Tax

Under Maltese law, the concept of taxation is based on one’s residence and domicile status which determines whether an individual is chargeable to income tax, and certain capital gains, in Malta on a worldwide basis or on a remittance basis. 
Malta therefore asserts jurisdiction to tax on the basis of territoriality, ordinary residence, domicile and remittance. 
The Maltese remittance basis of taxation for individuals who are resident in Malta but not domiciled, allows for flexibility on the amount of chargeable income an individual may be subject to in a given calendar year.

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The income tax rates vary depending on the tax status of the individual (single, married, single parent) and whether an individual is a resident or non-resident individual in Malta. Income tax rates are applied on progressively with a tax free bracket which ranges from EUR 9,100 to EUR 10,500 and a tax rate which varies from a minimum of 15% to a maximum of 35%.

Income tax rates applicable for corporate entities are charged at a flat rate of 35%.

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The Maltese income tax system operates on a self-assessment basis whereby every individual is responsible for declaring his income, and any capital gains in relation to the previous basis year, which runs from 1 January – 31 December. Income tax returns must be filed by not later than 30 June of the subsequent year. Any income tax which may be due must be paid by not later than the 30 June.

The deadline for submission of a corporate income tax return varies depending on the year end of the company.

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Capital gains implication may arise upon the transfer of shares in a Malta company which are payable by the individual disposing of the shares, while stamp duty implications may arise in the hands of the acquirer. Certain exemptions in respect of capital gains and stamp duty implications may arise.

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There are a number of foreign direct investments in Malta which render it attractive and flexible in many ways.

Malta’s participation holding allows for an exemption on dividends and capital gains in relation to a holding in a company, provided that the relevant compliance requirements are satisfied.

The refundable tax credit system also adds to Malta’s attractiveness, whereby a shareholder in receipt of dividend income from a Malta registered company, may be entitled to claim a tax refund on the amount of tax suffered by the Malta company, which amount of refund varies depending on the type of income generated by the Malta company. The tax refund which may be claimed is 6/7 of the Malta tax suffered by the company on profits generated, however the refund is reduced to 5/7 of such Malta tax suffered if the relevant dividend was paid out of profits consisting of passive interest or royalties.

The combined overall Malta effective tax rate which may be applicable may range from 0% - 10%.

The full imputation system also ensures that there is no system of double taxation at the level of a Malta company and dividend income declared to its shareholders, thereby eliminating any further effective tax on dividend income.

Malta also has a double taxation treaty network with over 60 countries, which ensures relief from double taxation on certain types of income.

Malta does not levy withholding taxes on outbound dividend payments, interest and royalty payment. Additionally, there are no controlled foreign company or thin capitalisation rules in Malta.

Malta does not have any wealth tax.

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The taxation in relation to shipping companies is regulated by distinct regulations which provide for various tax exemptions in respect of income and certain capital gains derived from shipping activities.

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The tax implications in respect to trusts varies depending on whether the trust is resident in Malta or not, which must be looked at hand in hand with the resident status of the trustee of the trust.

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