Malta’s Tax System
The Malta tax system together with numerous double tax treaties allows investors to achieve considerable fiscal efficiency. When investing in Malta investors are selecting a jurisdiction with the following characteristics:
- Only EU member state with full imputation system, this implies that profits taxed at company level will not be subject to further tax once distributed to shareholders.
- Compliant with EU non-discrimination system
- Approved by the OECD
- Over 70 double taxation treaties in force as well as different forms of unilateral relief where no bilateral treaty is in place;
- Refunds on corporation tax paid allowing for an effective tax rate as low as 5%. Income from aneligible participating holding is exempt from tax.
- Attractive tax residency schemes for individuals including the possibility to apply for Maltese citizenship through the IIP program.
Taxation of Key Vehicles in Malta
- Banks and Financial Institutions & Fund Managers/Fund Administrators: Taxed like all companies registered in Malta
- Insurance Companies: Special provisions apply to the determination of total income from the business of insurance
- Insurance Managers: Taxed like all companies registered in Malta. Each cell in a PCC or an ICC is treated as separate company for tax purposes
- Investment Funds: Malta-domiciled funds are, as a general rule, exempt from Maltese income and capital gains tax as long as they do not have over 85% of their assets situated in Malta
- Trusts: When all the beneficiaries of a trust are not domiciled/resident in Malta and where the trust assets are situated outside Malta, no Maltese income tax (or transfer duty) is payable
- Foundations: A foundation may be treated as a Maltese company and benefit from Malta’s full imputation system. Foundations may also opt to be taxed in the same manner as a trust
- Retirement Schemes: Licensed retirement schemes are exempt from tax on income and capital gains but this does not apply to immovable property situated in Malta
- Individuals: Charged on their income at progressive tax rates up to a maximum rate of 35%
Tax Incentives for ‘Qualifying’ expatriates employed in Malta with financial institutions and I gaming companies
To attract highly qualified personnel to the financial services and Gaming industry, Malta introduced an incentive scheme in 2011 targeting well-paid foreign executives. Individuals who have their domicile outside of Malta and are employed in senior positions with a financial services company licensed by the MFSA, or a gaming company licensed by the Malta Gaming Authority can benefit from a flat personal income tax rate of 15% on income up to €5 million. Any income over €5 million will be tax-free. To qualify for this tax incentive the employee must earn a minimum of €81,457 (basis year 2015) per year, amongst other criteria.
The scheme applies for 5 consecutive years in the case of EU/EEA and Swiss nationals (up to a maximum of 10 years) and for 4 consecutive years in the case of third party nationals.
No death tax or duty is payable in Malta. However, duty on documents and transfers is payable by the heirs of the deceased or the purchaser on real estate situated in Malta, and upon the purchase of shares in Malta companies. However, no such duty is payable on share transfers effected by shareholders in or by trading companies which have business interests to the extent of more than ninety per cent outside Malta. Likewise, an exemption from duty on share transfers in holding companies exists where more than half of the ordinary share capital, voting rights and rights to profits are held by persons who are not resident in Malta. Subject to certain exceptions, duty is due at the rate of 5% in the case of real estate, and 2% in the case of shares.
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