Malta’s Company Tax Regime

Malta’s income taxation, whether personal or corporate, is regulated by two principle bodies of law, the Income Tax Act[1] and the Income Tax Management Act.[2]  This paper considers the income tax treatment of companies only.  Please feel free to contact us should you require further information on aspect of Malta tax treatment not covered by this paper. 

Malta’s right to tax income and capital gains, and the manner in which Company Income Tax is applied, is contingent on:-

1. the recipient of the income being a chargeable person (see Point 2 below),

AND

1. the income and/or capital gains being chargeable income (see Point 3 below). 

1.Chargeable Companies

Malta Company Tax applies only to companies which are connected to Malta by virtue of their Malta domicile and/or their Malta residence. The extent to which a Malta company’s income is chargeable to Malta Company Taxation hinges on the extent of its connection with the jurisdiction of Malta as follows:

1.1.Malta-domiciled companies

A company is considered to be domiciled in Malta if it has either been:-

1. incorporated in Malta,

OR

2. if the company was incorporated in a jurisdiction outside Malta, but later elected to move its domicile and continue its existence in Malta.[3]

1.2.Malta-resident companies

A company is considered to be resident in Malta in either of the following cases:-

1. if the company has been incorporated in Malta;[4]   OR

2. if the company was incorporated in a jurisdiction outside Malta, but later elected to move its domicile and continue its existence in Malta;[5]

     AND

3. if the company, whether domiciled in Malta or elsewhere, holds its Place of Effective Management in Malta.

1.3 Malta-domiciled and Malta-resident companies

Based on the above principles, a company domiciled (incorporated or continued) in Malta would automatically be treated as tax resident in Malta and therefore is both domiciled and resident in Malta.

2. Chargeable Income

The definition of income under Malta’s Income Tax Act brings within the scope of Maltese taxation:

1. Gains or profits from any trade, business, profession or vocation;
2. Gains or profits from any employment or office, including any related benefit;
3. Dividends, premiums, interest;
4. Pension, charge, annuity or annual payment;
5. Rents, royalties, premiums and any other profits arising from property
6. All other gains.

Such income together with any capital gains of a chargeable company are subject to Malta Company Tax.  Chargeable income is determined by adding all income streams of a chargeable company – save any income streams which enjoy a statutory exemption from tax – and subtracting therefrom any permissible deductions.[6]   

However, the extent of taxation of such income and capital gains depends on the combination of the connecting factors explained above, as follows:

2.1.Worldwide liability

The chargeable income of a company which is domiciled and resident in Malta is considered to encompass all earnings of the company arising worldwide and whether or not the earnings are remitted to Malta.[7]

2.2.Source and remittance liability

In the case of a company which is either only domiciled in Malta or only resident in Malta, its chargeable income consists only of local source income as well as foreign source income remitted to Malta, together with any foreign source capital gains irrespective of whether these are remitted to Malta or not.[8]