Comparative Guides
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Results: 4 Answers
Corporate Tax
1.
Basic framework
1.1
Is there a single tax regime or is the regime multi-level (eg, federal, state, city)?
 
Malta
A single tax regime.

For more information about this answer please contact: Kenneth Camilleri from Chetcuti Cauchi Advocates
1.2
What taxes (and rates) apply to corporate entities which are tax resident in your jurisdiction?
 
Malta
The tax rate for corporate entities which are tax resident in Malta is a flat 35%, subject to shareholders receiving an imputation credit for tax at source which reduces the effective tax rate. Certain streams of income may benefit from the participation exemption and thus may not be subject to tax in Malta, resulting in no tax being due in Malta.

For more information about this answer please contact: Kenneth Camilleri from Chetcuti Cauchi Advocates
1.3
Is taxation based on revenue, profits, specific trade income, deemed profits or some other tax base?
 
Malta
Tax is levied on a company’s chargeable income – that is, income less deductible expenses. Broadly speaking, expenses are deductible where they are incurred wholly and exclusively in the production of the company’s income.

For more information about this answer please contact: Kenneth Camilleri from Chetcuti Cauchi Advocates
1.4
Is there a different treatment based on the nature of the taxable income (eg, gains on assets as opposed to trading income or dividend income)?
 
Malta
All income and capital gains are in principle subject to tax at the flat corporate income tax rate of 35%.

Participation exemption regime: Dividends or gains derived from qualifying investments may benefit from the participation exemption regime, resulting in no tax being due in Malta.

Rental income: A corporate taxpayer may opt for the gross rental income derived from immovable property to be subject to a final withholding tax of 15% instead of the corporate tax rate. In such case no deductions may be made and no set-off or refund is permitted against the tax paid.

Income from property transfers: Gains from property transfers are subject to a property transfer tax, calculated on the basis of the transfer value as opposed to gain. The tax applies to all transactions in which immovable property is transferred. However, by way of exception, the transferor may, in specific circumstances, opt out of the property transfer regime and pay tax on the capital gains realised on the transfer instead.

The default applicable rate for property transfers is 8% of the transfer value.

Different rates may apply in other scenarios, as follows:

  • a 5% final withholding tax rate if the property is transferred within five years of the acquisition date and does not form part of a project;
  • a 5% final withholding tax rate if the property is located in an urban conservation area, is acquired on or after 1 January 2016 and is subsequently restored and/or rehabilitated, where such works have been certified by a planning authority compliance permit; and
  • a 2% rate if the property was acquired as a sole ordinary residence and is transferred no later than three years from the date of acquisition.

For more information about this answer please contact: Kenneth Camilleri from Chetcuti Cauchi Advocates
1.5
Is the regime a worldwide or territorial regime, or a mixture?
 
Malta
The connecting factors which are taken into account for tax purposes in Malta are residence and domicile. The basis of taxation changes depending on the taxpayer’s connections with Malta. A company registered in Malta is deemed to be resident and domiciled in Malta for tax purposes and is taxable in Malta on a worldwide basis on all income and capital gains, whether arising in Malta or outside Malta and whether remitted to Malta or not.

Companies which are registered overseas but whose management and control are exercised in Malta are deemed to be resident, but not domiciled in Malta, and are taxed on a source and remittance basis – that is, on local source income and capital gains, as well as foreign source income which is remitted to Malta.

Corporate entities which are neither resident nor domiciled in Malta are taxable on a source basis only.

For more information about this answer please contact: Kenneth Camilleri from Chetcuti Cauchi Advocates
1.6
Can losses be utilised and/or carried forward for tax purposes, and must these all be intra-jurisdiction (ie, foreign losses cannot be utilised domestically and vice versa)?
 
Malta
Trading losses may be offset against any income and capital gains, while capital losses may be offset against capital gains only. Any unutilised losses may be carried forward indefinitely. All losses must be intra-jurisdiction.

Where a company with tax losses is sold, it must continue the same line of business in order for those losses to continue to be carried forward.

For more information about this answer please contact: Kenneth Camilleri from Chetcuti Cauchi Advocates
1.7
Is there a concept of beneficial ownership of taxable income or is it only the named or legal owner of the income that is taxed?
 
Malta
It is the named legal owner of the income that is taxed

For more information about this answer please contact: Kenneth Camilleri from Chetcuti Cauchi Advocates
1.8
Do the rates change depending on the income or balance-sheet size of the taxpayer?
 
Malta
No – the rate is a flat 35%, regardless of income level or balance-sheet size.

For more information about this answer please contact: Kenneth Camilleri from Chetcuti Cauchi Advocates
1.9
Are entities other than companies subject to corporate taxes (eg, partnerships or trusts)?
 
Malta
Yes – partnerships, foundations and trusts may all be subject to tax in Malta, with all these entities having an option as to how to be treated for tax purposes.

Under Maltese tax law, partnerships are deemed to be tax transparent and although taxable income is calculated at the level of the partnership, each partner must declare its share of the profits in its own tax return and pay tax on the same at the tax rate applicable to it. Alternatively, partnerships may opt to be treated as companies, in which case all provisions of the Income Tax Acts applicable to companies will apply.

In relation to trusts, the general principle is that a trust is taxable in Malta on income which is attributable to it where at least one of the trustees is resident in Malta. In certain instances, and depending on the tax-resident status of the beneficiaries and the type of income received by the trust, income may be deemed to have been received directly by the beneficiaries as opposed to the trust, and therefore will not be taxable in Malta. Where a trust has been set up in writing and income attributable to the trust comprises income in the form of royalties, dividends, capital gains, interest, rent or any other income from investments, the trust may also make an irrevocable election to be treated as a company.

Foundations are taxed as companies by default; however, the administrators of a foundation may irrevocably elect for the foundation to be taxed under the provisions applicable to trusts.

For more information about this answer please contact: Kenneth Camilleri from Chetcuti Cauchi Advocates