| Malta Income Tax Malta Personal Income Tax rates for singles, 2009:
Taxable Income (EUR) Rate (%)
up to EUR 8,500: 0%
EUR 8,501 - 14,500: 15%
EUR 14,501 - 19,500: 25%
over EUR 19,501: 35%
Malta Personal Income Tax Rates for Married Couples opting for a joint declaration, 2009:
Taxable Income (EUR) Rate (%)
up to EUR 11,900: 0%
EUR 11,901 - 21,200: 15%
EUR 21,201 - 28,700: 25%
over EUR 28,701: 35%
Malta Corporate Tax RateThe corporate tax rate in Malta for 2009 is 35%. For resident companies listed on Malta Stock Exchange, reduced tax rates are available, see below.
Company tax is payable by all companies registered or resident in Malta at 35% with no threshold for reduced rates of taxation (subject to the reduced rates depending on shareholder residency and company operations specified below).
The rate of tax on resident companies listed on Malta Stock Exchange is reduced as follows:
20% to 30% of shares offered to public: 33% instead of 35%
35% 31.5% 31% to 40% of shares offered to public: 31.5% instead of 35%
41% or more % of shares offered to public: 30% instead of 35%
The reduction in the tax is also passed to shareholders when dividends are paid out.
Collective investment schemes: Withholding tax on such funds varies between 10% and 15% depending on the type of income. Tax at 15% will be withheld on the capital gains realized by resident investors on disposal of non-prescribed funds (i.e. funds whose assets are non-Maltese). Dividends paid by a non-resident non-prescribed fund to a resident investor carry a final 15% withholding tax. Dividends paid to nonresident investors are exempt from withholding tax.
Companies: Malta allows the incorporation of Malta Companies which can have multiple or mixed sources of income (holding, trading or passive investment income) and has implemented an extension of the refundable tax system for all companies distributing dividends to shareholders. The new refundable tax system (commencing 1 January 2007) applies both to profits allocated to a company's Maltese taxed account and to profits allocated to a company's foreign income account and is available both to residents and non-residents.
A new refund system replaces the International Trading Company (ITC) and International Holding Company (IHC) regimes. All international companies registered before 1 January 2007 will retain their ITC or IHC status and tax regime until 31 December 2010.
These companies could be set up in Malta by non-Maltese residents to engage in trading with persons outside Malta. They were given refunds which reduced the effective tax rate on them to 4.17%.
An IHC was usually involved in the management of shares and other investments held outside Malta. Although profits were taxed at the full rate of 35%, the IHC enjoyed a refund of full tax suffered when it distributed dividends to non-resident shareholders on profits derived from participating holdings.
Refunds of tax due to an IHC / ITC must be effected by the tax authorities within 14 days of the end of the month during which the dividend is paid.
Malta's corporate tax refunds: Following amendments implemented to the Maltese Income Tax Acts in 2007 in line with an agreement reached with the EU, a revamped system of corporate tax refunds is now available. The agreement that Malta has reached with the EU includes the retention of the full imputation tax. In this system, dividends paid by a company resident in Malta carry a tax credit equivalent to the tax paid by the company on the distributed profits. This system has been extended to cover all income derived from Malta and to all shareholders irrespective of their residence. A company that is registered and taxable in Malta allocates its income to one of the five tax accounts depending on the nature of the income concerned.
A shareholder who receives a dividend from a company that is registered in Malta from profits allocated to the company's Maltese profits or its foreign income account and which does not consist of passive interest or royalties, may claim back a refund of six-sevenths of the tax paid by the company on that income - the effective rate of Malta tax being 5%.
A shareholder who receives a dividend from a company that is registered in Malta with only passive interest or royalty income may claim back a refund of five-sevenths of the tax paid by the company on that income - the effective rate of Maltese tax thereon being 10%.
Such refunds are only available where the Maltese company does not claim double taxation relief, either through unilateral relief or under a double taxation treaty. Where double taxation relief has been obtained, the individual shareholder will be entitled to a two thirds refund of Maltese tax paid, resulting in an effective rate of tax of 6.25%.
Branch profits tax: Branches that have been registered with the Commissioner of Inland Revenue are taxed in Malta on profits attributable to the activities performed in Malta. Such branches are entitled to the same refunds etc. as resident companies.
Capital gains tax: Companies and individuals are taxed on the transfer of securities, business goodwill, copyrights, patents, trademarks and trade names and on the assignment of ownership rights over such properties. Property inherited after 22 November 1992 (when the law on succession was amended) is subject to tax when it is subsequently sold, like all other properties. Capital gains by companies are computed separately and added to trading income in the same way as income from investments and non-trading income.
