Taxation of Malta Trading Companies

Who is this for?

This solution is particularly relevant for:

• International trading and operating companies
• Groups centralising commercial or service activities
• Entrepreneurs structuring cross-border trading operations
• Family-owned businesses expanding internationally
• Groups seeking an EU-based trading platform with tax certainty

Understanding Malta trading company taxation

A Malta trading company is generally a company whose income arises from active trading or operating activities, whether involving goods, services, consultancy, technology, digital activities or similar commercial operations.

Unlike jurisdictions that narrowly define trading income, Maltese tax law adopts a commercially realistic and broad interpretation, allowing a wide range of business models to fall within the trading category, subject to proper structuring and substance.

Trading companies are taxed on a worldwide basis, though double taxation relief mechanisms ensure that foreign-sourced income is not taxed twice.

Corporate tax rate and the imputation system

Malta applies a flat corporate income tax rate of 35% on taxable profits. This rate applies uniformly, without reduced headline rates or ring-fencing.

However, Malta’s system must be understood together with its full imputation mechanism, which operates as follows:

• Corporate tax paid by the company is fully imputed to shareholders
• Upon dividend distribution, shareholders are deemed to have received profits net of tax
• Shareholders may then be entitled to a refund of part of the tax paid

This structure is a core pillar of Malta’s tax system and is embedded in statute.

Tax refunds for Malta trading companies

For trading income, the most common refund applicable is the six-sevenths (6/7) tax refund, subject to conditions being met.

In practice:

• The company pays tax at 35%
• Dividends are distributed from taxed profits
• The shareholder may claim a refund of 6/7 of the Malta tax paid
• This results in an effective tax leakage of approximately 5%

Other refund mechanisms may apply depending on the nature and source of income, including reduced refunds where foreign tax relief is claimed.

Refunds are claimed after dividend distribution, reinforcing the shareholder-level nature of Malta’s tax system.

Deductibility of expenses and losses

Malta trading companies may deduct expenses incurred wholly and exclusively in the production of income. This includes:

• Operational and administrative costs
• Personnel and office expenses
• Professional and advisory fees
• Financing and commercial costs

Where a Malta trading company incurs losses, these may be carried forward indefinitely and set off against future trading profits, providing valuable downside protection for growing or cyclical businesses.

Double tax treaty and relief mechanisms

Malta maintains an extensive network of double taxation agreements, covering major commercial jurisdictions. These treaties typically:

• Reduce or eliminate foreign withholding taxes
• Allocate taxing rights clearly between jurisdictions
• Provide certainty for cross-border trading operations

Where no treaty applies, Malta’s domestic law provides unilateral relief, ensuring that foreign tax suffered is credited against Maltese tax, subject to statutory limits.

Withholding taxes and distributions

Malta does not levy withholding tax on:

• Dividends paid to non-resident shareholders
• Interest paid to non-residents
• Royalties paid to non-residents

This feature significantly enhances Malta’s attractiveness as a trading and distribution hub, particularly within international group structures.

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Malta combines:

• EU membership and legal certainty
• A transparent, statute-based tax system
• Competitive effective tax outcomes
• No outbound withholding taxes
• Broad acceptance by banks and counterparties
• A sophisticated professional and regulatory ecosystem

This balance makes Malta particularly suitable for long-term, scalable trading structures, rather than short-term or aggressive planning.

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• For international businesses, the Malta trading company regime offers:
  • Predictable and sustainable tax outcomes
  • Flexibility across multiple business models
  • Alignment with international tax standards
  • A jurisdiction suitable for real operational growth
  When structured correctly, Malta trading companies can form a robust core component of an international business strategy.

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Eligibility of Malta Trading Companies

• To qualify as a Malta trading company and enjoy the local tax regime, the following are typically required:
  • Minimum Share Capital: A minimum of €1,250 authorised share capital, with at least 20% paid up (or equivalent in other convertible currencies).
  • Corporate Appointments: Appointment of at least one local director and a company secretary. Directors manage day-to-day operations, while the secretary handles statutory administration and filing obligations.
  • Standard Formation Documentation: Submission of Memorandum & Articles of Association alongside due diligence and confirmation of share capital payment.
  • Registered Auditor: Appointment of a Malta-registered auditor to ensure compliance with local reporting standards.