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Tax Guide

Financial Year – 1 January to 31 December
Currency – Euro

Corporate Tax Summary

Residence – Companies that are incorporated in Malta are considered to be both domiciled and resident in Malta.

Overseas companies that are not incorporate in Malta shall be considered to be resident in Malta when the control and management of their activities are exercised in Malta. The creation of a permanent establishment in Malta by an overseas company must be registered as a branch with the Malta Business Registry and taxed on any income generated in Malta.

Basis of Taxation – Worldwide for companies that are resident and domiciled in Malta. Companies not domiciled (incorporated and registered) in Malta shall be taxed on income generated by its operations in Malta.

Malta operates the full-imputation system of dividends, that is, no further tax is imposed upon distribution by a Malta registered company to its shareholder. A refund of Maltese tax may result if the tax rate of a shareholder is lower than that incurred at company level. This does not apply for certain income thresholds.

Reference
Corporate Income Tax Rate (%) 35% Under certain conditions, exemptions apply on transfer of shares in companies whose assets do not consists property situated in Malta.
Branch Tax Rate (%) 35%
Withholding Tax Rate:
Dividends – Franked 0% 15% WHT applies on distribution of dividends out of untaxed income where the shareholder is a person directly or indirectly acting on behalf of a Maltese domiciled and ordinarily-resident individual, or an EU/ EEA individual who has declared that at least 90% of worldwide income is derived from Malta.
Dividends – Unfranked 0%
Dividends – Conduit Foreign Income 0%
Interest 15% May elect to be charged at the corporate rate of 35% after allowable deductions.
Royalties from Intellectual Property 0%
Fund Payments from Managed Investment Trusts 0% Trusts may also opt to be treated as companies in which case 35% corporate rate shall apply.
Branch Remittance Tax 0%
Net Operating Losses (Years)
Carry back 0
Carry forward Indefinite against income from same activities

Individual Tax Summary

Residence – In general individuals are considered to be Maltese residents for tax purposes, if they spend more than six months in Malta in one calendar year.

In determining the tax residency in Malta one may apply the facts-based test and these include:

  • Place of abode
  • Physical presence, i.e. > 183 days rule
  • Regularity and Frequency of visits
  • Intention to reside in Malta
  • Ties of birth
  • Ties of family
  • Business ties

Basis of Taxation – Malta taxes individuals who are both domiciled and ordinarily resident in Malta on their worldwide income.

Individuals who are ordinary resident in Malta but not domiciled are taxable only on income arising in Malta and worldwide income that is remitted to Malta. No tax is charged on capital gains arising outside Malta even if this gain is received in Malta.

Individuals who are married to an individual domiciled and ordinarily resident in Malta such individual shall be taxable on a worldwide basis.

Other individuals not resident in Malta are taxed only income and capital gains arising in Malta.

Filing Status – Tax assessments are done each year based on income arising in the previous calendar year.

Two partners who are living together under a civil union are jointly responsible for the filing to tax returns with one spouse electing to be the responsible spouse for the filing of the tax return. Tax computation may be based either on a joint basis or on separate computation. In case of separate computation passive income is chargeable under the spouse earning the highest income. Nonetheless spouses may opt to file separate tax returns and be taxed accordingly.

Tax returns together with a self-assessment are to be filed by the end of June of the following year on the basis of income earned in the previous year. No filing is required if the income of an individual is derived only from employment income or income which has already been taxed at source.

A self-assessment is deemed to represent the correct tax liability of the individual unless the Commissioner of revenue has basis to disagree with such self-assessment.

Personal Income Tax Rates

Taxable Income Tax Payable – Residents Tax Payable – Non Residents
up to 700 0% 0%
700 to 3,100 0% 20%
3,101 to 7,800 0% 30%
7,801 to 9,100 0% 35%
9,101 to 14,500 15% 35%
14,501 to 60,000 25% 35%
60,001 and over 35% 35%

The apply to persons who are not married or where spouses opt to file separate tax computation. Other rates apply to married persons who file joint declarations and joint tax computation, with another group of tax rates applicable to individuals that qualify for Parents status.

Goods and Services Tax (GST)

Rate 18% – 7% – 5% – 0%
Taxable Transactions 18% [Standard Rate of VAT] Applicable on the taxable value of every supply of goods, services or importation, unless exempt or falls within the reduced rates categories
7% [Reduced Rate of VAT] on accommodation supplies of licensed premises.
5% [Reduced Rate of VAT] on various printed matter / supply of electricity / confectionery items / medical accessories / works of arts / etc.
0% [Zero Rate of VAT] on specified goods and services, such as Food [except for Catering], Pharmaceuticals, Transport, Gold etc. Various exceptions apply.
Registration Taxable persons whose economic activity consists principally in supplies of services and whose annual turnover is not higher than €20,000 are not required to charge VAT on their supplies, but they would still have a registration requirement.
Registration can be done either under Article 10 or Article 11 of the VAT Act depending on the annual turnover and transaction. Persons not falling under the above but carry out intra-community transactions exceed €10,000 in one calendar year then they must register for VAT and pay tax in Malta on each time intra-community transaction as prescribed under Article 12 of the VAT Act.
In Malta there is no exemption from registration. A taxable person established in Malta shall apply to be registered for VAT purposes not later than thirty days from the date on which he makes a supply for consideration in Malta other than an exempt supply [without credit].
Filing and Payment Upon registration for VAT purposes, the VAT department shall assign VAT periods to the taxpayer, usually on a three-month basis, with the exception of article 11 (small business) registrations, whereby tax period shall be for a calendar year. VAT Returns must be submitted together with payment, if applicable, not later than 6 weeks after the end of the tax period.
In the case of Article 12 registrations, monthly VAT returns would apply and must be submitted within 2 weeks or 6 weeks from end of period, depending if it is a declaration of goods received in Malta, or services which place of supply is deemed to be Malta.

Other Taxes Payable

Tax Reference
Payroll Tax In terms of the Final Settlement System (FSS) Rules, an employer is required to withhold income tax and social security contributions at source from the employees’ salaries (including taxable fringe benefits), which, in most cases, equals the individual’s total tax liability. An FS5 is compiled listing the deduction of tax/social security for each month forwarded and dues settled to Commissioner for Revenue within the following month.
Part-time workers can be taxed on a FWT basis of 15%.
Social security contributions is shared between the employer and the employee based on 20% of the weekly basic wage and capped at €96.10 weekly.
A contribution to the Maternity is also to be included in the FS5 and paid monthly.
Duty Transfer of immovable property on the island of Malta 5%
Transfer of immovable property on the island of Gozo 2%
Transfer of marketable securities (shares) 2%
Transfer of marketable securities (shares) in property companies 5%
Currently a reduced rate of 1.5% applies to transfers of property made within family members
Transfers within related of group companies are exempt
Land Tax There is no Land Tax in Malta

Property Tax

Transfers of immovable property situated in Malta are generally subject to a final withholding tax (WHT) based on the transfer value of the property less certain deductible expenses. WHT on such transfer should be 8% or 10% if the property was acquired before 1 January 2004. Certain other rates of WHT may apply in specific circumstances.
Under specific conditions the property tax on immovable property situated in urban conservation areas is set at 5% of the transfer value.
These rate may also apply to transfers ‚causa mortis‘ or donation.

Last updated: 2 April 2020

Contact us:

Senior Partner And Director Malta
Anthony Vella
Senior Partner and Director
+35 6 21-341-680