts and circumstances. Where an arrangement or series thereof are ignored, the tax authorities in Malta shall disregard for tax computation purposes any artificial or fictitious scheme that reduces the amount of Malta tax payable by a taxpayer, and to assess tax on the taxpayer to nullify or modify the scheme and the consequent tax advantage. An arrangement or series of arrangements thereof will be regarded as non-genuine to the extent that it is not put into place for valid commercial reasons that reflect economic reality.

Digital services tax and Other significant anti-avoidance legislation: There are other anti-abuse provisions that target specific activities.

Value-added tax/Goods and services tax

Type of tax: Value Added Tax (VAT) on EU model: An end-consumer tax that is charged on the supply of taxable goods and services.

Standard rate: 18%

Reduced rates: 0% (e.g. supplies consisting of international transport and ancillary services. 7% (supply of accommodation) 5% (e.g. supplies consisting of electricity, confectionery and similar items, certain medial accessories, certain printed matter)

Registration: A taxable person established in Malta is required to register for VAT within 30 days from the date on which the taxable person makes a supply for consideration of goods and/or services in Malta (other than an exempt without credit supply) and/or supplies goods and/or services within the territory of another Member State that is subject to the Reverse Charge Principle. A taxable person who is not established in Malta but is liable for the payment of VAT on a supply made by/to the taxable person, shall register for VAT within 30 days from the date of that supply. Note – Voluntary Registration: Any person who carries on or intends to carry on an economic activity may apply to be registered for VAT. There is no registration threshold. Small undertakings may opt to register under a simplified registration category and these small undertakings will not charge or reclaim VAT.

Filing and payment: VAT registered persons are required to file a VAT return on a quarterly basis and the VAT return filing deadline is 6 weeks from the close of the relative VAT period. Input VAT, i.e. VAT incurred by a taxpayer for the furtherance of an economic activity, may be offset against VAT liabilities. Any residual VAT payable must be paid in full within 6 weeks of the relevant VAT quarter end. When a taxpayer performs intra-EU supplies whereby the customer is liable to the VAT under the Reverse Charge Principle, the taxpayer would need to file a Recapitulative Statement (Recap). A Recap is a periodical statement required to be made by suppliers in Malta who make intra-Community supplies of goods and/or services to customers identified with a valid VAT Registration number in another Member State. Recaps are filed monthly unless the the taxpayer can avail of filing Recaps on a quarterly basis.

Social security contributions

Social Security Contributions (SSC) are calculated by reference to the basic weekly wage of an employee. The weekly SSC payable is typically 10% of the basic weekly wage, capped at EUR 45.19 per week (for persons born up to 31/12/1961) or EUR 54.43 per week (for persons born after 01/01/1962). Other SSC rates may apply depending on the category of the employee (e.g. EUR 6.62 per week for persons under 18 years of age earning not more than EUR 181.08 per week).

The employer deducts SSC from the employee’s basic weekly wage and remits the entire amount, together with the employer’s share of SSC, to the tax authorities on a monthly basis. The employer’s share of SSC is a deductible expense for income tax purposes. Social security is compulsory for all persons aged between 16 and 65 and gainfully occupied in Malta, including non-resident persons working in Malta. There are certain exemptions for the payment of SSC in relation to persons gainfully employed in Malta but who choose to continue to pay SSC in their country of domicile.

Self-employed

Persons who are self occupied or self employed are required to pay SSC in three installments (29 April, 31 August and 21 December). Self occupied persons are persons who earn income from a trade, business, profession, vocation or any other economic activity that exceeds EUR 910 per annum. Self employed persons are persons who receive income from rents, investments, capital gains or any other income. The rates of SSC for self occupied and self employed persons are based on the annual net profit or income for the year preceding the contribution payment year. The weekly rate is calculated by reference to the social security contribution category of the self occupied and self employed person but is capped once the net profit of the self occupied and self employed person exceeds a certain threshold.

Other taxes

Capital duty: N/A – There is no capital duty.

Immovable property taxes: N/A – There is no immovable property taxes in addition to capital gains tax on transfers of immovable property situated in Malta.

Transfer tax: N/A – There is no transfer tax.

Stamp duty: Duty is levied on the execution of documents resulting in a transfer of specific assets or real rights thereof. Examples include (1) the transfer of shares in a company not being a property company attracts stamp duty of 2%; (2) the transfer of immovable property situated in Malta will be subject to stamp duty of 5%. Stamp duty may also be levied on certain specified documents even when no transfer of property takes place (e.g. insurance policies). The payment of duty rest upon the acquirer of the assets transferred or the policy holder. Certain transactions may be exempt from stamp duty depending on the nature of the asset transferred and the status of the acquirer.

Net wealth/worth tax: N/A – There is no net wealth/worth tax.

Inheritance/gift taxes: N/A – There is no inheritance/gifts taxes.

Other: n/a

Tax treaties

Malta has a broad treaty network, the majority of which are based on the OECD Model Tax Convention. Malta’s double tax treaties provides rules in respect of dividends, interest, royalties, income from employment, students, entertainers and sportspersons amongst others, as well as rules on the elimination of double taxation. Malta has concluded over 70 double tax treaties.