Malta Corporate Tax and Shareholder Tax Refund System

Companies incorporated in Malta, or companies that are resident and domiciled in Malta for tax purposes, are generally subject to corporate income tax at the standard rate of 35% on their chargeable income.

Malta operates a full imputation system of taxation, under which shareholders may be entitled to claim a refund of all or part of the Malta tax paid by the company when profits are distributed as dividends. This system is intended to eliminate economic double taxation and can result in a significantly lower effective tax rate for qualifying shareholders.

When dividends are distributed from profits derived from trading activities, shareholders are generally entitled to claim a 6/7ths refund of the Malta tax paid by the company, resulting in an effective Malta tax rate of approximately 5%, subject to the applicable tax rules and the particular circumstances of the shareholder.

Tax refunds are administered by the Malta Tax and Customs Administration (MTCA). Refund claims are processed following the submission of the required documentation and satisfaction of the statutory requirements.

Types of Tax Refunds

6/7ths Refund

A refund of 30% out of the 35% corporate tax paid by the company, resulting in an effective Malta tax rate of approximately 5%. This is the refund most commonly applicable to trading profits.

5/7ths Refund

A refund of 25% out of the 35% corporate tax paid, generally applicable to profits derived from passive interest and royalties.

2/3rds Refund

Applicable where the company has claimed double taxation relief in accordance with the relevant provisions of the Income Tax Act.

100% Refund / Participation Exemption

Available where dividends are distributed from profits that qualify under Malta's Participation Exemption provisions.

Participation Holding

A holding by a Maltese company in a non-resident company may qualify as a participating holding where one of the qualifying conditions prescribed by the Income Tax Act is satisfied. These include, among others:

• The Maltese company directly holds at least 10% of the equity shares in the non-resident company.
• The Maltese company has invested at least €1,164,000 (or the equivalent in another currency) in the non-resident company and has held that investment for a continuous period of at least 183 days.
• The Maltese company is entitled to appoint a director to the board of the non-resident company.
• The investment is held for the furtherance of the Maltese company's own business and is not held merely as a portfolio investment.

Other qualifying conditions may also apply under the Income Tax Act.

Participation Exemption

Income or capital gains derived from a qualifying participating holding may benefit from Malta's Participation Exemption where one of the following conditions is satisfied:

• The non-resident company is resident or incorporated in an EU Member State; or
• The non-resident company is subject to foreign tax at a rate of at least 15%; or
• Not more than 50% of the non-resident company's income is derived from passive interest or royalties.

Where none of the above conditions is satisfied, the Participation Exemption may still apply provided that:

• The holding is not a portfolio investment; and
• The non-resident company is subject to foreign tax of at least 5%, together with the satisfaction of the applicable anti-abuse provisions under Maltese tax legislation.

Important Note

Malta's corporate tax system continues to offer an attractive fiscal framework for international businesses. In addition to the traditional shareholder refund system described above, certain companies may also be eligible to elect for Malta's Final Income Tax Without Imputation (FITWI) regime, introduced in 2025, subject to the applicable conditions.

As eligibility for the various tax refunds and exemptions depends on the specific facts and circumstances of each case, professional advice should always be obtained before establishing a Malta company or implementing any corporate structure.

Contact Us

For more information about incorporating a company in Malta or to obtain a tailored quotation, please contact us.

We will be pleased to guide you through the Malta company formation process and advise you on the corporate structure and tax solution that best suit your business objectives and compliance requirements.