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Business Taxation for Expats in Malta

Submitted: November 2013

This guide covers tax issues for limited companies. For tax issues for self-employment please see: Taxation - Employment Taxation for Expats in Malta.

The Maltese Tax Authority is the Inland Revenue Department, their website is here.

 

Registration

For expats the most common form of business structure in Malta is partnership anonyme or limited liability company (company). These companies require a minimum of one director, and must have a company secretary. A director may be a corporate entity such as another company. The minimum share capital is €1,165. Forming a company means that your liabilities are limited to the assets of the company and any unpaid share capital. The business income is taxed at the corporate tax rate. Another possible choice is a sole proprietorship, however with these your liability extends to your own personal assets and the business income is taxed at your individual marginal rate.

All Maltese companies must be registered with the Registrar of Companies at the Malta Financial Services Authority (MFSA). There is guide to the registration of companies available here. The company may require a trade licence; there are several varieties which depend on the nature of the business. Licences are obtained from the Trade Services Directorate of the Commerce Department of Malta whose website is here. Licences for companies involved in the remote (online) gaming and betting industry are obtained from the Lotteries and Gaming Authority (LGA) of Malta whose website is here.


Corporate Income Tax

The Maltese tax year for companies runs from 1 January to 31 December. Companies may apply to the Inland Revenue to have a different business year-end if there is a genuine commercial reason for doing so. Maltese resident companies are liable for corporate income tax on their worldwide income and capital gains. Non-resident companies are generally only liable for corporate income tax on their Maltese source income and gains.

The corporate income tax rate is 35%.

In Malta capital gains are treated as ordinary income and taxed as such. However transfers of immovable property are taxed at a flat rate of 12% on the transfer value of the property. Capital losses can be carried forward and set off against future capital gains

Companies with a year-end falling between 1 January and 30 June must file their Maltese corporate income tax returns by 31 May of the year following the year in which the income was generated; so for a company with a year-end of the 1 January this is approx 15 months after the year-end. Otherwise tax returns must be filed within nine months of their year-end. Returns may be filed online.

Corporate tax is collected under a self-assessment system. Companies are required to calculate and pay their own Advance Corporate Income Tax in instalments three times a year; in April, August and December. The amount they pay is based on the previous year. There is also a final balancing tax payment (if applicable) which must be made once the actual amount due is calculated. This must be paid by the filing return date. Penalties apply for late payment of tax.

 

Dividends

Dividends are paid out of company income that has been taxed. A dividend comes to the resident shareholder with a credit for the tax already paid by the company; this can be set against the shareholder’s personal income tax. Dividends are paid to non-residents free of withholding tax.

As a director and shareholder of your new company you might find it useful to consider the effect on individual taxation that dividends paid out of income from different kinds of company tax accounts can have. There are five types of tax account:

  • the Final Tax Account (FTA)
  • the Immovable Property Account (IPA)
  • the Foreign Income Account (FPA) – taxed profits arising out of foreign income
  • the Maltese Taxed Account (MTA) – taxed profits not allocated to the FTA, IPA or FIA, and
  • the Untaxed Account (UA)

Shareholders are entitled to claim a refund of either 6/7ths (giving a final tax rate 5%), 5/7ths, 2/3rds, or in certain cases 100% of the tax paid by the company if the dividend is paid out of the FPA or the MTA. There is a guide called Tax System for Companies Resident in Malta available as a .pdf from this search.

 

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