Tax Incentives in Malta

Updated on Tuesday 12th November 2019

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Foreign investors who open companies in Malta are mainly attracted by the country’s taxation system. However, they can also benefit from other tax incentives in Malta, through their companies or as shareholders in these businesses.

In order to benefit from these incentives, foreign business owners are recommended to work with accounting firms in Malta. These can assess the companies and create reports based on which they can obtain the various tax incentives available. Our accountants in Malta can also prepare the paperwork related to applying for these tax incentives.
 

What are the tax incentives available in Malta?


The Maltese taxation system is a very flexible one, however, in order to fully benefit from it and the incentives granted by various agencies, a company should know these incentives and whether they qualify for them.

Here are the main tax incentives available in Malta at the moment:
 
  1. the tax refund which is applied on the corporate tax which is charged at a standard rate of 35%;
  2. the participation exemption which applies to holding companies which meet certain requirements;
  3. the double taxation relief which is available under Malta’s network of agreements for the avoidance of double taxation;
  4. the High Net Worth Individuals schemes which are available for foreign citizens who take up residence under various relocation schemes;
  5. the company re-domiciliation scheme which was enabled in 2002 and under which a foreign company can relocate to Malta and continue its activities here;
  6. incentives on investment under the Malta Enterprise Act, Business Promotion Act, and Business Promotion Regulations.

Below, our tax advisors in Malta explain each of these programs. Also, you can rely on us for assistance in applying for those incentives which suit your business.
 

The tax refund scheme in Malta


The most popular tax incentive available for companies in Malta is the tax refund which also gives the uniqueness of this country’s taxation system.

This incentive applies to the distribution of dividends paid by a Maltese company to its shareholders who are entitled to obtain a refund of the tax paid by the company on the profits for which the distribution is made. The refunds consist of:
 
  • the 6/7 refund which is granted on trading activities and which implies obtaining an effective corporate tax rate of 5%;
  • the 5/7 refund which is usually granted on income resulted from passive interests, royalties and participation holdings which do not qualify for the participation exemption and implies a reduced rate of 10%;
  • the 2/3 refund which is available for companies claiming double taxation relief; in this case, the refund will be limited to the amount paid as tax in Malta;
  • the 100% refund which implies obtaining a full exemption from the corporate tax under the participating holding regime.

Our accountants in Malta can offer more information on the tax refunds. You can also rely on us for audit services in Malta.
 

The participation exemption in Malta


Another important tax incentive available in Malta is the participation exemption regime which applies in two different situations. The first one implies the participating holding in which a company owns at least 10% of the equity shares in a company which grants the following rights in a minimum percentage of 10 on those shares:
 
  • voting rights;
  • the right to profits from their distribution;
  • the right to asset distribution if the company is wound up.

The Maltese tax authorities can also grant this tax incentive if the equity holding does not exist, but at least two of the conditions above are met.

The participation exemption also exists when:
 
  • the investment in the foreign company is of 1,164,700 euros for a minimum period of 183 days;
  • the Maltese company can acquire the remaining balance of the equity shares in the foreign company;
  • the Maltese company has pre-emptive rights over the disposal, the redemption or cancellation of the remaining equity shares in the company;
  • the Maltese company has the right to be part of the Board of Directors in the foreign company;
  • the holding of shares in the foreign company is for the continuation of the activity of the Maltese company, but not for trading purposes.

The tax incentive granted under the participation exemption regime refers to the exemption from taxation of the profits derived from the participating holding or the gains resulted from the disposal of the shares.

Under the double taxation relief, Maltese companies can benefit from unilateral or Commonwealth relief, but also from a flat rate foreign credit tax.

For complete information on all the tax incentives granted here, do not hesitate to contact our accountants in Malta. We can also help you apply for these incentives.