What are the benefits of taxation in Malta?

Maltese islands are known for their favourable taxation regimes both for companies and individuals. We decided to look deeper and talked to experts from a London-based company Imperial & Legal that for many years have been helping clients move to Europe and start a business there.

7 key advantages of Malta’s tax system

1. Apply to refund a significant part of a corporation tax.

2. Low tax rates for main taxes.

3. Zero rates for taxes on royalty, dividends and deposit interests for businesses.

4. Double taxation agreements with 60 countries.

5. Tax reliefs for individual tax residents: no tax on foreign income, gift, inheritance, wins, wealth and sometimes on properties.

6. No taxation of non-tax residents with a residence permit, permanent residence permit or citizenship of Malta.

7. No exchange-related risks as Malta is in Euro zone.

Taxation of businesses in Malta

Corporation tax in Malta is 35%. Where is a benefit in that?

Well, local laws say that once a company files her tax return, pays taxes and distributes the profit, it can straight away file for a tax refund. Depends on what your business is doing, it can reduce its corporation tax expenses manifold. For example, if your company has been selling, the government will return you 6/7 of the tax paid, so you will end up paying only 5%.

Currently, there is no tax in Malta on the authorised capital and zero tax on passive income such as royalty, dividends and bank deposits.

Besides, double taxation agreements that we have already mentioned will also allow you to reduce your tax burden significantly.

Do I need to become tax resident in Malta?

To become tax resident, you must live on the islands constantly and earn income there. For example, you need to spend at least 183 days in Malta in a tax year. Whether it is beneficial for you personally to become Malta’s tax resident will depend on your personal circumstances and different factors.

Benefits of tax residence status

If you want to benefit from reliefs and allowances provided to tax residents by the Maltese government or you plan to live in the country, then you should become tax resident. Foreign investors that get their main income from outside Malta will benefit from tax residency status because of there is no tax on foreign income. Besides, there are no taxes on real estate, royalty and bank deposits, wealth, gifts and inheritance.

When you don’t need tax residency in Malta

Malta’s citizenship or residence permit might be your solution to visa-free travel, opening a bank account in a European bank or running an international business. But you prefer to stay where you are and do not plan to relocate to or work in Malta. Holders of residence permits and permanent residence as well as Maltese citizens do not have to pay taxes if they are not resident in Malta for tax purposes.

How to get Maltese passport

The government operates a citizenship by investment program that allows you to get residence permit and citizenship of Malta. An investor does not have to live in Malta for a long time, but there is a price to pay. If you do not have the money, you can still choose a longer route, but you will have to live in the country which will make you tax resident automatically.

Irrespective of your tax residency status in Malta, if you do a business there that generates profit, you will have to pay corporation tax.

How to do it right?

To use every opportunity and relief offered by the Maltese tax system, you must either become an expert in the international law or go to an expert for qualified advice. Look for a respectable firm that has good reviews and happy clients and that can solve both immigration and financial issues all in one place.