Overview of the Malta Corporate Tax System

Malta’s corporate taxation framework is rooted in UK tax principles and has been continuously updated to align with EU directives and OECD initiatives. This has created a competitive and attractive Malta corporate tax regime that is fully compliant with European and international standards.

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A2CO's Tax team including Partner Antoinette Scerri, Benjamin Zammit McKeon, Stephanie Bianco and Clivert Vella posing for a photo in front of a glass wall.

Understanding Corporate Taxation in Malta: Tax Rates, Refund System, and Double Taxation Relief

Basis of Corporate Taxation for a Company in Malta

The taxation of a company in Malta depends on its residence and domicile status. A company incorporated in Malta is considered both resident and domiciled in Malta and is subject to tax in Malta on its worldwide income.

A company incorporated outside Malta but effectively managed and controlled from Malta is deemed tax resident but not domiciled in Malta. In such cases, the company is liable to tax in Malta on income arising in Malta and on foreign tax remitted to Malta. Importantly, foreign capital gains are exempt from tax in Malta, even when remitted.

To confirm residence for income tax purposes, a company must demonstrate sufficient substance in Malta. This typically includes:

Maintaining a physical office in Malta
Employing local staff who work physically in Malta
Holding an active Maltese bank account
Ensuring that directors hold meetings and make key management decisions in Malta

Corporate Income Tax Rate in Malta

Corporate income tax is applied at a flat corporate tax rate of 35%. However, the full imputation system of taxation ensures that tax paid by the company is credited in full to shareholders of a Malta company when profits are distributed as dividends. This eliminates double taxation, as the maximum personal income tax rate in Malta is also 35%.

Certain types of income may be taxed at final withholding rates, such as:

Bank interest and other interest paid through an authorised financial intermediary, which may be subject to a 15% withholding tax
Rental income from immovable property situated in Malta, which may also be taxed at 15% on the gross amount
Gains from the sale of immovable property, which are subject to a final tax ranging between 5% and 10%, depending on the circumstances of the sale

In some cases, the company may choose to opt out of this final tax system.

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Tax Refund Mechanism in Malta: Dividends and Double Taxation Relief

A distinctive feature of the Malta corporate tax framework is the tax refund mechanism. When a company distributes profits as dividends, shareholders may claim a refund of part or all of the tax paid by the company, depending on the type of income being distributed.

Refunds may be claimed as follows:

Two-thirds of tax paid on income where double taxation relief has been applied.
Five-sevenths of tax paid on passive interest and royalties.
Six-sevenths of tax paid on other trading income.
A full refund of the tax on income that could have qualified for the participation exemption.

This tax refund mechanism can reduce the tax leakage in Malta to as little as an effective tax rate of 5% of taxable income. However, refunds are only available when a dividend is distributed, unless a Fiscal Unit is registered.

Basis of Corporate Taxation for a Company in Malta

The taxation of a company in Malta depends on its residence and domicile status. A company incorporated in Malta is considered both resident and domiciled in Malta and is subject to tax in Malta on its worldwide income.

A company incorporated outside Malta but effectively managed and controlled from Malta is deemed tax resident but not domiciled in Malta. In such cases, the company is liable to tax in Malta on income arising in Malta and on foreign tax remitted to Malta. Importantly, foreign capital gains are exempt from tax in Malta, even when remitted.

To confirm residence for income tax purposes, a company must demonstrate sufficient substance in Malta. This typically includes:

Maintaining a physical office in Malta
Employing local staff who work physically in Malta
Holding an active Maltese bank account
Ensuring that directors hold meetings and make key management decisions in Malta

Corporate Income Tax Rate in Malta

Corporate income tax is applied at a flat corporate tax rate of 35%. However, the full imputation system of taxation ensures that tax paid by the company is credited in full to shareholders of a Malta company when profits are distributed as dividends. This eliminates double taxation, as the maximum personal income tax rate in Malta is also 35%.

Certain types of income may be taxed at final withholding rates, such as:

Bank interest and other interest paid through an authorised financial intermediary, which may be subject to a 15% withholding tax
Rental income from immovable property situated in Malta, which may also be taxed at 15% on the gross amount
Gains from the sale of immovable property, which are subject to a final tax ranging between 5% and 10%, depending on the circumstances of the sale

In some cases, the company may choose to opt out of this final tax system.

Get Free Consultation

Tax Refund Mechanism in Malta: Dividends and Double Taxation Relief

A distinctive feature of the Malta corporate tax framework is the tax refund mechanism. When a company distributes profits as dividends, shareholders may claim a refund of part or all of the tax paid by the company, depending on the type of income being distributed.

Refunds may be claimed as follows:

Two-thirds of tax paid on income where double taxation relief has been applied.
Five-sevenths of tax paid on passive interest and royalties.
Six-sevenths of tax paid on other trading income.
A full refund of the tax on income that could have qualified for the participation exemption.

