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Malta

General Information

Country Name: Malta
Currency: Euro (€) (EUR)
Primary Tax Authority: Commissioner for Revenue
Key Legislation:

  • Income Tax Act (Chapter 123)
  • Value Added Tax Act (Chapter 406)
  • Duty on Documents and Transfers Act (Chapter 364)

Fiscal Authority Allocation

Centralized Fiscal System:
Malta operates under a centralized tax system, with all tax collection and administration handled at the national level. There are no local taxes, and all revenues flow directly to the central government.

Corporate Income Tax (CIT)

Standard Rate: 35%
Malta applies a corporate tax rate of 35%, but a full imputation system and refund mechanisms significantly reduce the effective tax burden for many businesses.

Refund Mechanisms:
Malta offers various tax refunds to shareholders, including:

  • 6/7 refund: Resulting in an effective tax rate of 5%
  • 5/7 refund: For passive interest and royalties, resulting in an effective tax rate of 10%
  • 2/3 refund: If double taxation relief is claimed
  • 100% participation exemption: For dividends and capital gains from qualifying holdings

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 18%
Malta applies a VAT rate of 18%, with reduced rates of 7% for accommodation services and 5% for certain goods, such as books, medical equipment, and electricity.

Exemptions:
Financial services, insurance, and real estate transactions are generally exempt from VAT.

Personal Income Tax (PIT)

Progressive Rates:
Malta uses a progressive personal income tax system, with rates ranging from 0% to 35%. Special rates apply depending on residency status and source of income.

  • Income up to €9,100: 0%
  • Income between €9,101 and €14,500: 15%
  • Income between €14,501 and €60,000: 25%
  • Income above €60,001: 35%

Additional Mandatory Contributions

Social Security Contributions:
Malta has a mandatory social security system for all employed persons.

  • Employer Contribution: 10% of employee’s gross salary
  • Employee Contribution: 10% of gross salary

Self-Employed Contribution: Self-employed individuals contribute 15% of their annual net earnings.

Withholding Taxes

  • Dividends: 0% (for qualifying shareholders)
  • Interest: 15%
  • Royalties: 0%

Malta’s tax treaties may lower or eliminate withholding taxes on cross-border payments.

Transfer Pricing Rules

Malta does not have formal transfer pricing rules; however, transactions between related parties must be at arm’s length, and the general anti-abuse provisions apply.

Special Tax Regimes

  • Global Residence Programme (GRP): Available to non-EU nationals, allowing for a flat 15% tax rate on foreign income remitted to Malta, with a minimum annual tax of €15,000.
  • Highly Qualified Persons (HQP) Scheme: Reduced personal tax rate of 15% for highly skilled professionals in certain sectors (e.g., financial services, IT).

Other Taxes

  • Stamp Duty: 5% on the purchase of property
  • Capital Gains Tax: Real estate gains are taxed at 8% of the sale value (if held for less than three years)
  • Inheritance and Gift Tax: Malta does not impose inheritance or gift taxes.

Double Taxation Agreements (DTAs)

Malta has an extensive network of double taxation agreements (over 70 countries), aimed at preventing double taxation and encouraging international investment. Key partners include the UK, Italy, and the USA.

Local Taxes

There are no local or municipal taxes in Malta. All taxation is centralized at the national level.

Compliance and Reporting

Annual Filing:
Both individuals and corporations must file annual tax returns. The deadline for individuals is typically by June 30th of the following year, while corporations must file within nine months after the end of the financial year.

Penalties for Late Filing:
Penalties for late filing and non-compliance include interest on unpaid taxes and administrative fines, which can vary depending on the severity of the delay.

Recent Developments

Tax Transparency:
Malta has made efforts to align with EU directives on tax transparency, including the implementation of DAC6 (cross-border reporting requirements) and OECD BEPS standards.
Digital Economy Taxation:
Malta is reviewing its tax system to address the challenges of the digital economy, potentially introducing measures in line with the OECD’s global tax framework.

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