Malta Tax & Accounting

Malta Tax for Companies

The standard company Malta 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 may 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, however the 10% holding rule is the most significant.

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

There are a number of tax and other incentives for start up companies available from Malta Enterprise. Other advantages or limitations arise from Maltese legislation implementing EU directives. DM Europe will analyse the clients’ particular activity and advise on the optimal and compliant tax treatment.

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 from tax 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 range from  €17,000 to €28,000 depending on the particular activity. The VAT registration threshold under Article 11 ranges form €20,000 to €35,000

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 Malta Business Registry. 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.