Tax Refunds in Malta

Find out why Malta’s highly favourable refundable tax system attracts hundreds of business to the Island each year.

Insight from AE Business Advisors 

Why Malta?

The tax paid by a company registered in Malta can be refunded totally or partially to the shareholders on the distribution of dividends. There are a number of refund systems available with the most popular being:

1. The 6/7 tax refund is the most commonly used because it’s applicable to most trading income. Once applied, it will result in a net effective tax charge of 5% due to a refund of 6/7 of the tax paid by the company on the trading income.

2. A 5/7 tax refund on the total tax paid is applied where the dividend is distributed out of profits derived from passive interest or royalties. The result is a maximum net tax of 10%.

3. A 100% (full) tax refund is applicable in the context of the participating holding, specifically for profits allocated to the foreign income account (FIA). In this scenario, assuming all the requirements of the participating holding are met, the shareholder can either decide to not pay tax on the income, or pay the 35% corporate tax and then claim a full refund.

It is pertinent to note that Malta does not impose any withholding tax on the distribution of outbound dividends, while also not taxing the refund.

How AE can help?

The right tax mechanisms can mean critical cost savings for your business. The team at AE can optimise your business tax structure to improve profits, dividends and future growth. It is to be noted that the refund systems outlined above require proper structuring. For these reasons it’s imperative to seek advice from an expert source. Our people examine each case independently in order to determine the most favourable structure, helping you to streamline your business.