The tax is charged on gains from the sale of all assets situated in Malta and on gains from the sale of assets situated abroad by persons domiciled and ordinarily resident in Malta. A provisional payment of 7% must be immediately paid to the CIR on signing of the deed of transfer. Capital losses may be carried forward and set off against future gains made from capital transfers.
Malta Sales tax / Value added tax (VAT)The standard VAT rate in Malta is 18%.
When Malta joined the European Union, various changes to the VAT Act became necessary. The changes relate mostly to intra-Community and international operations as well as changes to the reporting system. A 5% VAT rate continues to apply to accommodation in hotel and other licensed premises. It will, additionally, apply to the supply of confectionery and similar items, medical accessories and printed matter.
Every taxable person who makes intra-Community supplies of goods to businesses registered in other EU Member States is required to make a quarterly VAT statement. The information on this statement will be shared with the authorities of other Member States and is designed as a means of controlling supplies that are exempt in one Member State and are reported and taxed as acquisitions in another Member State.
Entities established in the European Union but not established in Malta may qualify under the Special Refund Scheme. Maltese VAT incurred on services received by persons established in the EU but not in Malta, or goods supplied to persons established in the EU but not in Malta, or charged on the importation of goods into Malta may be refunded to such persons under the same conditions as those that govern the right of a taxable person registered for VAT in Malta to deduct Input VAT.
Schemes apply for reduced VAT rates on leasing of yachts. For sailing boats or motor boats over 24 metres in length there is a 30% reduction in the effective VAT rate subject to certain terms and conditions.
Eco contribution: The provisions of the Eco-Contribution Act (Act XII of 2004), came into force in September 2004. Producers charge the eco-contribution when items are first sold, transferred, otherwise disposed of, destroyed or when they are no longer in the manufacturer's possession.
The VAT department is the competent authority administering the Eco-Contribution Act. The liability for payment lies with the producers who are also required to submit an eco-contribution return.
Fringe benefits tax: Certain benefits such as use of cars for private purposes, rent, school fees, free meals etc. are added to the salaries of employees and taxed accordingly. All cash allowances paid to employees, with the exception of cash allowances paid in respect of the use of employee-owned cars for business purposes, are fully taxable. Employees are responsible for the disclosure of fringe benefits provided by third parties over which the employer has no control.
Employers are responsible for reporting the value of fringe benefits provided by them or by associated companies. Employers who fail to report the fringe benefits properly and on time will be subject to penalties. Employers have to keep records that show how the valuation of the fringe benefit was determined.
Other taxes: Both resident and non-resident companies pay Social Insurance Funds contributions. Both the employer and the employee pay 10% on the weekly basic pay (excluding bonuses, overtime etc). They are accounted for on a monthly basis.
Carry-Over of Losses: Losses incurred in a trade or business may be carried forward indefinitely.
Carry-Backwards of Losses: The Income Tax Act does not allow any carry-backwards of losses.
Group Relief: The Income Tax Act contains provisions which enable Maltese resident companies to form part of a group for tax purposes. A group may be formed when:
- One company is the 50% subsidiary of another company
- Two companies are 50% subsidiary of another company
A tax group enables Maltese resident companies to transfer losses between members forming part of the group.
Relief from double taxation: Relief from double taxation is granted by way of credit. Companies resident in Malta may claim one of the following types of relief from double taxation on their foreign sourced income:
- Double Tax Relief: Relief granted by virtue of Malta's double tax agreements. Currently Malta has 45 double tax treaties in force based on the OECD MC with both EU and Non-EU countries.
- Unilateral Relief: A domestic type of relief which may be claimed when a double tax agreement is not in force. Certain conditions should be fulfilled.
- Flat-Rate Foreign Tax Credit: This type of relief may be claimed when the taxpayer may not claim any of the two types of relief listed above. The Flat Rate Foreign Tax Credit assumes that tax at the rate of 25% was levied on the foreign sourced income.
Deductions: The general rules of the deductibility of expenses prescribe that expenses are deductible to the extent that these are wholly and exclusively incurred in the production of income.
Article 14 (1) of the Income Tax Act lays down specific types of expenses which may be deducted from the taxable income:
- Interest
- Rent
- Bad debts
- Contributions to a pension fund
- Wear and tear allowances
- Expenditure on scientific research
- Expenditure on patents and patent rights
- Capital Expenditure on intellectual property rights
- Trade losses
Is Malta part of the European Union? Yes, Malta joined the EU on 1 May 2004, joined the borderless zone Schengen on 21 December 2007 and adopted the euro on 1st January 2008.
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