Malta

Flag Tax of Malta

Corporate tax

Rate

The corporate tax rate of Malta is a flat rate of 35%. Investment income of some kind can be taxed at varying rates (often between 10-15%). Double taxation may enable a relief. The “Malta Tax Payment and Refund System” offers the possibility to reduce the effective tax rate close to zero (0-10% in most instances). The method in short: A shareholder has the right to claim a refund on the Malta tax paid on qualifying profits out of which dividend was distributed.

Taxation of dividends

Dividend income is taxed but the relevant company can get relief for the underlying tax. Dividend income or capital gains coming from a participating holding are exempt from tax in Malta. Dividends coming form a participating holding aquired after 2007-01-01 can be subject to tax if some specific conditions exist (such as EU-resident entity).

Capital gains

Capital profits are treated as income. Thus, company income and capital gains are added, and the total is subject to income tax. Immovable maltese property transfers are subject to a flat rate tax of 12% (on the highest of either maket value or transfer consideration received) if the transfer of the immovable property occurred after 2005-11-22.

Losses

Trading losses are allowed to offset income from the year. Trading losses may also be carried forward indefinitely to offset the tax effect of future income. Capital losses may be carried forward indefinitely to offset capital profits. Also, depreciation losses may also be carried forward indefinitely.

No losses are allowed to be carried backwards.

Withholding tax

Interest has no withholding tax as long as the recipient is not in any way affiliated or contolled to residents or persons domiciled in Malta, and as long as there is no business going on in Malta through a permanent establishment.

There is no withholding tax on outbound dividends in Malta.

Royalties and technical service fees are not subject to withholding tax. The 0% withhholding tax rate only applies if  the recipient is not in any way affiliated or contolled to residents or persons domiciled in Malta, and as long as there is no business going on in Malta through a permanent establishment.

 

Individual  tax

General

Residents and domiciles of Malta are subject to tax on their world-wide income. Spouses are jointly responsible for filing tax returns.

The extent of tax liability will depend heavily on whether a person is 1. ordinarily resident and domiciled in Malta or 2. resident and domiciled- BUT not ordinarily resident and domiciled in Malta.

Rates

Progressive rates apply from 0% to 35%. Highly skilled individuals in highly qualifying industries, working under a qualifying contract may enjoy a 15% tax rate. A flat tax rate of 15% may also apply in some instances when foreign source income coming from high net worth EU/EEA individuals is remitted to Malta. This may also apply for other countries but is subject to different requirements.

Capital Gains

Capital profits are treated as income. Thus, individual income and individual capital gains are added, and the total is subject to income tax. Immovable maltese property transfers are subject to a flat rate tax of 12% less brokerage fees (on the highest of either maket value or transfer consideration received) if the transfer of the immovable property occurred after 2005-11-22.

Deductions

Interest on borrowed money is deductible from income coming from assets bought with the loaned funds. Individuals may deduct fees connected to schools, children related activities, child care, and homes for the elderly. Alimony payments are deductible.

Real Estate

There is a tax on gains from transfer of immovable property. This tax is not reffered to as a real property tax, since technically the gains from the transfer of property is added to a person´s income and taxed as such.  A stamp tax is levied on transfers of immovable property at 5% of the highest of the real value and consideration.

Inheritance Tax

Inheritance tax is 0%, but a stamp tax is levied on transfers of immovable property at 5% of the highest of the real value and consideration. Reduced rates apply for transfers caused by death.

Social Security

All employees contribute 10% of weekly wages. The employer also contributes 10% of all weekly wages. The numbers are subject to an annually updated minimum and maximum contribution.

VAT

VAT applies to all sales of goods, services and imports. The VAT is 18%. Specfic items have a reduced VAT, often these products and services have a VAT of 5%-7%. In some cases the VAT has been eliminated completely, e g insurance and banking services.

 

Other

Tax year. Tax year is the financial year (year of assessment. Companies can apply to have another tax accounting year than the calendar year.

Individuals are subject to tax on all income arising during the calendar year. Taxes are paid the following year.

Tax treaties. Malta currently has 57 relevant tax treaties.

Filing requirements. VAT returns are due on quarterly basis. Companies should file financial statements and tax return within 9 months from the end of the corresponding accounting period. During the accounting period companies are required to make advanced payments of tax.

Registration (for VAT purpose). All individuals who trade in goods and services in Malta are required to register for VAT purposes. Cross-border supply of goods and services require additional registration.

Individuals  make provisional tax payments on a preceding year basis. Important dates for individuals in this context is 30 APril, 31 August, 21 December and finally the balance dead line 30 June.

 

Links

Tax authorities. Inland Revenue Department

Consulate

Local Tax Resources

Chamber of commerce

(Online realtor/stock exchange)