Malta stands out as a tax-friendly European country when considering the taxes and social contributions paid by businesses. Since joining the European Union, the country has become an appealing investment location for international entrepreneurs due to changes made in the Malta corporate tax rate.
In addition to its highly adaptable corporate tax rate of 5%, Malta has also established approximately 70 double tax treaties with other nations, aiming to further alleviate the tax obligations.
In this article, we will discuss the benefits of Malta’s competitive corporate tax rate, its key features, and the tax planning strategies for Startups and small businesses in Malta.
Corporate Tax Structure of Malta
Corporate tax is a form of direct tax that is been levied on the net income or revenue of various big corporations and small business entities that are doing business in a given location. This form of taxation is also mostly known as ‘Corporate Income Tax’ or Business Profits Tax.’
Maltese tax Law can be linked to the UK tax system and its foundation is on UK tax principles. The Income Tax Act levies a tax on income and not on capital.
As a member of the EU, this country maintains a very favorable tax regime that is attractive to foreign investors in spite of not being an offshore jurisdiction. Foreign-owned businesses are entitled to a tax refund that results in a 5% Corporation Tax, which is the lowest corporate tax rate among European countries.
Also, Malta has do not withhold taxes or have stamp duty, and dividend taxes are not applicable too in certain circumstances. Also, other taxes in the country include VAT, stamp duty, and customs and excise duty.
stands out as the only European Union member state with a full imputation system of taxation in place. One of the top benefits of the Maltese business’s income tax system is the full imputation system that has to do with the taxation of dividends.
What is the Rate of Corporate Tax in Malta?
The Malta corporate tax rate 2023 is set at 35% and all companies that are incorporated in Malta are by law mandated to comply with this tax rate base on their worldwide income.
This tax applies to businesses regardless of where the source of business revenue is from and where it is received. The good part is that the country’s tax law also protects businesses because the law has laid down processes that check the incidence of double taxation which is why the country is home to the best investment opportunities.
What are the Corporate Tax Benefits of Malta?
Malta offers attractive taxation benefits for both companies and individuals. Below we have discussed the key points regarding Malta’s tax benefits.
Low Corporation Tax Rate
The typical corporation tax rate in Malta is 35%. This makes Malta’s corporate tax rate the lowest in the European Union. Research and
The Maltese government provides generous tax advantages for research and development (R&D) expenses. Companies engaged in qualifying R&D activities can benefit from tax credits and deductions, further reducing their tax liabilities.
Grants and Incentives
Malta offers a broad range of grants and incentives to businesses. These incentives aim to promote investment, job creation, and economic growth in various sectors, including manufacturing, tourism, film production, and more. Eligible businesses can access financial assistance, tax credits, and other supportive measures.
0% Dividend Tax for Holding Companies
Registered holding companies in Malta can take advantage of a 0% dividend tax rate. This means that profits earned by a subsidiary of a Maltese company can be distributed to shareholders as dividends without incurring tax liability. This provision allows companies to optimize their tax strategies and maximize their taxation opportunities.
Tax Treaties and Double Taxation Relief
Malta has an extensive network of double taxation agreements (DTAs) with numerous countries worldwide. These agreements aim to prevent the double taxation of income earned by individuals and companies operating in multiple jurisdictions. Through DTAs, taxpayers can benefit from reduced or eliminated tax liabilities in specific situations.
Access to the European Union
Malta’s membership in the European Union provides businesses with access to the EU market and its advantages, including the free movement of goods, services, and capital within the EU. This can be particularly beneficial for companies looking to expand their operations in Europe.
How to Calculate Tax In Malta?
The first step for you to start calculating your tax in Malta is first calculating the corporation’s taxable income. This is generally done by subtracting allowable business expenses, deductions, and tax credits from the company’s total revenue or gross income. Knowing how to calculate the amount of tax you are to pay is one of the good ways to create effective financial planning for a business.
Malta Tax Calculator
The Malta tax calculator is an online tool created to estimate the amount of income tax you are obligated to pay in a specific financial year.
By considering factors such as your income, tax deductions, and HRA exemption, the calculator offers an approximate calculation of your income tax liability. It provides a convenient way to determine your potential tax obligations in Malta.
Who is Qualified for a Tax Refund in Malta?
The shareholders of Maltese companies have the right to request tax refunds for the taxes paid by the company on income that has been allocated to the Foreign Income Account (FIA) and Maltese Taxed Account (MTA), provided that such income is distributed as dividends.
Rate of Tax Refunds Rate in Malta
The amount of tax eligible for a refund varies based on the income generated and whether the Maltese company has applied any double taxation relief on those profits.
Below is the rate of tax refunds to which shareholders are entitled:
- 6/7ths of Malta’s tax
- 5/7ths of Malta’s tax
- 2/3rds of the tax payable in Malta
- A 100% full tax refund payable in Malta
Yes.Malta taxes companies that are domiciled in Malta on their worldwide income.
Individuals in the country are subject to tax on income arising in a calendar year.
Malta business tax rate is a flat rate of 35%. Other taxes that businesses are subject to include VAT, stamp duty, and customs and excise duty.
Malta’s corporate taxation system makes setting up a corporate entity in the country to be easy. The tax system is a kind of incentive for foreign investors, that them to maximize benefits for business advantage.