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A Quick Guide to Corporate Tax in Malta

A Quick Guide to Corporate Tax in Malta
by
April 11, 2023
in Finance News, Laws, NEWS Malta, Taxation
236

If you’re considering starting a business in Malta, it’s important to understand the country’s corporate tax laws. In this guide, we’ll provide an overview of the tax system in Malta and the key considerations for businesses.

Understanding the Maltese Tax System

The Maltese tax system operates on a territorial basis, meaning that residents and businesses are taxed on income earned in Malta, while income earned outside of Malta is generally exempt from taxation.

Corporate entities are taxed as separate legal entities from their owners, and all companies operating in Malta must register for tax purposes with the Maltese tax authorities.

Corporate Tax Rates in Malta

The standard corporate tax rate in Malta is 35%, which is higher than the average rate in the European Union. However, there are a number of tax incentives and deductions available to businesses, which we’ll explore in the next section.

Tax Incentives for Businesses in Malta

Malta offers a range of tax incentives for businesses, including:

  • Participation exemption: Dividends received from a participating holding in a Maltese company are generally exempt from tax.
  • Patent box: Income derived from qualifying patents is subject to a reduced tax rate of 5%.
  • Notional interest deduction: Companies can claim a notional deduction on their equity base, which can significantly reduce their tax liability.

Value-Added Tax (VAT)

In addition to corporate tax, businesses in Malta are also subject to value-added tax (VAT). The standard VAT rate in Malta is 18%, with reduced rates of 7% and 5% for certain goods and services.

Double Taxation Agreements in Malta

Malta has an extensive network of double taxation agreements (DTAs) with other countries, which are designed to prevent businesses from being taxed twice on the same income. These agreements also help to promote trade and investment between Malta and other countries.

Tax Compliance in Malta

All businesses operating in Malta must comply with the country’s tax laws and regulations. This includes keeping accurate financial records, submitting regular tax returns, and paying taxes on time.

Conclusion

Corporate tax in Malta can be complex, but by understanding the key considerations and taking advantage of the available tax incentives, businesses can reduce their tax liability and thrive in this vibrant business environment.

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