Malta’s Full Imputation Method of Taxation
Posted: Wed Feb 19, 2025 10:33 am
The unilateral relief and refund system provides a low effective Maltese tax rate of 5% for active income and 10% for passive income:
Active income – in most instances non-resident shareholders can apply for a tax refund of 6/7ths of the tax paid by the company on the active profits used to pay a dividend. This results in an effective Maltese tax rate of 5% on active income.
Passive income – in the case of passive interest and royalties, non-resident shareholders can apply for a tax refund of 5/7ths of the tax paid by the company on the passive income used to pay a dividend. This results in an effective Maltese tax rate of 10% on passive income.
What Other Tax Advantages are Available to Maltese Companies?
Other tax advantages are also available to companies established in Malta:
No withholding tax on dividends, even if they payment is made to a non-European jurisdictions.
Qualifying dividends and capital gains derived from a “participating holding” are, at malta mobile database the option of the taxpayer, exempt from Malta tax. In order for a holding to be classified as a ‘participating holding’, please see Article: Malta Holding Companies – Why Are They So Attractive. It details what single condition, from a list of six, needs to be met.
Notional Interest Deduction (NID). NID is an innovative way in which Maltese companies can, in the correct circumstances, reduce their tax liabilities. This option is of greatest interest to companies with large equity balances. NID allows companies to deduct a notional interest amount based on the ‘risk’ capital of a company. Such companies will be able to claim a deduction against chargeable income, for NID deemed to be incurred on their equity capital. Previously in Malta, debt interest had been tax deductible, whilst dividends were not. Please see the following Article for additional information: Malta’s Notional Interest Deduction Regime Which Types of Company Are Most Likely to Benefit.
Malta has approximately 70 Double Taxation Treaties in place. If there is no relevant double taxation treaty, then unilateral tax relief is available.
Active income – in most instances non-resident shareholders can apply for a tax refund of 6/7ths of the tax paid by the company on the active profits used to pay a dividend. This results in an effective Maltese tax rate of 5% on active income.
Passive income – in the case of passive interest and royalties, non-resident shareholders can apply for a tax refund of 5/7ths of the tax paid by the company on the passive income used to pay a dividend. This results in an effective Maltese tax rate of 10% on passive income.
What Other Tax Advantages are Available to Maltese Companies?
Other tax advantages are also available to companies established in Malta:
No withholding tax on dividends, even if they payment is made to a non-European jurisdictions.
Qualifying dividends and capital gains derived from a “participating holding” are, at malta mobile database the option of the taxpayer, exempt from Malta tax. In order for a holding to be classified as a ‘participating holding’, please see Article: Malta Holding Companies – Why Are They So Attractive. It details what single condition, from a list of six, needs to be met.
Notional Interest Deduction (NID). NID is an innovative way in which Maltese companies can, in the correct circumstances, reduce their tax liabilities. This option is of greatest interest to companies with large equity balances. NID allows companies to deduct a notional interest amount based on the ‘risk’ capital of a company. Such companies will be able to claim a deduction against chargeable income, for NID deemed to be incurred on their equity capital. Previously in Malta, debt interest had been tax deductible, whilst dividends were not. Please see the following Article for additional information: Malta’s Notional Interest Deduction Regime Which Types of Company Are Most Likely to Benefit.
Malta has approximately 70 Double Taxation Treaties in place. If there is no relevant double taxation treaty, then unilateral tax relief is available.