Company limited by shares
Malta has established itself as a transparent and well-regulated jurisdiction within the European Union (EU), providing an advantageous environment for international businesses. As a full EU member state since 2004 and having adopted the Euro in 2008, Malta benefits from the harmonization of EU directives and access to the European single market, home to over 500 million consumers.
The standard corporate income tax rate in Malta is 35%. However, the jurisdiction operates a unique full imputation system, which mitigates double taxation by allowing nonresident or corporate shareholders to claim significant tax refunds upon the distribution of dividends. These refunds are as follows:
- 6/7 Refund: Applied to active (trading) income, resulting in an effective tax rate of approximately 5%.
- 5/7 Refund: Applied to passive interest and royalties, resulting in an effective tax rate of approximately 10%.
- 2/3 Refund: Applied to other forms of passive income, such as capital gains or investment income, leading to an effective tax rate of around 11.67%.
These refunds are available to both nonresident individual and corporate shareholders, provided the relevant conditions are met. Importantly, non-resident shareholders are not subject to withholding tax on dividends, further enhancing the jurisdiction’s attractiveness.
Malta provides for a participation exemption regime that can eliminate tax on dividends and capital gains derived from qualifying shareholdings in foreign entities subject to compliance with certain conditions.
This structure is particularly useful for multinationals setting up intermediate holding companies in Malta to consolidate and manage cross-border investments efficiently.
Malta permits the formation of fiscal units between a parent and subsidiary company, whereby the two entities are treated as a single taxpayer. In this setup, the group may apply the effective tax rate (5%, 10%, or 11.67%) directly at the corporate level without needing to distribute dividends to trigger the refund. This simplification streamlines corporate group taxation and facilitates cash flow management.
If the holding entity is not part of a fiscal unit, refunds are still available through the traditional mechanism, where the operating company pays tax at 35%, distributes dividends, and the holding company (Maltese or foreign) then claims the applicable refund. Refunds are typically processed within one to two months.
Malta allows for the formation of private limited liability companies with a single shareholder and up to 50 shareholders. Shareholders can be natural or legal persons, and there are no residency requirements. Where the director is a corporate entity, a minimum of two shareholders may be necessary.
Each company must appoint at least one director, who may also be a shareholder. Directors may be individuals or entities, regardless of residence. A company secretary must also be appointed, and this role must be filled by a natural person.
The identities of directors and shareholders are available for public inspection through the Malta Business Registry. While details of beneficial ownership were previously public, access has been restricted following a European Court of Justice ruling.
The standard VAT rate in Malta is 18%. VAT applies to imports and to sales of goods and services within Malta. Businesses must file VAT returns quarterly and reconcile input and output VAT accordingly.
For intra-EU B2B transactions, the reverse charge mechanism applies. This shifts the VAT reporting obligation from the supplier to the recipient, resulting in zero-rated transactions. Both parties must be registered with the VAT Information Exchange System (VIES) and comply with EC Sales Lists and Intrastat declarations where applicable.
B2C sales within the EU are subject to the VAT rate applicable in the consumer’s location if annual cross-border sales exceed €10,000. These can be centrally reported via the One Stop Shop (OSS) mechanism.
Services delivered electronically or via telecommunications to EU consumers are taxed at the consumer’s location, again with OSS reporting available. Sales outside the EU are generally exempt from VAT.
To obtain a Maltese VAT number, businesses may be required to demonstrate substance in Malta, such as maintaining a local office or having resident employees or directors.
Maltese limited companies must submit audited financial statements annually, regardless of their level of activity. These accounts, accompanied by the auditor’s report and directors’ report, must be filed with the Registrar of Companies.
Key compliance deadlines include:
- Audited accounts due by October (for companies with a financial year ending December 31),
- Annual corporate tax return within nine months of the financial year-end,
- Provisional tax payments typically due in three installments unless the company derives most of its income from foreign sources, in which case final tax may be paid upon distribution or within 18 months of the financial year-end.
Companies must also file an Annual Return detailing current shareholding, directorships, and company secretary appointments.
Small companies may be eligible for certain exemptions or simplifications in financial reporting, although these are subject to specific criteria.
Legal
Country code - MT
Legal basis – Mixed (Civil and Common law)
Legal framework - Companies Act
Company form – Limited Liability Company (Ltd.).
Liability - The liability of the shareholders for the company is limited to the unpaid amount of their respective shareholdings.
Share capital – Minimum issued share capital required is EUR 1,164.69, of which twenty percent (20%) of the nominal value of each share must be paid up. It may be denominated in EUR or any other currency. Bearer shares are not allowed.