This tax refund mechanism can reduce the tax leakage in Malta to as little as an effective tax rate of 5% of taxable income. However, refunds are only available when a dividend is distributed, unless a Fiscal Unit is registered.

Group Taxation and Fiscal Unity in Malta

Malta’s Consolidated Group (Income Tax) Rules allow qualifying companies within the same group to form a fiscal unit for income tax purposes. Through fiscal unity, the group is treated as a single taxpayer, simplifying administration and improving cash flow.

Key Features

Single Tax Return: One income tax return is filed for the entire group, covering the parent and its subsidiaries.
Corporate Parent Requirement: Only corporate entities can act as the parent company; individuals cannot form part of a fiscal unit.
Direct Effective Tax Rate: Instead of paying tax at 35% and later claiming refunds, the group is taxed directly at the reduced effective rate that would otherwise apply through Malta’s refund system.
Cash Flow Efficiency: The group pays only the effective tax due, avoiding the need to wait for refunds or distribute dividends to achieve the lower rate.

Eligibility and Formation

To form a fiscal unit, the parent company must hold at least 95% of the subsidiary’s ordinary share capital, voting rights, and profit entitlement. Both parent and subsidiaries must be resident in Malta or operate here through a permanent establishment.

A fiscal unit is created through a joint election submitted by the parent and subsidiary to the Commissioner for Tax and Customs before the end of the relevant accounting period. Once approved, the parent company acts as the principal taxpayer, filing the consolidated return and paying the group’s tax liability.

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Key Features

Single Tax Return: One income tax return is filed for the entire group, covering the parent and its subsidiaries.
Corporate Parent Requirement: Only corporate entities can act as the parent company; individuals cannot form part of a fiscal unit.
Direct Effective Tax Rate: Instead of paying tax at 35% and later claiming refunds, the group is taxed directly at the reduced effective rate that would otherwise apply through Malta’s refund system.
Cash Flow Efficiency: The group pays only the effective tax due, avoiding the need to wait for refunds or distribute dividends to achieve the lower rate.

Eligibility and Formation

To form a fiscal unit, the parent company must hold at least 95% of the subsidiary’s ordinary share capital, voting rights, and profit entitlement. Both parent and subsidiaries must be resident in Malta or operate here through a permanent establishment.

A fiscal unit is created through a joint election submitted by the parent and subsidiary to the Commissioner for Tax and Customs before the end of the relevant accounting period. Once approved, the parent company acts as the principal taxpayer, filing the consolidated return and paying the group’s tax liability.

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A2CO's Tax team including Partner Antoinette Scerri, Benjamin Zammit McKeon, Stephanie Bianco and Clivert Vella posing for a during a meeting.

Benjamin Zammit McKean, Stephanie Bianco and Clivert Vella during an A2CO tax department meeting.

Relief from Double Taxation and Tax Credit in Malta

Malta provides several methods to eliminate double taxation and reduce the total tax burden:

Double taxation agreements: Where a double tax treaty network is in place, foreign tax paid may be credited against tax liability in Malta.

Unilateral double tax relief: Available when no treaty exists, provided that evidence of tax payment abroad is available.

Flat Rate Foreign Tax Credit (FRFTC): Foreign income is deemed to have been taxed abroad at 25%. The income is grossed up and taxed in Malta at a corporate tax rate of 35%, but the deemed tax is credited against the liability. This effectively reduces the rate of tax to 18.75%. The FRFTC is available only to companies authorised in their Memorandum and Articles of Association to receive such foreign income.

Double taxation agreements: Where a double tax treaty network is in place, foreign tax paid may be credited against tax liability in Malta.
Unilateral double tax relief: Available when no treaty exists, provided that evidence of tax payment abroad is available.
Flat Rate Foreign Tax Credit (FRFTC): Foreign income is deemed to have been taxed abroad at 25%. The income is grossed up and taxed in Malta at a corporate tax rate of 35%, but the deemed tax is credited against the liability. This effectively reduces the rate of tax to 18.75%. The FRFTC is available only to companies authorised in their Memorandum and Articles of Association to receive such foreign income.

Participation Exemption

The participation exemption exempts both dividend income and capital gains from income tax in Malta, provided that the income arises from a participating holding.

A participating holding generally exists when a company registered in Malta holds at least 5% of another entity and has rights to:

Vote at general meetings,
Receive dividends, or
Participate in liquidation proceeds.

Dividend income qualifies for the participation exemption if one of the following conditions applies:

The entity is incorporated in the EU.
The entity is taxed abroad at a rate of at least 15%.
No more than 50% of the entity’s income is derived from passive interest or royalties.

If these conditions are not met, the exemption may still apply if:

The holding is not considered a portfolio investment, and
The foreign entity (or its passive income) is taxed at a minimum rate of tax of 5%.

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A2CO accounting and financial documentation prepared for client review.

How A2CO Supports Your Corporate Tax Needs in Malta

Malta’s corporate tax system offers significant opportunities, but it also requires careful navigation to ensure compliance and efficiency. At A2CO, we provide clear, practical advice tailored to your business needs.

