Malta: Tax Benefits in Malta or use Malta to gain tax benefits in the International Corporate Structure

Malta, leveraging its robust full imputation tax system, exemplifies an advantageous fiscal environment for corporations. Within this system, any income tax paid by a company becomes a credit fully accessible to the shareholder upon profit distribution. This strategic approach effectively mitigates the risk of double taxation on corporate profits, ensuring that income is taxed only once.

At the heart of Malta's tax regime lies the domiciliation and residency concept. The pivotal criterion for a company to be deemed resident in Malta hinges on the exercise of management and control within the Maltese jurisdiction. This residence-based model aligns with international standards and fosters a transparent and predictable tax framework.

In terms of the effective tax rate, Malta boasts a remarkably low rate of 5%, standing as the most favorable effective corporate tax rate not only in the European Union but also on a global scale. Despite a headline corporate tax rate of 35%, Malta distinguishes itself through a highly appealing tax refund system. This system substantially lowers the effective tax burden, rendering Malta an attractive destination for businesses seeking a competitive fiscal landscape.

The strategic appeal of Malta extends beyond tax considerations, encompassing a spectrum of non-tax benefits. The nation's well-developed infrastructure, favorable business climate, adherence to the rule of law, stable political environment, and connectivity to both the European Union and neighboring regional economies emerge as pivotal intangible assets. These factors collectively position Malta as a regional business hub and a gateway to the broader European market.

In the realm of practical tax planning, foreign investors are advised to adopt a double-tier structure for their business operations in Malta. This structure typically involves the establishment of a holding company and a trading company. Notably, this configuration allows tax refunds to be retained within the holding company, strategically avoiding additional taxation in the home country of the ultimate beneficiary owner.

For multinational corporations eyeing the European market, Malta emerges as a premier choice for establishing a corporate structure. Beyond its strategic geographical location, Malta stands as a European country within the Eurozone and Schengen Area, further enhancing its appeal. Notably, prominent multinational entities such as BMW and Microsoft have recognized the advantages of Malta, having strategically chosen to establish their corporate presence within this dynamic and tax-efficient jurisdiction.

In summary, Malta's tax framework, grounded in the principles of full imputation, residency, and strategic tax planning, positions the nation as a beacon for businesses seeking an optimal balance between fiscal advantages and operational efficiency. The confluence of a low effective tax rate, a sophisticated tax refund system, and a suite of non-tax benefits underscores Malta's status as an exemplary destination for corporations aiming to navigate the complexities of the European market and beyond.

Reference/ Citation

CHAPTER 123 Income tax Act 

CHAPTER 372  Income Tax Management Act article 48