Shareholders – Limited liability companies may be formed by one or more shareholders, who can be either natural or legal persons, residents or non-residents, without limitations. Details of shareholders are publicly accessible.
Directors – At least one director, who may be a natural person or a legal entity, resident or non-resident. A shareholder may be the company director. Directors’ details are available to the public.
Secretary – A secretary is required who must be an individual, resident or non-resident. In most cases, the director may also act as company secretary. Secretary must fulfill requirements stated in the Companies Act.
Registered Address – Private limited companies must have a registered physical office address located in Malta, where the company must keep all statutory records and other documents which must be available for review.
General Meeting – Every company must hold one annual general meeting, which can be held in Malta or abroad, in addition to any other meetings held during the year. The first general meeting must be held no later than 18 months after the company is formed. No more than 15 months may elapse between one general meeting and the next one. A corporate shareholder would have to appoint a corporate representative to sign documents on behalf of the company, individual shareholders may appoint proxies to attend on their behalf.
Electronic Signature – Permitted.
Re-domiciliation – Inward and outward re-domiciliation is allowed.
Compliance – Limited companies are required to include financial statements audited or certified by officially authorized auditors or accountants and a declaration on the Income Tax Return. These requirements also apply to companies with no taxable income or dormant companies.
The financial year of Maltese companies is generally the calendar year. The company must appoint an auditor and submit audited accounts, regardless of its size. Audited accounts for the previous financial year must be submitted in October.
An annual corporate tax return must be submitted no later than 9 months from the end of the previous financial year (September).
During the basis tax year, a company is generally required to make provisional tax payments every four months (20% + 30% + 30%) but if the company has most of its business overseas, provisional tax payments do not apply and the company may pay tax on the distribution of profits or 18 months after financial year end, whichever is earlier.
Directors are required to file to the Registrar a copy of the company’s annual accounts laid before the company in general meeting, together with a copy of the auditor’s report and the directors’ report.
Audit and director's report requirements may be waived for a company that qualifies as a small company.
Limited companies are required to submit annually an Annual Return to the Registrar of Companies.
- Shareholders not disclosed
- Directors not disclosed
- Corporate shareholders permitted
- Corporate directors permitted
- Local director required
- Secretary required
- Local secretary required
- Annual general meetings required
- Redomiciliation permitted
- Electronic signature
- Annual return
- Audited accounts
- Audited accounts exemption
- Exchange controls
- Mixed (Civil and Common) Legal basis
- 1 Minimum shareholders
- 1 Minimum directors
- EUR 1,164.69 Minimum issued capital
- EUR 232.938 Minimum paid up capital
- EURAny Capital currency
- Anywhere Location of annual general meeting
- 2017 AEOI
Taxes
Tax residency – A company is tax resident in Malta if it is incorporated in Malta or the management and control of its business is exercised in Malta
Basis – Companies both domiciled and resident in Malta and are taxable on a worldwide income basis. A non-Maltese incorporated company that is resident in Malta through management and control is subject to Maltese tax on income arising in Malta and on income remitted to Malta.
Tax rate – Malta has a headline tax rate of 35% but has a tax credit system where shareholders can claim a tax credit towards their income taxes of up to 6/7 for trading income, 5/7 for passive interest and royalties and 2/3 for other investment income and income to which a foreign tax credit has been availed of, upon distribution of dividends. If the shareholders are nonresidents or are corporate bodies, the tax credit will be refunded to the shareholders upon submitting a claim to the Revenue Commission to that effect. If the shareholders are resident taxpayers, the actual refund amount will depend on the actual personal income tax liability of the resident taxpayer.
Assuming that the shareholders are companies or nonresident individuals, after receiving the tax refund, the effective tax rate on trading income would be 5%, 10% on interest and passive royalties, and 11.66% on other investment income, and income to which a foreign tax credit has been availed of.
Capital gains - Capital gains on disposal of shares received by a corporate investor from a non-resident company (or from a non-resident partnership, subject to certain conditions) may qualify for a participation exemption in Malta.
The Participation Exemption on capital gains will apply if the Malta holding company complies with one of the following -
- Holds directly at least 5% of the equity shares of the underlying entity. The 5% must confer the right to at least two out of the following three equity rights:
- the voting rights,
- the dividend rights
- the rights to assets on a winding-up of the equity shares; or
- Is an equity shareholder in another entity and is entitled to either sit on the Board or appoint a person to sit on the Board of the other entity; or
- Is an equity shareholder investing at least €1,164,000 (or the equivalent sum in a foreign currency) for an uninterrupted period of not less than 183 days in another entity; or
- Is an equity shareholder and is entitled to, at its option, call for and acquire the entire balance of the equity shares not held by it; or
- Is an equity shareholder and is entitled to the first refusal in the event of proposed disposal, redemption or cancellation of all the equity shares; or
- Is holding shares for the furtherance of its own business, and the holding is not held as trading stock for trade.
