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Taxation in Malta

Companies resident in Malta are subject to income tax on their worldwide income. The company rate of tax is 35 per cent on chargeable income, but shareholders are entitled to a refund. A branch of a non-resident company carrying on any activity in Malta will be treated in the same way as a resident company with resulting tax planning opportunities. As a consequence, Malta Branches will have full access to Malta tax accounting and tax refund system. Branches will be required to prepare branch accounts (IFRS Audit). When a foreign company distributes a dividend which is declared to be a dividend distributed out of the Malta branch profits, then the shareholder of the foreign company will be entitled to claim the refund. To claim a refund, foreign shareholders must be registered for refunds, and a foreign company must be registered in Malta. By ‘company registered in Malta’ is meant either a resident company (incorporated in Malta or overseas) or a non-resident company which carries out activities in Malta (branch of a foreign incorporated and non-Malta resident company).

All companies registered in Malta on or after 1st of January 2007 may carry out international activities whether “trading” or “holding” in nature. Any distinction that existed before between trading and holding companies were eliminated from 2007. The tax treatment applicable would depend on the allocation of income to the different taxed accounts depending on its nature and source.
ITCs and IHCs registered prior to the 1st of January 2007 also have the option to shift to the new tax refund regime. When an ITC has been successfully converted to the new regime, the shareholder/s of the company are entitled claim a 6/7ths refund of corporate tax. In general, an ITC may convert to the new regime by passing an extraordinary resolution and by informing the Commissioner of Inland Revenue that it has opted to cease to be an International Trading Company.

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