Malta is considered worldwide as a “low tax jurisdiction” where the rate of taxation can vary between zero and 10%. This is being illustrated in the examples below.

 

FULL IMPUTATION SYSTEM

 

Shareholders receive full credit for any tax paid by the company on profits distributed as dividends, resulting in the elimination of any economic double taxation.

 

A dividend is declared gross of the tax paid by the distributing company but a full imputation credit is allowed. A credit equivalent to the tax paid by the company on the tax paid on the taxed profits distributed by way of dividend which is to be allowed against the shareholder’s tax liability on the dividend.

 

Example:

 

Taxation at corporate level:

 

 

 

Profits before tax

1,000

 

Standard corporation tax @ 35%

(350)

 

Net profit after tax

650

 

 

 

Taxation at shareholder level:

 

 

 

Gross dividend

1,000

 

Tax @ 35%

350

 

Credit under Full Imputation Refund

(350)

 

Tax due

0

 

Shareholder receives net dividend of

650

 

FULL REFUND

 

When profits distributed of a company are derived from a participating holding or from the disposal of such holding, a claim may be made for a full refund of all the Malta tax paid in respect of these profits. Under Maltese law, a participating holding arises where,

 

·         Company holds directly at least 10% of the equity shares of a company whose capital is divided into shares; or

·         Company is an equity shareholder in a company not resident in Malta and is entitled at its option to call for and acquire the entire balance of the equity shares; or

·         Company is an equity shareholder in a company not resident in Malta and is entitled to first refusal in the event of the proposed disposal, redemption or cancellation of all of the equity shares of that company; or

·         Company is an equity shareholder in a company and is entitled to either sit on the Board or appoint a person to sit on the Board of that company as a director; or

·         Company is an equity shareholder which invests €1,164,000 in a company not resident in Malta and that investment in the company not resident in Malta is held for an uninterrupted period of not less than 183 days; or

·         Company is an equity shareholder in a company not resident in Malta and where the holding of such shares is for the furtherance of its own business and the holding is not held as trading stock for the purpose of a trade.

 

The application of the full-refund system is restricted by some anti-abuse provisions.

 

 

 

6/7ths REFUND

 

A person in receipt of a dividend paid to him by a company registered in Malta from its profits which do not consist of passive interest or royalties may claim a refund of 6/7 of the Advance Company Income Tax (ADIT) paid by the distributing company pertaining to those profits distributed to him by way of dividend.

 

Example:

 

Taxation at corporate level:

 

 

 

Profits before tax

1,000

 

Standard corporation tax @ 35%

(350)

 

Net profit after tax

650

 

 

 

Taxation at shareholder level:

 

 

 

Gross dividend

1,000

 

Tax @ 35%

350

 

Credit under Full Imputation Refund

(350)

 

Tax due

0

 

Shareholder receives net dividend of

650

 

Shareholder receives:

 

Net Dividend

€650

Claims 6/7 refund on ADIT (€350)

€300

 

Shareholder ends up paying only €50 in tax or just at the rate of 5%.

 

5/7ths REFUND

 

A person in receipt of a dividend paid to him by a company registered in Malta from its profits which consist of passive interest or royalties may claim a refund of 5/7 of the Advance Company Income Tax (ADIT) paid by the distributing company pertaining to those profits distributed to him by way of dividend.

 

Example:

 

Taxation at corporate level:

 

 

 

Profits before tax

1,000

 

Standard corporation tax @ 35%

(350)

 

Net profit after tax

650

 

 

 

Taxation at shareholder level:

 

 

 

Gross dividend

1,000

 

Tax @ 35%

350

 

Credit under Full Imputation Refund

(350)

 

Tax due

0

 

Shareholder receives net dividend of

650

 

 

 

Shareholder receives:

 

Net Dividend

€650

Claims 5/7 refund on ADIT (€350)

€250

 

Shareholder ends up paying only €100 in tax or just at the rate of 10%.

 

 

Disclaimer

The information contained in this website is for general information purposes only. The information is provided by Trek Malta and while we endeavour to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose.

Any reliance you place on such information is therefore strictly at your own risk.

Contact Details

Email: info@trekmalta.com

Website: www.trekmalta.com

Address: A3 Towers,
Block A3, Level 12,
Triq l- Arkata, Paola,
PLA 1211, Malta