Capital Gains derived from the transfer of immovable property situated in Malta may be taxed at a final tax of 8% of the transfer value. Rates from 2% to 12% may apply in certain cases.
Dividends - Dividends received from a resident company are taxable on the gross amount in the recipient’s hands. If the distributed profits have been taxed, no further tax should be chargeable to the recipient company.
Dividends received from a non-resident company and remitted profits from a foreign PE, may be tax-exempt, subject to complying with one of the following conditions:
- Holds directly at least 5% of the equity shares of the underlying entity. The 5% must confer the right to at least two out of the following three equity rights:
- the voting rights,
- the dividend rights
- the rights to assets on a winding-up of the equity shares; or
- Is an equity shareholder in another entity and is entitled to either sit on the Board or appoint a person to sit on the Board of the other entity; or
- Is an equity shareholder investing at least €1,164,000 (or the equivalent sum in a foreign currency) for an uninterrupted period of not less than 183 days in another entity; or
- Is an equity shareholder and is entitled to, at its option, call for and acquire the entire balance of the equity shares not held by it; or
- Is an equity shareholder and is entitled to the first refusal in the event of proposed disposal, redemption or cancellation of all the equity shares; or
- Is holding shares for the furtherance of its own business, and the holding is not held as trading stock for trade.
Furthermore, the paying company must meet one of the following conditions:
- Is a resident or incorporated in an EU country
- Is subject to foreign tax of at least 15%
- Has 50% or less of its income from passive interest or royalties
- Is not a portfolio investment and has been subject to tax at a rate of at least 5%
Interests - Interest income is subject to taxation at standard rates.
Royalties – Royalty income is subject to income tax.
Foreign-source income – Companies ordinarily residents and domiciled in Malta are taxed on their worldwide income. Profits of a foreign permanent establishment may be exempt from taxes as long as the aforementioned participation exemption condition is met. Companies that are not ordinarily resident or not domiciled are taxed on income accrued in Malta or remitted to Malta.
However, taxable profits of Maltese-resident companies derived from foreign investments; profits of a foreign PE; and profits derived from foreign investments, assets, or liabilities of an onshore bank licensed in Malta, for which no evidence of tax paid is available can qualify for a flat-rate foreign tax credit of 25%.
Withholding taxes – Malta does not levy withholding tax on dividends paid to non-residents. No withholding tax applies to royalty and interest payments, provided that the recipient does not act on behalf of a Maltese domiciled resident.
Losses – Losses arising from taxable income may be carried forward indefinitely. Carryback of losses is not allowed.
Inventory - Inventory valuations are usually made at the lower of cost or market value. In general, the book and tax methods of inventory valuation will be acceptable. Last in first out method (LIFO) is not allowed for taxation purposes.
Anti-avoidance rules – The transfer pricing regime in Malta is not sophisticated. There are included some anti-avoidance provisions and brief references to transactions at arm’s length.
Malta conscripted into local law the EU Anti-Tax Avoidance Directive (ATAD 1) via the L.N. 411 of 2018 – which is now in force since January 1, 2019.
Under the L.N. 411 of 2018, Malta has implemented controlled foreign company (CFC) rules.
Under Maltese law, a CFC may be a Malta’s company foreign permanent establishment (PE) or a subsidiary in which the parent company holds directly or indirectly more than 50% of its voting rights/capital or is entitled to receive more than 50% of the profits – which corporate tax paid is lower than half of the tax that would have been charged on the company or PE under the Malta Income Tax Act.
Malta taxes non-distributed income of the CFC if this is derived from a non-genuine arrangement to create a tax advantage.
CFC rules don’t apply to subsidiaries and PEs with no more than EUR 750,000 of trading profits and non-trading income of EUR 75,000 or less, or companies which profit amount does not exceed 10% of its operating costs.
Malta has also transposed into law the interest deductibility rule, whereby a company can only deduct net interest expenses up to the higher of 30% of its EBITDA or EUR 3 mil.
