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Andrew Henderson

Founder of Nomad Capitalist and the world’s most sought-after expert on global citizenship.

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Legal Tax Reduction

Tax Benefits of Setting Up a Company in Malta

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Setting up a company in Malta can result in numerous tax benefits. This article will explain all you need to know about Malta and its attractive corporate tax rates.

Malta offers significant tax benefits to investors, business owners, and other foreigners seeking to grow their wealth. This is a low-taxation jurisdiction that doesn’t hinder or interfere with your business or other ventures.

At Nomad Capitalist we advocate for moving your wealth or business to a country that values your money. We’ve helped thousands of clients find a place where they’re treated best and save more of their profits for themselves and their business. Become a client and let us help you navigate the complexities of moving your business overseas.

Setting Up a Company in Malta

Malta Country Overview

Malta is an island group in the central Mediterranean Sea. The government is a unitary multiparty republic with a judicial, legislative and executive branch. The legislative branch consists of an elected parliament, Cabinet of Ministers make up the judicial branch, and the Prime Minister is the executive branch.

Malta – Climate

Malta’s climate is dominated by Mediterranean-type weather, meaning they have mild, warm weather patterns. Brief, mild winters are followed by long, hot summers leading to warm but wet falls. There’s an annual average temperature of the mid-60s F (around 19 °C).

Malta – Culture

Maltese, a hybrid of North African Arabic and Sicilian Italian cultures and people. English and Maltese are the official languages. The people are known for their warm and welcoming nature, prioritizing hospitality.

Malta – Economy

The Maltese economy has developed and diversified since reliance on the British empire in the 1950s. Capital controls were fully lifted when Malta joined the European Union in 2004. The movie industry contributed €85 million to the economy in Malta in 2022 as the island has become a popular filming location, and the Central Bank of Malta forecasts 3.6%, which is much more than the rest of the Eurozone.

Malta - Economy
Malta’s full imputation system is unique in Europe.

Malta Corporate Tax Benefits

The corporate tax rate is 35% and is charged on capital gains and worldwide income. However, in the future distribution of dividends, Maltese shareholders can set off this taxation against income tax. This means that non-resident shareholders are entitled to a refund of most of this tax, which allows a significant reduction in the effective tax rate. The tax paid can be reduced, so you end up paying between 0 and 10%.

To look at it in another way, Malta operates a full imputation system, meaning that dividends paid by a Maltese company do not trigger any further tax since they include a tax credit identical to the tax paid by the company upon the distribution of profits.

So shareholders are eligible for a refund equivalent to two-thirds, five sevenths, six-sevenths, or a 100% refund of the income tax paid by the Maltese company when dividends are distributed. As you can see, this participation exemption can be substantial. But this potential full refund of the taxation paid on the dividends and gains received from participating holding as long as it does not derive more than 50% of its income from passive interest or royalties.

Malta has agreed to 76 Double Tax Treaties and signed five Tax Information Exchange Agreements with different countries worldwide. This prevents double taxation. A double tax treaty protects you from getting taxed more than once on the same income.

Become a Nomad Capitalist client, and we will show you how to win the corporate tax system. A tax refund could be yours, meaning less tax paid overall.

Malta Corporate Tax Requirements

To be taxed on chargeable income, companies must be registered or resident in Malta. The tax base on which corporate taxation is levied on Maltese companies comprises the profit and losses made by a company in a fiscal year with expenditure and income adjustments. Double tax agreements shelter foreign income.

Foreign companies incorporated outside Malta can be subject to Maltese taxes if carrying out business activities in Malta and pay tax on income derived from Malta. This is a universal rule applicable in all jurisdictions. Foreign companies that are managed and controlled from Malta are considered non-domiciled tax residents.

Malta Corporate Tax Requirements
Would you like to take advantage of Malta’s unilateral relief?

Malta Corporate Tax Conclusion

To create taxable income, companies must be registered in Malta or be residents there. Companies pay a 35% corporate income tax on capital gains and income generated overseas. Yet, in the future distribution of dividends, shareholders are permitted to set off this taxation against income tax. This results in non-resident shareholders benefiting from a total tax refund system. This can reduce the taxation rate to between 0 and 10%. But the dividend income must satisfy the participating holding regime.

Double tax relief is available thanks to a wide-ranging double tax treaty network between Malta and different countries. This ensures Maltese companies are free of double taxation on the same income.

Keep in mind, however, that there are additional nuances as well as cases whereby a company is considered a non-domiciled tax resident and pays a flat 15% tax on remitted income.

This is something that needs to be explored on a case by case basis, so if you’re unsure, get in touch. As a Nomad Capitalist client we can advise you on all things Malta-related from taxation to residency and citizenship by investment.

Conclusion

For income tax purposes opting to become a tax resident or taxable business in Malta can save you a lot of money every year. It’s just one of the reasons why the country has become such a popular jurisdiction for company formation, particularly with financial services and fintech companies.

Nomad Capitalist specializes in helping people go where they’re treated best. We pride ourselves in helping our clients save more money in taxes while going to a country that encourages growth. Become a client and let us help you achieve these goals.

Tax Benefits of Setting Up a Company in Malta,Conclusion
Companies paying the lowest tax on profits in the EU make Malta an appealing option for HNWIs.

Malta Corporate Tax FAQ

What Is the Corporation Tax Rate in Malta?

By Maltese income taxation legislation, companies resident in Malta are taxed at the standard rate of 35% on their worldwide income and capital gains. A refund is available to nonresident shareholders, which can reduce this taxation liability to between 0 and 10%.

Why Do Companies Incorporate in Malta?

Foreign investors set up a Maltese company to benefit from the effective corporate taxation on foreign income. The foreign tax rate in Malta is 35%, which you can drastically reduce by distributing all the profits to Maltese holding companies.
We can assist you with much more than Malta’s tax rates. Our holistic plans cover everything, from foreign source income to withholding taxes. Let us lend you a helping hand with the likes of allowable expenses, passive income, and tax exemption.

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