Upon incorporation in Malta, a company is deemed to be both resident and domiciled in Malta. Companies which are not incorporated in Malta are deemed to be resident in Malta only if they are effectively managed and controlled in Malta.
Companies that are both resident and domiciled in Malta are subject to tax in Malta on their world wide income. While companies which are deemed to be resident in Malta but not domicileid in Malta are only subject to tax in Malta on income arising in Malta and foreign income remitted to Malta.
The standard corporate tax rate in Malta is 35%. Companies that are not resident in Malta and which derive income from Malta as a consequence of an activity carried out in Malta are subject to the same tax rules as are applicable to companies which are resident in Malta. Non-resident companies are subject to 35% tax on income and on certain capital gains arising in Malta.
Every Maltese company is required to allocate its profits to five tax accounts. The allocation of profits to the tax accounts is a very important aspect of the Maltese tax system as it determines the tax treatment applicable to shareholders and the tax refunds which may be claimed upon a distribution of profits. The following is an overview of the five tax accounts, the type of income or gains allocated to each tax account and the tax refunds which may be claimed by shareholders:
|Tax Account||Allocation||Types of Tax Refund|
|Foreign Income Account||Foreign source passive income such as dividends, interest, royalties, rent etc. and all capital gains from foreign sources.||5/7ths in the case of passive interest and royalties. 2/3rds where company claims double taxation relief including FRFTC. 100% in the case of income from a Participating Holding.|
|Maltese Taxed Account||Profits from trading activities and profits which are not allocated to any of the other tax accounts.||6/7ths in the case of trading income.|
|Immovable Property Account||Profits resulting from the use of immovable property situated in Malta and which have not suffered the final withholding tax, as well as profits from rent, accommodation and activities related to immovable property situated in Malta.||None. No tax refunds|
|Final Tax Account||Profits subject to a final withholding tax and income exempt from tax.||None. No tax refunds.|
|Untaxed Account||The difference between the company’s accounting profits or losses and the total of the amounts allocated to the other four tax accounts.||None or even subject to a Final Withholding Tax.|