An Exit tax became effective in January 1, 2020. A Maltese company that transfer assets to a PE outside of Malta, a non-resident operating through a PE that transfer assets or business to outside Malta, or a Malta company that transfers its tax residency from Malta to outside Malta – would be deemed to have accrued a capital gain, which will be subject to tax. The capital gain would be calculated by the market value of the transferred assets less their base cost for tax purposes.
Labor taxes – Employers and resident employees are required to make contributions to the Social security fund at 10% on resident employees’ monthly income, each one, without a maximum limit amount.
Tax credits and incentives – A tax credit for foreign tax paid is usually available. When no evidence of tax paid is available, a company may qualify for a flat-rate foreign tax credit of 25%.
The Malta Enterprise Act and other related legislation provide comprehensive tax incentives for foreign investment on certain activities in Malta, such as manufacturing activities.
There are also tax incentives for securitization vehicles, re-insurance special purpose vehicles and collective investment schemes.
The Micro Invest Scheme provides tax credits up to EUR 30,000 for micro-enterprises. A tax credit may be increased to EUR 50,000 for self-employed women, businesses that are majority owned by women, and start-ups established in Gozo.
Compliance – On average, a Limited company in Malta may require 8 payments and 138 hours per year to prepare, file and pay taxes.
Personal income tax - Maltese ordinarily residents and domiciled in Malta are subject to personal income tax on their worldwide income and capital gains.
Maltese ordinarily residents and not domiciled in Malta are taxed on their income and capital gains arising in Malta and on income arising outside Malta that is remitted to Malta. In such case, foreign-source income not remitted to Malta and capital gains (remitted or not) may be tax-exempt.
Non-residents are only taxed on their income and capital gains from Malta.
Personal income tax rates are progressive from 0% to 30%. Capital Gains are taxable income. However, gains from the disposal of immovable property are taxed at lower rates of 8%, 10% or 12% depending on the circumstances.
Other taxes – In Malta, there are no inheritance, real property, net wealth and municipal taxes. There is a stamp duty applied on certain transfers such as real property or securities. Value-added tax is 18%.
- Offshore Income Tax Exemption
- Offshore capital gains tax exemption
- Offshore dividends tax exemption
- CFC Rules
- Thin Capitalisation Rules
- Patent Box
- Tax Incentives & Credits
- Property Tax
- Wealth tax
- Estate inheritance tax
- Transfer tax
- Capital duties
- 35% Offshore Income Tax Rate
- 35% Corporate Tax Rate
- 35% Capital Gains Tax Rate
- 35% Dividends Received
- 0% Dividends Withholding Tax Rate
- 0% Interests Withholding Tax Rate
- 0% Royalties Withholding Tax Rate
- 0 Losses carryback (years)
- 100 Losses carryforward (years)
- 139 Tax time (hours)
- 8 Tax payments per year
- 10% Social Security Employee
- 10% Social Security Employer
- 35% Personal Income Tax Rate
- 18% VAT Rate
- 75 Tax Treaties
Country details
The Republic of Malta is a densely populated archipelago, located in the center of the Mediterranean, in the south of Italy, east of Tunisia and north of Libya. Malta is a former British colony, and currently a member of the European Union and the Commonwealth.
It has about half a million inhabitants. Its capital is Valletta, although its most populated urban center is Birkirkara, with over 22,000 inhabitants. Its official languages are Maltese and English. Since 2008 its legal tender currency is the Euro (EUR).
Malta has a House of Representatives, known in Maltese as Kamra tar-Rappreżentanti, which is elected by direct universal suffrage by simple transferable vote every five years unless the House is dissolved by the President in consultation with the Prime Minister.
The President of the Republic is elected every five years by the House of Representatives.
Malta is strategically located in the center of the Mediterranean Sea at a crossroads between Europe, North Africa, and the Middle East.
Its economy depends mainly on tourism, foreign trade, serving as a transshipment port for ships, manufactures, especially electronics and textiles, and on its developed ICTs and financial clusters.
The country produces only 20% of the food it consumes. It also has limited reserves of fresh water and does not have its own sources of energy.
Film production is a growth factor for the Maltese economy, with several large-budget foreign films being shot annually.
The country has increased exports of many other types of services such as banking and finance. The financial sector has grown in recent years and managed to escape the economic crisis of 2008. Locally attributed to the stability of the country's banking sector and its prudent practices in granting loans.
It also stands out its fully developed mixed market economy and its low effective corporate tax compared to the European Union average, which encourages the location of foreign companies' headquarters.
Malta also has an approved EU citizenship by investment program, where it is possible in a period of 12 months, to be granted as Maltese citizen, through a contribution to the National Development and Social Fund, among other requirements.