Malta has one of the most competitive corporate tax rates in the European region. The Maltanese corporate tax legislation has noticeably clear, objective and harmonized provisions which are in line with international standards.

Taxation

Malta offers a highly efficient fiscal regime which avoids double taxation on taxed company profits distributed as dividends. Companies are taxed at a rate of 35 per cent. However, a full imputation system applies to the taxation of dividends, whereby the tax paid by the company is imputed as a credit to the shareholder receiving the dividend. Following the distribution of a dividend, shareholders are also entitled to claim a tax refund of six-seventh of the relevant tax paid in respect of trading income and five-sevenths of the relevant tax paid in the case of passive interest and royalties. The refund is reduced to two-thirds where the distributing company claims double-taxation relief. Malta’s tax system has been deemed by the European Commission to be compliant with EU non-discrimination principles and has also gained approval from the OECD. Individuals are charged on their income at progressive tax rates up to a maximum of 35 per cent (for income over €60,000). The top rate of income tax for those who earn less than €60,001 is 29 per cent.

Expat Taxation

To attract highly qualified personnel from abroad, Malta has introduced an incentive scheme targeting foreign executives. Professionals in the financial services, gaming and aviation sectors can benefit from a flat personal income-tax rate of 15 per cent on income up to €5 million. Any income over that figure is tax-free. To qualify for this tax incentive, the employee must earn a minimum of €80,100 per year (basis year 2013), among other criteria. EU nationals can benefit from the reduced tax rate for an unlimited period, EEA and Swiss nationals for a period of five consecutive years and third-country nationals for four consecutive years. Malta is also an attractive place for retires as well as high-net-worth individuals and their families, with separate programmes allowing to benefit from a reduced tax rate if they relocate to the island.

Double Taxation Treaties

Malta has signed agreements for the avoidance of double taxation with some 70 countries. The tax system also includes Commonwealth relief, unilateral relief and the flat-rate foreign tax credit, thereby ensuring that income arising from overseas is not subject to double taxation, even if there is no double-taxation agreement in force.

VAT

Value-added tax (VAT ) applies to most transactions. The standard rate is 18 per cent with reduced rates for some products and services. Most financial services are not subject to VAT and for clients outside the EU VAT does not apply.

Accounting & Auditing

Companies in Malta are required to maintain accounting records in accordance with the Companies Act. Accountancy principles conform to International Financial Reporting Standards (IFRS). Companies are also required to submit accounts, which are audited, and every company incorporated in Malta is required to appoint an independent auditor registered with the local Accountancy Board and holding a certificate to practice. Auditors must follow the International Standards of Auditing (ISA) issued by the International Federation of Accountants (IFAC).

Tax Returns

The fiscal year is the calendar year. Malta operates a self-assessment tax system. Taxpayers are required to declare their income and calculate their tax, taking into account payments in advance and any other tax credits. The tax payable must be settled at the time that the self-assessment is filed. For individuals, the deadline is 30 June each year. For companies, the tax return date is nine months after the financial year-end (ten months if the return is filed electronically), but not earlier than 31 March of each year. Companies’ tax returns must be accompanied by an auditor’s certificate. Revenue assessments may be raised when a return is not filed or where the Commissioner of Revenue disagrees with the self-assessment.

Sources

• Taxation and Auditing Requirements