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Malta employs a full imputation system which is unique within the EU. This system coupled with our tax refund system and extensive range of double taxation treaties make Malta one of the most attractive EU countries to invest in.

The full imputation system basically means that tax suffered on income in the hands of one tax payer will be credited against tax payable in the hands of recipient of that taxed income. This system lends itself extremely well to tax planning opportunities especially when coupled with the tax refund system and the extensive network of over 50 double tax treaties currently in force.

Moreover besides treaty relief, the Maltese tax system has what is called unilateral relief and ensures that income from abroad is not subject to double taxation even if no tax treaty is in place.

There are no withholding taxes on dividends, interest or royalties paid to non residents . There is also no tax on gains made upon the transfer of securities by non residents as long as the securities do no represent fixed property, situated in Malta.

Corporate tax on companies registered in Malta is of 35% . For tax purposes there is only one corporate tax rate. Companies registered outside Malta are considered as resident in Malta, if managed and controlled from Malta. Companies that are neither managed nor controlled from Malta are taxed only on their Malta source income or capital gains.

No separate legislation for capital gains exists . Instead Section 5 of the Income tax act, regulates what income is considered to be of a capital nature for the purposes of this section. The gains falling under this section are brought to charge with the rest of the income at the corporate or personal tax rate.

In the case of immovable property there exists the option to be taxed at 12% of the transfer value of the property and such tax is a Final withholding tax.

Sources of income falling under the capital gains rules are:

• Real estate;
• Goodwill;
• Trademarks;
• Patents
• Beneficial interest in a trust

Please note that certain exceptions apply, so it is best to contact us to be properly guided according to your personal case.

Malta offers various forms of relief from double taxation, which ensures that income will not be taxed twice. The forms of relief contemplated under Maltese fiscal laws are:

• Double taxation relief
• Commonwealth income tax relief
• Unilateral relief
• Flat rate foreign tax credit

Please read more about Double Taxation Treaties here.

VAT applies to most transactions. The standard rate is 18% and a 5% rate applies to the supply of holiday accommodation, electricity, printed matter and confectionery. Zero rating applies to exports, international transport, domestic passenger transport, food, pharmaceuticals, and the supply and repair of ships and aircraft. Exemptions from VAT include the sale and leasing of immovable property, banking and insurance services, health, education and broadcasting.

Various registration thresholds apply.

With Malta’s accession to the European Union on 1st May, 2004, the Islands form part of the EU’s customs’ union. Full details of how EU regulation affects customs & excise are available from the Department of Customs.

There are no restrictions on external transactions, i.e. capital and current transactions involving operations between resident and non-resident persons or other entities, whether in or outside Malta, also including operations involving foreign exchange by a resident or between residents.

However, effecting external transaction entail certain reporting requirements. Institutions licensed to deal in foreign exchange must observe the External Transactions Circulars issued by the Central Bank of Malta. These Circulars stipulate the directions and procedures, of a general or specific nature, that must be followed by such institutions when effecting external transactions on behalf of their customers.

Any person entering or leaving Malta and carrying a sum equivalent to € 11,650 or more in cash is obliged to declare that sum to the Comptroller of Customs, who will pass this information to the Central Bank of Malta. The Central Bank of Malta maintains a database of such declarations.

Resident individuals are taxed on their worldwide income; non-residents are taxed only on Maltese-source income. There is no strict definition of residence, but residence will be based on where a person effectively lives and has a home.

Staying in Malta for six months in a year would imply residence. Tax is charged at progressive rates up to a maximum rate of 35%. There is a favourable residency scheme for those individuals seeking to move their tax residency status to Malta.

The income tax bands for individuals and married couples opting for joint income tax computation have been revised as follows in the 2007 Budget, and take effect for year 2009: 

FOR MARRIED COUPLES OPTING FOR A JOINT TAX COMPUTATION - PRE 2009

FOR MARRIED COUPLES OPTING FOR A JOINT TAX COMPUTATION - 2009 (REVISED)

FOR SINGLE PERSONS OR MARRIED PERSONS OPTING FOR A SEPARATE TAX COMPUTATION - PRE 2009

FOR SINGLE PERSONS OR MARRIED PERSONS OPTING FOR A SEPARATE TAX - 2009 (REVISED)

Investment income includes: bank interest, discounts or premiums payable by the Government of Malta interest, discounts or premiums payable by a corporation or authority established by law interest, discounts or premiums payable in respect of a public issue in Malta by a company, or other legal entity whether resident in Malta or otherwise capital gains arising on the disposal of shares or units in a collective investment scheme licensed under the Investment Services Act, where the collective investment scheme redeems, liquidates or cancels such shares or units capital gains arising on the surrender or maturity of units and such like instruments relating to linked long term business of insurance. Resident individuals may opt to pay a 15% final withholding tax on investment income.

Malta operates a full-imputation system and accordingly tax paid by a company is imputed as a credit against the tax due by the shareholders upon a dividend distribution.

Employees, pensioners and students engaged in part-time work (and the spouses if employees, pensioners and students) earning up to € 6,988 annually, may benefit from a special rate of tax. All income (up to € 6,988) derived from part time employment is taxed at a flat rate of 15% withheld at source by the employer.

Part time self employed persons may also benefit from this reduced rate of tax. Recipients need not declare such income in their personal income tax return. Any part-time income earned in excess of € 6,988 has to be declared in the income tax return and charged at the normal rates of tax.

Fees received as well as remuneration to persons sitting on boards of directors of a body corporate are also subject to tax on such income at the normal rates of tax.

Any capital gains derived by an individual are added to all other income earned during the basis year and taxed at normal rates.

There are no such taxes in Malta.

Persons who transfer immovable property situated in Malta are liable to pay income tax based upon the sales value. This tax is calculated at the rate of 12% of the market value of the immovable property (exemption from sales tax are envisaged). A Duty on Documents and Transfers tax amounting to 5% on the market value of the property is levied on the purchaser when buying real estate in Malta.

Such tax is withheld by the notary who publishes the deed of transfer and paid to the Commissioner of Inland Revenue within a stipulated time period. Residents buying real estate as their first residence will pay duty at the rate of 3.5% on the first € 69,881. Such tax is levied on the market value of the property and not on the actual transfer consideration.

Duty on Documents and Transfers tax is due by heirs upon inheritance of real estate and shares. Duty will be due at the rate of 5% in the case of real estate and 2% in the case of shares. There are no gift taxes in Malta.

| 28.06.2009 |