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

Insight from AE

Why Malta?

The tax paid by a company registered on the Island of Malta is refunded to the shareholders on the distribution of dividends. This is largely possible due to a particular rule in Malta’s tax system, called the 6/7 refund. It means that the shareholder of a Maltese trading company (both resident and non-resident) can be refunded 6/7 of the tax paid by the company on the trading income. All dividends derived across companies apply, irrespective of the activity or source of income. Also important to note is that Malta does not impose any withholding tax upon distributions of outbound dividends. It also does not tax the refund.

Gains derived from participating holdings of 10% or more are exempted. This applies to dividends and also to capital gains realised from the transfer of such holdings. In most cases, dividends distributed from subsidiaries (both EU or non-EU) and received in Malta benefit from this exemption. Alternatively, the company receiving the dividend can elect to pay tax at the standard rate of 35%, and the shareholder will then be entitled to a 100% refund. And despite the fact that a 35% tax rate is applied to dividends from holdings which do not qualify for exemption, this can be reduced to less than 10% through a system of shareholder refunds.

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. There are some exceptions to these general rules, which is why it’s important to seek advice from an expert source. The way the Maltese tax system is interpreted will vary between jurisdictions, meaning receiving solid advice is a crucial step.

The team at AE examines each case independently in order to determine the most favourable structure. The correct structuring could see a company’s overall tax leakage in Malta reduced to as little as 5%. At AE we can advise on the best way to make the most of the Maltese Tax Refund System, and our people are primed to help you streamline your business.

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