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Malta - Corporate Taxation

Malta is a member of the European Union and, for non-resident taxpayers, has a low taxation.

The Maltese tax system was designed to:

1. Promote international investment in Malta

2. Support development of financial services in Malta

3. Ensure that corporate profits are not taxed twice - for example, at company level and again at shareholder level

 

For the fiscal system in Malta, a company is considered resident if:

is incorporated in Malta or

in the case of a foreign company, if the control and management are exercised in Malta.

All companies pay 35% income tax, but the tax paid by the company is imputed to the shareholder in case of a dividend. As Malta operates an imputation system, there is no withholding tax on dividends.

The reimbursement system

The distribution of dividends, the shareholders will be entitled to a refund of part or all of the tax paid by the company on the profits of which were paid dividends.

The amount of the tax refund is set at 6/7 of the tax paid by the company (5/7 in case of royalties and interest expense). The refund will be reduced if the distributing company has obtained the 'double taxation relief.

The resident shareholder will be taxed to the total amount of the net dividend and refund received. The non-resident shareholder is not taxed in Malta.

When dividends received by a holding company are distributed by a Maltese company to its shareholders, they are entitled to request a refund of 100% of tax paid on distributed profits.

Regarding the acquisition of participating companies made after January 2007, where the non-resident company, having mainly passive income, is not resident or incorporated in an EU Member State or are subject to tax at a rate that is lower to 15%, the following additional conditions must be met:

The shares of non-resident company should not be considered as a portfolio investment, and the non-resident company or its passive income must have been subject to tax at a rate not less than 5%.

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