Malta - Market Insights

Corporate tax in Malta

The Maltese Income Tax Act treats a company incorporated in Malta as a separate taxpayer and as both domiciled and resident for tax purposes in Malta. Consequently, a company incorporated in Malta is treated as taxable on a worldwide basis.

A company incorporated outside Malta may be considered resident for tax purposes in Malta (if the control and management of its business is exercised in Malta) but not domiciled in Malta. Such a company would be taxed in Malta on any income arising in Malta and on any income received in Malta (i.e. remittance basis).

Full imputation system

Malta operates a full imputation system of taxation whereby economic double taxation is eliminated by providing shareholders in a Maltese company a full credit for the tax paid by the company on dividends received from the same company. The corporate tax rate in Malta is 35% and, since the maximum personal tax rate in Malta is also 35%, this means that Malta-resident shareholders will not need to pay any further tax on dividends received from a Maltese company (a refund may be due if the personal tax rate of the shareholder is lower than 35%).

Non-Malta-resident shareholders will not benefit from the full imputation system unless their home jurisdiction gives them credit for the underlying tax paid by the Maltese company (or an exemption) when they receive dividends from a Maltese company. However, a non-Malta-resident shareholder may be able to claim a refund of the tax paid by the Maltese company upon the distribution of a dividend. Such a refund may be equal to 6/7, 5/7 or 2/3 of the Maltese tax paid, depending on the source of income of the company paying the tax, and whether double tax relief was claimed by the company.

FITWI — Final Income Tax Without Imputation

As of 2026, Maltese companies (including other bodies of persons and trusts if they elect to be taxed as companies) can elect to be taxed at a rate of 15% (instead of 35%). The tax is final and non-refundable and requires no further tax at the shareholder level (but does not give rise to a right to claim a refund). The chargeable income is calculated as per normal Maltese income tax provisions.

Where a company elects to be taxed at 15%, such an election is binding on the company for at least five years. The tax so charged is final and is not available as a credit, nor subject to refund, for the shareholder.

The new rules were designed to cater for large multinational groups, with an eye to the Pillar Two minimum tax rules for groups with revenues of at least EUR 750 million. Questions have been raised regarding the elective nature of the new FITWI rules and whether or not it qualifies as a “tax” in the first place. The OECD Model rules define “tax” as a “compulsory unrequited payment to government”. Taxpayers should tread with caution and make sure that the group shareholder company’s home jurisdiction will recognise the 15% as satisfying the minimum tax rules. Otherwise, companies may face additional top-up taxes outside Malta on income that has been taxed at 15% in Malta.

Tax treatment of highly skilled individuals

New rules have been introduced replacing a number of previous schemes available in Malta. The new rules offer a 15% flat rate of tax on qualifying employment income for non-domiciled professionals occupying a variety of positions in specific sectors.

The rules require a minimum annual income of EUR 65,000 (increasing by EUR 10,000 every five years) and are subject to a maximum cap of EUR 7 million. Any income exceeding the cap would be taxed at normal progressive rates.

The 15% rate applies if income is fully and correctly declared, and no deductions, credits, reductions or set-offs are available.

The new regime applies to employees holding senior or specialised positions with companies that are regulated and/or licensed by:

• The Malta Financial Services Authority.
• The Malta Gaming Authority.
• Transport Malta.
• The office of the Chief Medical Officer.
• Malta Enterprise.

Typical eligible positions include Chief Executive Officer, Chief Information Officer, Chief/Head Risk Officer, Chief Customer Experience Officer, Chief Financial Officer, Chief Commercial Officer, Chief Operations Officer, Chief/Head Compliance and AML Officer, Chief Technology/Digital Officer and Head of Marketing.

The individual in question must be protected under Maltese law as an employee and must be in possession of professional qualifications and/or experience commensurate with the role. The employee must reside in accommodation regarded as normal for a person in the position.

The benefit applies for an initial period of five years, with the possibility to extend for a further two five-year periods.

Tax disputes in Malta

A new mechanism has been introduced in Malta to allow taxpayers and the Maltese tax authorities to resolve tax disputes without resorting to litigation. The new mechanism offers a much faster alternative to often long, drawn-out proceedings. Settlements can be made with regard to Maltese income tax, VAT, social security contributions and transfer taxes. Upon a request of a taxpayer, the authorities may now negotiate a settlement resulting in a binding agreement between the taxpayer and the authorities, which specifies the resulting tax liabilities and penalties due. A settlement negotiation will normally stay any proceedings undertaken via the courts, and a binding agreement will result in such proceedings being stopped.

VAT exemption for gambling services

Starting on 1 October 2026, Malta is restricting its VAT exemption for gambling services, resulting in previously exempt services becoming subject to VAT. For operators in Malta, this will mean that they will have to charge VAT on services previously exempt, but can also mean increased recovery of input VAT. The following supplies will remain exempt:

• Low-risk games as defined in the Gaming Authorisation Regulations.
• Junket events held on an occasional basis (subject to approval).
• The provision of facilities for gambling on the outcome of real-life events at the place where the event takes place.

The new rules have clarified that live casino services are similar to an entertainment activity for place of supply purposes. Furthermore, certain specific online gambling and betting activities now fall under the definition of electronically supplied services for VAT purposes, including:

• Online betting.
• Online casino and poker.
• Online bingo.

Various other developments in Malta

Expenditure incurred on research, development and innovation activities may claim a 175% deduction. Where such expenditure is of a capital nature, it shall be spread over six years from the year it is incurred.

The legislation has been updated to line up with current practice by accepting digital signatures.

The exempt pension amount has been increased to EUR 37,000 (from EUR 17,000).

A critical view

The new mechanism whereby criminal charges can be avoided by a settlement agreement with the Maltese tax authorities has been widely criticised locally. The new system enables people to avoid money laundering and tax evasion charges by settling with the tax authorities.

Given Malta’s sometimes fragile reputation when it comes to prosecuting high-profile individuals, a chorus of commentators is claiming that the new mechanism was introduced by the government to help their supporters evade justice. The Maltese Minister of Finance has confirmed in Parliament that the Malta Tax and Customs Administration has received several applications under the new law and is currently processing them. No figures on the number of individuals or companies involved have been published, nor whether any fines or sanctions have been imposed, but various reports in local media have identified a number of companies and individuals that have benefited from the new mechanism.

Malta has a problem with uncollected taxes, with 2024 figures showing more than EUR 16 billion was outstanding. The government has written off about EUR 7 billion as uncollectable and is arguing that the new mechanism makes it easier to collect outstanding taxes. It remains to be seen whether the cases that are coming to light in local media, some of which include persons with very colourful stories involving accusations of kidnapping, very close relations with the ruling party, staggering collections of luxury cars and big cats (lions, pumas, leopards) will allow the government to continue arguing their case without major loss of face.

The Maltese courts have continued to confirm that directors in Maltese companies can be held personally responsible for unpaid income taxes, VAT and social security payments due by Maltese companies, even after such companies have been liquidated or struck off the Malta register. The European Court of Human Rights (Busuttil v. Malta 48431/18) established that it is not unreasonable for Maltese law to hold company directors personally responsible for company tax debts, and the Maltese courts continue to apply a very strict line in this regard.

Conclusion

Malta continues to attract international business to the island, and the Maltese system can be very efficient for a number of international operations. On the local scene, there is room for improvement and, although compliance is taken increasingly seriously, it is a slow process that requires the authorities to have the courage to make unpopular and difficult decisions.