An outline of corporate tax in Malta

The Company Tax System in Malta

• Maltese companies are subject to tax on profits at 35%.
• Tax is ultimately borne by shareholder depending on his tax status, since Malta’s tax system adopts a full imputation system
• Effective system for relief of double taxation.
• Compliant with EU law.

Maltese corporate vehicles

• Taxed corporate vehicles:

            Limited liability companies

                      -Plc (public)
                      -Ltd (private)

              Partnership en commandite the capital of which is divided into shares.

• Foreign branches in Malta treated as local companies for tax purposes.
• Annual audit/accounts to be IFRS compliant.
• Share capital may be effected in any foreign convertible currency (company’s reporting currency).
• Tax is payable in the company’s reporting currency.
• Any applicable refund of tax is made in the company’s reporting currency.

Malta Tax Accounting

Profits are allocated to one of the following tax accounts depending on their source and nature:

• Foreign Income Account (FIA)
• Maltese Taxed Account (MTA)
• Final Tax Account (FTA)
• Immovable Property Account (IPA)
• Untaxed Account (UA)

Effective System for Relief of Double Taxation

• Unilateral relief, including credit system for relief of underlying tax.
• OECD - based Double Tax Treaty Network.
• EU Parent-Subsidiary Directive.
• EU Interest & Royalties Directive.
• Participation Exemption.

Compliant with EU law- Outline of 2007 Reform

• Extension of Malta tax refund system to dividends derived by all persons from all sources with the exception of profits derived from immovable property situated in Malta.
• Phasing out of the International Trading Company regime.
• Extension of Malta tax refund system to the shareholders of companies having a Malta branch.
• Introduction of Participation Exemption.

Tax Rulings

• Procedure for formal tax rulings exists

                Provide certainty on the legal application to a specific transaction;
                Binding on Inland Revenue for 5 years;
                Survives a change in law for 2 years;
                Issued within 30 days of application.

• Informal system of Revenue guidance is also possible

               In the form of a letter of guidance from Revenue;
               Not expressly regulated in terms of law;
               Creates a legitimate expectation on which the taxpayer may rely;
               Considered by the Inland Revenue Department as binding.

For further information about how Zammit & Associates – Advocates can help you with your requirements for corporate tax in Malta kindly contact us on tax [at] zammit-law [dot] com