About Malta

The Islandmalta-map-europe

Malta is situated in the centre of the Mediterranean Sea about 60 miles south of Italy and 180 miles north of North Africa. Its strategic position between Southern Europe and North Africa provides companies located in Malta with an opportunity for penetrating both markets with ease through the promotion or exportation of medicines developed and produced in Malta.

The island is an independent republic, having gained independence from the United Kingdom in 1964 and has been a member of the EU since 2004.

Government is exercised by a democratically elected parliament with elections being held every five years.

MaltaThe local population currently accounts for approximately 400,000 people.

Whereas Maltese is the national language of the country, English is also an official language and is the language of business. Italian is also widely spoken. The official currency is the Euro.

Malta as an EU Member State

Since its accession into the EU in 2004, Malta’s responsibilities as a member state include conformity assessments (Mutual Recognition) with other member states and non EU countries (3rd Country). This is ideal for companies who set up in Malta and require recognition inside and out of the EU.

Maltese Tax systemYacht

Malta operates a full imputation system of taxation whereby shareholders in receipt of dividends from a Maltese company may credit the 35% tax paid by the company against their own Maltese income tax liability or obtain a refund of tax where shareholder tax is less than the 35% tax paid by the company.

Persons who are resident and domiciled in Malta are subject to tax on their world-wide income at the transfers of shares are mainly exempt from transfer duties for international business. 

There are no thin capitalization rules, controlled foreign corporation legislation, transfer pricing or capital or wealth taxes.rate of 35% (progressive rates apply to individuals).Air Malta

Persons who are resident but not domiciled in Malta are only taxed on income arising in Malta or on income (not including capital gains) which although arising outside Malta is remitted to Malta.This may give rise to very attractive tax planning opportunities for expatriates and resident non-domiciled companies

.Double Taxation Relief

Double taxation relief (DTR) is provided, under an applicable treaty or unilaterally, in the form of an ordinary credit for foreign taxes suffered on foreign income. This applies both for resident companies and registered branches of foreign resident companies.

Free Port

The ordinary credit applies to both withholding and underlying tax (for dividends) of direct subsidiaries and 10% (participation in) sub-subsidiaries to all tiers. Thus if foreign taxes exceed the Malta tax charge (35%), no further Malta tax is payable. An alternative form of DTR, the Flat Rate Foreign Tax Credit (FRFTC) is also available whereby foreign income is deemed to have suffered foreign tax of 25% of foreign income received. The application of this DTR method can reduce tax suffered to between 7.47% and 18.75%

The FRFTC may be claimed on income allocable to the foreign income account (FIA income) if company empowered to receive FIA income.1

Tax Refunds

Perhaps the characteristic that sets apart the Maltese tax system from other tax systems is the possibility given to shareholders to claim a cash refund of the tax paid by a Maltese company following a distribution of profits. Duly registered shareholders of Maltese companies in receipt of a dividend may typically claim, from the Commissioner of Inland Revenue, a partial refund of 6/7ths of the tax paid by the company. After the refund is received, the effective tax suffered in Malta is 5%. If a credit for foreign tax of 5% or more is claimed, the incidence of Maltese tax is eliminated.

 A 5/7ths and a 2/3rds refund may also apply in specific circumstances depending on the nature of the income of the distributing company and whether double taxation relief is claimed on that income. A 100% refund may also be claimable in determinate circumstances (see section on participation exemption below).

Refunds of tax may be claimed irrespective of the activity exercised and whether the source of the income derived by the distributing company is in Malta or outside Malta, with the exception of profits derived from immovable property.

 

6/7ths Refund Practical example:
Profit of the company

 1000

Tax

                               350

Dividend distribution to shareholder

                               650

Refund (6/7ths of 350)

                                         300

Total funds received by shareholder:
Net Dividend

650

Tax refund

300

Total

950

Effective tax

50

1 FIA income consists of royalties and similar income arsing outside Malta; income/gains derived from a participating holding, dividends, interest, rents, capital gains and other income derived from investments situated outside Malta; profits of permanent establishments; profits from foreign assets/liabilities of Malta licensed banks and financial institutions and profits of Malta licensed insurance companies related to risks situated outside Malta.