We support clients in establishing and maintaining substance in Malta, structuring corporate tax efficiently, and making full use of the tax refund mechanism and relief from double taxation methods. Our team advises on compliance with EU and OECD measures, including transfer pricing.

Whether you are establishing a new company in Malta or managing an existing structure, we help you make informed decisions with confidence.

Speak to our team to discuss how we can support your corporate tax needs in Malta.

Our Services

At A2CO, we provide tailored support for businesses navigating the corporate tax system in Malta:

Structuring corporate tax efficiently for your company in Malta

Preparing and filing your tax return in compliance with Maltese requirements

Advising on the corporate tax rate in Malta and planning to optimise your tax liability

Applying the full imputation system and assisting with tax on dividends

Guiding you through the tax refund mechanism to ensure you can claim a refund of the tax paid

Supporting you with double taxation relief and use of the flat rate foreign tax credit

Assisting Maltese companies with participation exemptions and tax exemptions on qualifying income

Advising on group taxation through Malta’s fiscal unity rules to streamline tax reporting and enhance cash flow efficiency.

Advising on international corporate taxation issues, including double tax treaties and transfer pricing rules

Structuring corporate tax efficiently for your company in Malta
Preparing and filing your tax return in compliance with Maltese requirements
Advising on the corporate tax rate in Malta and planning to optimise your tax liability
Applying the full imputation system and assisting with tax on dividends
Guiding you through the tax refund mechanism to ensure you can claim a refund of the tax paid
Supporting you with double taxation relief and use of the flat rate foreign tax credit
Assisting Maltese companies with participation exemptions and tax exemptions on qualifying income
Advising on group taxation through Malta’s fiscal unity rules to streamline tax reporting and enhance cash flow efficiency.
Advising on international corporate taxation issues, including double tax treaties and transfer pricing rules

Why Choose A2CO

We help businesses simplify corporate taxation in Malta and reduce their tax burden with confidence:

Deep expertise in Malta corporate tax and compliance for companies registered in Malta

Clear guidance on tax credit opportunities and effective use of double tax relief

Proven support in reducing the effective tax rate to as little as an effective tax rate of 5%

Experience with tax refund mechanism applications

Assistance with cross-border structures to maximise Malta’s double taxation relief methods

Practical, plain-language advice on corporate income tax planning

A trusted partner for parent companies and holding companies seeking stability in Malta’s tax framework

Tailored strategies that align with EU directives, OECD initiatives, and Malta’s evolving taxation system

Deep expertise in Malta corporate tax and compliance for companies registered in Malta
Clear guidance on tax credit opportunities and effective use of double tax relief
Proven support in reducing the effective tax rate to as little as an effective tax rate of 5%
Experience with tax refund mechanism applications
Assistance with cross-border structures to maximise Malta’s double taxation relief methods
Practical, plain-language advice on corporate income tax planning
A trusted partner for parent companies and holding companies seeking stability in Malta’s tax framework
Tailored strategies that align with EU directives, OECD initiatives, and Malta’s evolving taxation system

FAQs

Frequently Asked Questions

The standard corporate tax rate in Malta is 35%, but refunds may reduce the effective tax rate to around 5% and the participation exemption may reduce it further.

A company incorporated in Malta is subject to tax on their worldwide income, while foreign companies managed from Malta are taxed only on locally sourced income and any remitted income not being foreign capital gains.

When a company in Malta distributes profits as a dividend, shareholders can claim a refund of the tax paid by the company.

Fiscal unity allows qualifying companies within the same group to be treated as a single taxpayer for income tax purposes. This simplifies administration and improves cash flow by enabling the group to pay tax directly at its effective rate rather than at the standard 35%.

Yes, Malta offers relief from double taxation through treaties, unilateral relief, and the flat rate foreign tax credit.

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Corporate Tax in Malta: Guide to the Corporate Tax System and Taxation for Companies

Overview of the Malta Corporate Tax System

Understanding Corporate Taxation in Malta: Tax Rates, Refund System, and Double Taxation Relief

Basis of Corporate Taxation for a Company in Malta

Corporate Income Tax Rate in Malta

Tax Refund Mechanism in Malta: Dividends and Double Taxation Relief

Basis of Corporate Taxation for a Company in Malta

Corporate Income Tax Rate in Malta

Tax Refund Mechanism in Malta: Dividends and Double Taxation Relief

Group Taxation and Fiscal Unity in Malta

Key Features

Eligibility and Formation

Key Features

Eligibility and Formation

Relief from Double Taxation and Tax Credit in Malta

Participation Exemption

How A2CO Supports Your Corporate Tax Needs in Malta

Our Services

Why Choose A2CO

Frequently Asked Questions

What Is the Corporate Tax Rate in Malta?

Who Is Subject to Corporate Tax in Malta?

How Does the Tax Refund Mechanism Work for a Company in Malta?

What is fiscal unity in Malta?

Does Malta Provide Double Taxation Relief?

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